Everyone is entitled to inherit assets of a deceased person either by a will created by the deceased or if the deceased has died intestate, the inheritance will be made according to Section 6 of the Distribution Act 1958.
If you are considering leaving your assets to a beneficiary who has been declared bankrupt in Malaysia, there are some important factors to consider.
A bankrupt can still inherit
First, even if a beneficiary has been declared bankrupt, they can still inherit money, property or other assets from you after your death according to your will or the Distribution Act 1958. However, according to Section 38 (ba) of the Insolvency Act 1967, a bankrupt shall immediately report to the Director General of Insolvency any receipt of money or property exceeding RM500. The inherited assets will become part of the beneficiary’s estate for the benefit of creditors, and the beneficiary will not be able to enjoy them.
Powers vest in the Director General of Insolvency
Second, the power of Director General of Insolvency further extends by Section 60 (e) of the Insolvency Act 1967 which empowers the Director General of Insolvency to deal with any property to which the bankrupt so entitled when he/she was adjudged bankruptcy after his/her discharge and even after his/her death. Hence, in the event a testator dies when the bankruptcy order was made against the beneficiary but the deceased’s asset only distributed to the bankrupt beneficiary after the beneficiary is discharged, the inheritance assets will still vest with the Director General of Insolvency by the operation of Section 60 (e) of the Insolvency Act 1967.
If any of your beneficiaries have been declared bankrupt, it is advisable to restructure your estate planning to avoid any undesired consequences.
You may make an appointment with our legal advisor here:
https://calendly.com/finex-and-co-legacy-advisory/tea-talk-with-legal-expert
