This article Long wait, hefty fees the bane in dealing with ARB by LeeSiewLean points out the danger of appointing an estate administrator without first ascertaining the fees that would be charged.
Always shop around, especially if you are writing a Will for the first time. Also always shop around, if you are looking for an estate administrator to administer the estate of someone who died without a Will. Estate administration can now be done by professional bodies apart from the ARB, and they’ll do this job excellently. For example, the trust corporations in Malaysia – such as Rockwills Trustee Berhad – offer very competitive rates.
This story first appeared in the NewStraitsTimes on 24 Apr 2008:
AMANAH Raya Bhd has flourished since it was corporatised in 1995. Now it charges among the highest fees in the market for what was once a public service of last resort, writes LEESIEWLIAN.
In recent years, thousands of Malaysians have named Amanah Raya Bhd their executor, a personal representative to carry out their last will and testament after they die.
Few may realise ARB’s fees could take a substantial chunk out of what they leave their rightful heirs.
Richard Mah* died last year, leaving the Taiping family home to his middle-aged sons Henry* and George*. Because he appointed ARB as executor, they will have to pay between RM14,000 and RM20,000 in fees.
That’s between two and three per cent of the house’s value of RM600,000.
“I don’t mind paying professional fees,” said Henry, “but I’m very unhappy about the amount. I’ve done my homework, and I know this is a lot to pay.”
Had Mah died without a will, his sons could have got everything done at the Small Estates Office for RM30. Lawyers polled by the New Straits Times said they charge between one and 1.5 per cent for similar cases.
What used to be a public service, especially for lower-income groups, has become a lucrative business. Originally Malaysia’s Public Trustee, its role was to cut the cost of administering estates of small value. Money saved on legal and court fees could go to beneficiaries instead.
(Small estates were worth under RM600,000 until earlier this year, when the value was raised to RM2 million.)
“Our ‘rack rates’ are uncompetitive,” acknowledged Rafie Omar, who leads ARB Legacy Services, the trustee company’s will-writing and estate management subsidiary.
The Mahs should be entitled to ask for a discount because their case is not contentious, he said. However, he declined to say how much, or to guarantee a reduction in fees.
“The decision rests solely with ARB group managing director Datuk Ahmad Rodzi Pawanteh. In most cases, he has given good discounts.”
Still, this discretionary reduction does not appear to be standard practice, and is not mentioned in available ARB literature.
Since it was corporatised in 1995, ARB has branded itself the country’s leading wills writer, and executor of choice.
Highly visible through a long-running marketing campaign, it has written more wills in the last two weeks than for the whole of 2005. It now has 34,000-plus wills in its custody, a far cry from 114 in 2002.
Revenues exceeded RM10 million last year from administering estates, up about two-thirds from 2001. Most of these estates are small, with an average value of under RM8,000 in 2002.
It has easily broken open what used to be the exclusive domain of solicitors, because the legal profession is restricted in adverti-sing services and fees, said lawyers.
“It’s something the Bar Council should have handled years ago,” said a probate lawyer, partner at one of Malaysia’s top five firms.
She said she would have charged the Mahs much less than ARB, perhaps RM6,000 depending on the complexity of the case. Her firm sometimes handles even very small estates for free as a public service, she said.
“The Public Trustee was supposed to be a temporary caretaker and a fall-back body that people could turn to. ARB as a corporation has defeated its original purpose.”
Ipoh lawyer Arthur Yeong pointed out lawyers’ charges usually cover obtaining probate, and not for performing executors’ duties in tracing and overseeing estates. Executors are legally entitled to fees, which family members often don’t claim to save the estate money.
That’s why Yeong usually advises clients with smaller estates and simple bequests to appoint spouses or grown-up children. “That may not be what ARB is doing.”
ARB’s sales pitch is usually to tell clients that family and friends often decline or renounce appointments, or are unable or unwilling to shoulder the heavy burden.
“We do advise them that banks and the Land Office are more than willing to deal with a statutory corporation like us,” Rafie said.
He acknowledged there was some conflict of interest, but executors’ fees are what make the legacy business profitable. Probate fees alone are not lucrative enough, he said.
ARB must compete to remain commercially viable, and to earn returns for its shareholder, he said. It is wholly owned by the Minister of Finance Inc.
Despite its hefty fees, however, ARB’s service appears unsatisfactory. Beneficiaries said they do much of the running around themselves, tracing assets and documents from banks and other bodies. Delays are common and decisions hard to come by, said lawyers and beneficiaries.
In one case, it took more than two years to distribute RM450,000 in a single intestate bank account, said lawyer Yeong. ARB deducted fees of about RM13,200 – almost three per cent.
The substantial fee might have been worth it had the matter been settled fast. After all, ARB is empowered to act directly for small estates. While lawyers must apply to court, ARB can issue the necessary declarations itself.
Yeong said he sent them reminders almost every month during that time. “I rarely got a reply.”
Daphne Nasir is frustrated too. When her husband died three years ago, he had not named a nominee for his Employees Provident Fund account and had no will.
Forced to borrow money for rent and food for her young children, she sorted through his affairs with much difficulty. Last year she finally obtained a distribution order and faraid certificate from the syariah court.
Her syariah lawyer told her the next step was to go to ARB for the distribution. But it was a mistake: Daphne should simply have gone straight to EPF.
EPF would have released the money by now, agreed Rafie, who had also handled intestacy in ARB until 2006.
The intestacy division is now most likely treating it as a new case, and has started the process from scratch, he added.
Daphne’s lawyer was under a false impression that ARB is the sole authority for distributing small estates, in particular Muslim ones. It is a widely held belief especially among staff of banks and other bodies, he said.
And, he acknowledged, many beneficiaries are referred to ARB under this notion, without knowing they have cheaper alternatives.
“But surely, as a going concern, we cannot be expected to just turn away business.”
(* Names have been changed.)