Always on My Mind (Wills)

By Peter Lee

One day, while waiting for my tyres to be repaired at a local shop, I struck up a conversation with a friendly uncle who was also waiting for his car. We chatted about the economy, the rising cost of living, and business in Malaysia. Then, he asked me what I do for a living.

When I told him that I provide will writing and estate planning services, his face lit up and he quickly asked:

“Is it true that when a person passes away, all their credit card debts are automatically waived by the bank?”

He explained that his friend had told him so, and even went as far as advising his children to simply ignore those debts when he eventually dies.

I had to stop him right there. I explained that this is one of the most dangerous misconceptions people hold. In reality, debts do not magically disappear when someone dies. They must be settled before anything can be distributed to beneficiaries.

A Real-Life Case

I then shared a story from years ago. A cancer patient, in his desperate attempt to save his own life, used his credit cards to fund expensive medical treatments. Sadly, despite exhausting both his finances and his health, he lost the battle.

When he passed on, his family was shocked to discover the large outstanding balances on his credit cards. They pleaded with the bank to waive the debt on compassionate grounds, but the bank only agreed to grant a small discount. The rest of the debt had to be paid from his estate.

The family was devastated. On top of their grief, they now faced the financial burden of his medical expenses. In the end, the Executors of the estate had no choice but to settle the debt before handling the rest of the estate.

The Legal Reality

When I mentioned that “the family must settle the debt,” what I really meant was this: it is the Executor (if there’s a Will) or the Administrator (if there’s no Will) who bears the legal responsibility to ensure all debts of the deceased are settled before distributing the estate to beneficiaries.

This is not optional. Under Malaysian law, specifically the Probate and Administration Act 1959, Executors/Administrators must first pay off debts and liabilities of the deceased before distribution. If they distribute too soon and leave creditors unpaid, they can be held personally liable. Once the money is in the hands of beneficiaries, recalling it is next to impossible.

And debts are not limited to credit cards. Executors need to watch out for:

1. Personal Taxes Payable – LHDN can issue tax assessments even after death.
2. Personal Loans – Often overlooked, but banks will still demand repayment.
3. Mortgage Loans – Failure to settle may result in foreclosure.
4. Hire Purchase Loans – Cars or equipment may be repossessed if unpaid.
5. Business Liabilities – If self-employed, debts may extend to suppliers, contractors, or even staff salaries.
6. Overdrafts & Lines of Credit – Banks will call these in upon death.
7. Student Loans (e.g. PTPTN) – Yes, even these remain payable unless formally waived.

The Hidden Risk Executors Face

From my observation, many Executors/Administrators are so eager to fulfil their duty to “distribute quickly” that they overlook liabilities. They assume their parents or relatives left no debts because “everything looked fine.”

But here’s the danger: creditors are always watching.

If distribution happens too soon and debts later surface, the Executors themselves are legally on the hook. Imagine inheriting not your parents’ assets, but their unpaid debts. 

In Malaysia today, debts are a growing concern for families and estate administration.

• Household debt is now around 84.3% of GDP (Q2 2025) — among the highest in Asia.
• An AKPK (Agensi Kaunseling dan Pengurusan Kredit) survey found that about 3 in 10 working adults (30%) had to borrow money just to buy essentials.
• Healthcare costs remain a burden — in 2021, out-of-pocket health spending made up 31.5% of total health expenditure. Many Malaysians turn to credit facilities to pay for treatment, leaving debts behind for their estate.

With numbers like these, Executors and Administrators must always assume the estate might have liabilities. Settling debts is not just a legal duty — it’s also the only way to ensure that beneficiaries receive a clean inheritance, free of creditor claims.

Practical Guide for Executors or Administrators : Settling Debts Before Distribution

If you’ve been appointed as an Executor or Administrator, here are key steps to protect yourself and ensure proper administration:

1. Obtain the Grant of Probate / Letters of Administration – This gives you legal authority to manage the estate.
2. Gather all financial documents – Bank statements, Investment statements, Titles,  loan agreements, tax returns, PTPTN status, and credit card bills.
3. Publish a Notice to Creditors (as required under Malaysian law) – Creditors usually have 2 months to submit claims.
4. Verify and validate all debts – Check with banks, LHDN, PTPTN, and business associates. Don’t assume there are none.
5. Settle debts in order of priority – Funeral expenses, secured debts (e.g. mortgages), taxes, unsecured debts (e.g. credit cards, personal loans).
6. Keep detailed records – Every payment made should be documented to protect yourself against disputes.
7. Distribute only after debts are cleared – Never release assets prematurely, no matter the pressure from beneficiaries.

Final Thought: Always on My Mind

Creditors don’t forget. As long as debts remain unsettled, they will keep knocking on the door of the estate.

This is why Executors and Administrators must act responsibly  to protect themselves, to honour the law, and to ensure the deceased’s estate is managed fairly.

As far as creditors are concerned, if debts remain unpaid, they will never stop reminding you of what is owed. To them, you are  and will remain  always on my mind.