When inheritance exists, but your family can’t access it

Estate planning in Malaysia is crucial to protect a family's future and ensure assets are distributed as intended. Despite a family being asset-rich, they may face a cash-flow problem after a death, as estate administration can delay access to assets. Approximately RM90 billion in assets is frozen in probate, and 46,707 cases remained unresolved as of December 31.

The consequences are practical, with mortgage payments, school fees, medical bills, and household expenses continuing even while the estate is being settled. In Malaysia, 61% of households would struggle to raise RM1,000 in an emergency, and 40% rely solely on their own savings or those of family members.

A will remains a key estate-planning tool, specifying how assets should be distributed and who should manage the estate. However, it does not provide immediate liquidity to those left behind. In straightforward cases, the process can be completed within four months, but disputes, incomplete documentation, late claims, and estate complexity can extend it.

A living trust can address the liquidity issue by transferring selected assets to a trustee during the donor's lifetime, who then manages them according to the trust deed. This allows beneficiaries to receive distributions without waiting for the broader estate-administration process. However, living trusts and wills serve different purposes and can complement each other.

For Muslim families, estate planning must also account for faraid and other shariah requirements, ensuring the chosen structure complies with relevant legal and religious frameworks. The key issue is liquidity: a person may leave behind valuable assets, but they may not help a surviving spouse pay monthly bills if not readily accessible.

Estimating the household's cash needs for several months can help determine how much cash, funds, or assets should be accessible during the transition period. Before setting up a trust, families should define its purpose, identify appropriate assets, determine beneficiaries, and consider the trustee's responsibilities, charges, and service terms.

Ultimately, the effectiveness of an estate plan is measured by how well it supports the family during the critical period following a death.