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Estate will be passed on to beneficiaries, how about debt?

Question:

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“Hi Mr. Yeo, my father has recently passed away and left behind a credit card debt of RM100k. Since I am the only beneficiary so named in his will, does this mean that legally, his debt will be passed on to me after his demise? ”

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“Furthermore, may I know that whether the bank has the right to charge interest on the outstanding sum after my father’s death?”

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When handling inheritance matters (such as applying Grant of Probate or Letters of Administration), quite often we encounter clients asking questions regarding the debts left behind by the deceased, such as whether these debts need to be paid by the beneficiaries, whether the bank has the right to charge interest, and so on.

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Therefore, in our short article today, we will answer these queries. We hope our little sharing today will enable our readers to have a better understanding to the inheritance laws in Malaysia.

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Answer:

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1.     When a person passes away, his/her debts WILL NOT automatically write off by the banks. As there is no written law in Malaysia that required the banks to do so.

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2.     Therefore, legally the bank still has the right to charge interest on the outstanding due by the deceased (be it credit card debt, mortgage, car loan, or so on), until these debts have been fully paid.

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3.     Since the debt of the deceased will not be write-off by the bank, is the beneficiary of the deceased required to pay the debt from his own pocket in order to inherit the property?
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4.     The answer is negative. The beneficiary of the deceased is not responsible to pay the deceased’s debts as the debt is personal in nature tie to the deceased’s estate.

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5.     However, under Section 68 of the Probate and Administration Act 1959, the executor or administrator of the deceased’s estate is legally obliged to use the deceased’s assets to pay off the debt first, including funeral expenses, legal fees, loans, credit card debt, income tax, before he/she is allowed to distribute these assets to the beneficiaries.
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6.     Therefore, although the beneficiaries are not legally required to pay the deceased’s debts, practically they may still need to use their own money to pay off these debts in order to avoid interest being imposed by the bank or to facilitate the whole transmission process.

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These are the information regarding inheritance laws in Malaysia that we would want to share with you today. If you have any inquiries about it, please do hesitate to contact us:https://wa.link/q3kmv5

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You can learn other legal information from our website:https://www.yeolaw.my/

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