When a family member passes away in Malaysia, their bank accounts get frozen, and their loans don’t disappear. It’s a reality that catches many families off guard. 

Bank Accounts Get Frozen

When a bank is notified about an account holder’s death, the account is frozen immediately. This applies to savings accounts, current accounts, and fixed deposits. The bank won’t allow any withdrawals until proper legal documentation is obtained.

This can create real hardship for families who relied on the deceased for household expenses. Even if you’re a spouse and knew the account passwords, you can’t access the money until you’ve gone through the legal process.

Joint Accounts Have Different Rules

Joint accounts work differently, but perhaps not as you’d expect. The outcome depends on whether the bank has a survivorship clause in its terms, and whether the account requires “either to sign” or “all to sign”.

For joint accounts with a survivorship clause and “either to sign” mandate, most banks will allow the surviving account holder to continue operating the account after signing an indemnity form. Banks like Maybank, CIMB, UOB, and OCBC generally follow this practice.

Just because the bank releases the money to you doesn’t mean you legally own all of it. Malaysian law treats jointly held assets under tenancy-in-common, meaning each person owns their share separately. The deceased’s share still forms part of their estate and may need to be distributed according to their will or inheritance laws.

For joint accounts without a survivorship clause, or where “all to sign” is required, the account will be frozen just like an individual account until a Grant of Probate or Letter of Administration is obtained.

How Family Members Can Claim The Money

To access a deceased person’s bank accounts, you’ll need legal authority to act on behalf of the estate. The route depends on whether the deceased left a will and the total value of their estate.

If there’s a will: The executor named in the will applies for a Grant of Probate from the High Court. This typically takes three to six months.

If there’s no will: A family member applies for a Letter of Administration. This process takes longer, usually six to twelve months, and can extend beyond two years in complex cases.

For smaller estates: If the estate consists only of movable property and totals less than RM600,000, you can apply through Amanah Raya Berhad, which is faster and cheaper than going through the courts.

The documents you’ll need include the death certificate, identity cards of the administrator or executor, the deceased’s bank statements, and proof of relationship (marriage or birth certificates).

Once you have the Grant of Probate or Letter of Administration, bring a certified true copy to each bank. The bank will then release the funds to the estate.

Muslim and non-Muslim estates follow different inheritance laws. Non-Muslim estates follow the Distribution Act 1958, while Muslim estates go through the Syariah Court for a Faraid Certificate. The requirement of obtaining proper authority before accessing bank accounts applies to both.

Outstanding Loans Don’t Get Written Off

Banks don’t simply forgive outstanding debts when someone dies. There’s no law in Malaysia requiring them to do so, and they can continue charging interest until debts are fully settled.

Debts don’t automatically transfer to family members. You don’t “inherit” your parents’ credit card debt or personal loan. Instead, these debts become the responsibility of the deceased’s estate.

The executor or administrator must use the deceased’s assets to pay off debts before distributing anything to beneficiaries. If your parent left you a house but also had RM50,000 in outstanding loans, the loans get paid first. In some cases, assets may need to be sold to cover debts.

When Family Members Might Be Responsible

While debts don’t pass to children or relatives automatically, there are exceptions:

Guarantors: If you guaranteed someone’s loan and they pass away, you’re responsible for the remaining balance. This is the most common way family members end up with inherited debt.

Joint borrowers: For joint loans like home loans taken with a spouse, the surviving borrower remains responsible for the entire balance.

Joint credit cards: Primary and supplementary cardholders may have different levels of responsibility depending on the bank’s terms.

If you weren’t a guarantor or joint borrower and creditors are pressuring you to pay, you’re not legally obligated to do so. Don’t let anyone bully you into paying out of your own pocket.

Home Loans And MRTA Coverage

Home loans deserve special mention because they often come with mortgage insurance. If the deceased had Mortgage Reducing Term Assurance (MRTA) or Mortgage Level Term Assurance (MLTA), the insurance may pay off the outstanding balance, allowing beneficiaries to inherit the property without the loan burden.

Without mortgage insurance, the home loan becomes the estate’s responsibility. Beneficiaries can either continue making payments, pay off the balance from other estate assets, or the property may need to be sold to settle the debt.

The Timeline Can Take Months Or Years

Settling a deceased person’s finances isn’t quick. During the waiting period, loan interest continues to accumulate and bills remain unpaid. It’s a frustrating situation: you can see the money sitting there, but you can’t touch it.

Some families continue paying the deceased’s loan instalments from their own funds to prevent interest from piling up, then claim reimbursement from the estate later.

With A Will vs Without A Will

	With A Will	Without A Will
Who handles the estate	Executor named in the will	Administrator appointed by court (usually next-of-kin)
Legal document needed	Grant of Probate	Letter of Administration
Typical timeline	3–6 months	6–12 months (can exceed 2 years)
Where to apply	High Court	High Court, or Amanah Raya for estates under RM600,000 (movable property only)
Additional requirements	None	Two sureties (guarantors) usually required
Distribution	According to the will	According to Distribution Act 1958 (non-Muslim) or Faraid (Muslim)

Planning Ahead Makes Everything Easier

Having a will makes the process significantly faster and cheaper. And if you have a home loan, make sure you understand whether your MRTA or MLTA coverage is still active and sufficient.

Making sure your family knows where to find important documents and which banks you have accounts with can save them considerable stress. A simple list kept somewhere safe goes a long way.

According to Amanah Raya, more than RM65 billion in assets by Malaysian families, mostly because relatives didn’t know the deceased had those accounts. Nobody likes thinking about death, but a little preparation now can save your family months of bureaucratic headaches when you’re gone.

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