In the administration of estates in Malaysia, executors and trustees play a crucial role in managing and disposing of the deceased’s property. Their powers and duties are governed primarily by statutory provisions and common law principles, which seek to balance efficient estate management with the protection of beneficiaries’ interests. This article expands on the key legal frameworks and fiduciary duties imposing limits and obligations on executors and trustees in disposing of estate properties.
Statutory Power of Disposal Under the Probate and Administration Act 1959
Section 60(3) of the Probate and Administration Act 1959 grants executors the legal authority to manage and dispose of the deceased's estate property as they deem fit, subject to the terms of the will. This includes selling, transferring, or otherwise dealing with estate assets to settle debts, liabilities, and distribute the estate. The executor’s power is essential for effective estate management but is circumscribed by any express limitations stated in the will. Additionally, executors must obtain a Grant of Probate, which legally empowers them to act on behalf of the deceased's estate and administer it according to the will and law.
Executor Duties and the Chain of Representation
Executors are fiduciaries obligated to act prudently and in the best interest of all beneficiaries. They must settle all lawful debts, funeral expenses, and administrative costs before distributing estate assets, as required by Section 68(2) of the Probate and Administration Act 1959. The law recognizes the “chain of executorship” principle, whereby an executor of an executor inherits the original testator’s grant of probate, provided there is no break by intestacy or revocation. This ensures continuity in administration without disruption.
Fiduciary Duty and Beneficiaries’ Interests
Both trustees and executors owe a strict fiduciary duty to all beneficiaries. They must act impartially, safeguard estate assets, and ensure fair treatment among beneficiaries. This fiduciary obligation was confirmed in Ong Thye Peng v Loo Choo Teng & Ors 4 MLJ 31, where the Federal Court emphasized the duty to protect the rights and interests of beneficiaries while administering the estate. Any preference or negligence exposing the estate to loss may be challenged, potentially leading to personal liability of the executor or trustee.
Requirement to Obtain Fair and Reasonable Price
When disposing of estate or trust property, the trustee or executor must secure a consideration that is fair and reasonable, reflecting market conditions at the time of sale. A sale at a significantly undervalued price constitutes a breach of trust exposing the fiduciary to personal liability. Courts will evaluate the prudence exercised and whether the fiduciary sought to maximize the estate’s value.
Sales Slightly Below Market Value and Section 17 of the Trustee Act 1949
Section 17 of the Trustee Act 1949 recognizes that sales of trust property can sometimes fall below market value for valid reasons such as poor property condition, urgent financial needs, or limited market interest. Sales at slightly depreciatory values are permissible if deemed reasonable and adequate under circumstances. However, Section 17(2) warns that any sale resulting from collusion between the trustee and purchaser can be impeached and set aside as a breach of fiduciary duty, protecting beneficiaries from fraud or misconduct. Such safeguards maintain transparency and integrity in trust administration.
Conclusion
The disposal of estate property in Malaysia is governed by a detailed legal framework balancing statutory powers with fiduciary duties. Executors empowered by the Probate and Administration Act 1959 must act within the will’s limits and in beneficiaries’ best interests. Trustees, under the Trustee Act 1949, may effect sales at below market value only under justified circumstances without collusion. Breaching these duties, especially by undervaluation or fraud, exposes fiduciaries to legal consequences and personal liability. Thus, careful adherence to statutory provisions and case law principles is essential for the prudent administration and disposal of estate property.
This article was contributed and sponsored by Kevin Wu & Associates, a full-service law firm based in Kuala Lumpur with practice areas in corporate, dispute resolution, criminal, family office and company secretarial services. KWA offers preliminary consultation and legal advisory to all Temasek Post readers.
Radhia is a contributor covering legal insights with the aim of keeping legal discourse relevant, accessible, and impactful in today’s changing world. More about Radhia.
Email: office@kevinwuassociates.com
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