WillJune 10, 2024by William WongLegal Implications of Bankruptcy on Inherited Assets: Exploring Wei’s Rights as a Beneficiary

Mr. Lim, a successful businessman, committed to providing for his family – his wife, Mei Ling, and their son, Wei. Despite losing his parents long ago, he was determined to secure a stable future for his own. However, he forgot one important thing: making a will. He thought he had plenty of time to sort it out.


A Sudden Tragedy

One day, Mr. Lim had a fatal accident while on a business trip. His sudden death shocked his family. On top of their grief, Mei Ling had to figure out what to do with Mr. Lim’s estate, which was now in disarray because he hadn’t left a will.


Distribution of Mr. Lim’s Assets

According to the Distribution Act 1958 in Malaysia, when someone dies without a will, their assets are divided among their surviving family members. In Mr. Lim’s case, Mei Ling (wife) would receive one-third of the estate, and Wei (son) would receive two-thirds. While this provided some financial security, it also brought complications due to Wei’s financial situation.


Wei’s Financial Troubles

Wei had big dreams but faced financial difficulties after a failed business left him bankrupt. His bankruptcy status added extra layers of complexity to the inheritance process.


Bankrupt’s Inheritance will be used to Settle Debts

In Malaysia, a bankrupt individual can inherit assets, but the inheritance is managed by the Director General of Insolvency (DGI). According to Section 38 (ba) of the Insolvency Act 1967, a bankrupt must report any inheritance over RM500 to the DGI. The DGI then uses this money to pay off the bankrupt individual’s debts.

When Wei inherited his share of Mr. Lim’s estate, he had to report it to the DGI. The DGI took control of Wei’s inheritance and used it to pay his creditors. As a result, Wei couldn’t directly benefit from his father’s legacy, as his inheritance was used to settle his debts.


Powers of the Director General of Insolvency

The DGI has significant control over a bankrupt individual’s assets. Even if a bankrupt person is discharged or dies, the DGI can still manage their inherited property until all debts are paid. In Wei’s case, the DGI continued to handle his inheritance until his financial obligations were settled.



This story of Mr. Lim and his family highlights the importance of proper estate planning. Planning ahead ensures that your assets are distributed according to your wishes and protects your loved ones from financial and legal troubles, even if you face unexpected financial problems.


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