Tuesday, June 16, 2009
Friday, March 14, 2008
THE BLIND MEN AND THE ELEPHANT
Almost everyone should be familiar with the story of the elephant and the three blind men. One blind man would hold the elephant’s trunk and would think that an elephant was like a large snake. Another blind man would hold the tail and describe the elephant in his own way. The third blind man who touched the elephant’s legs would form an opinion that the elephant was a tree-like creature. The story goes that each man was adamant to the point of arrogance that only each of them was right and everyone else was wrong. In fact, as we know, they were right in their own way but also partially wrong because they could not see the elephant as a whole. This is how I would describe Islamic inheritance Planning - like an elephant that one would have to take a holistic approach to understand it.
Islamic Inheritance Planning
The three components of Islamic inheritance planning are the Faraid (Islamic Law of inheritance), the Civil Law, and financial planning. The Faraid determines who the heirs are and what the ratios of distribution are, as stated in the Holy Quran (Surah An Nisaa’ verses 11 and 12). In this area, the Syariah scholars are the experts. It is also important to understand the principles of justice fairness and equality behind the Faraid as many Muslims feel that the Faraid is unjust and restricts their right to determine ‘who gets what’ upon their death.
The second component, the Civil Law is important because in Malaysia, the legacy of the British Administration still remains intact and the procedures of estate administration and settlement are regulated by the Small Estates Distribution Act 1959 and the Probate and Administration Act 1959. In such matters, it is the advocate and solicitor who knows the law; however, people only come to them when a member of the family dies. Basically, lawyers are needed to solve the ‘problem’.
Why then is financial planning – the third component -- important? Well, estate planning or inheritance planning as I call it, is part of financial planning as it is the closing chapter known as wealth distribution (the others being wealth creation, and wealth preservation). It is only normal that people, Muslims and non-Muslims alike, would love to have their way in the distribution of wealth. The problem is; if you give away before death (by way of inter-vivos gift), you lose control of the asset. Conversely, if you leave it too late, and you ‘kick the bucket’ before making the bequest, then it becomes part of your estate. Upon death, the difference is that non-Muslims can make the bequest through a written will and if all formalities of the Wills Act 1959 has been complied with, your intentions will be implemented. Muslims, or the other hand, are ‘guided’ by the Faraid, the Islamic law of inheritance. Also there are no strict formalities to follow because the Wills Act does not apply to Muslims. As such, financial planning here means not only who are your heirs and their distribution ratio but also the value of their distribution ratios which shall be based on your net asset value (value of asset minus liabilities). Planning also means that as Muslims, you need to know the priorities or ranking of distribution rights, which is as follows:
- Settlement of burial expenses;
- Payment of debts to Allah swt eg. Nazar (solemn pledge) and uncompleted haj;
- Payment of debts to other people or banks;
- Wasiyyah (Islamic bequest limited to one-third of the estate, to non-heirs);
- Harta Sepencarian (jointly acquired property), and lastly;
- Distribution according to Faraid
Once you know the ranking of distribution rights, you can then finalise your estate planning objectives or goals. For example, to reduce the incidence of the Faraid, you can make a Hibah (gift) during your lifetime, be it directly or through the mechanism of a living trust. These gifts are revocable if made to your children; otherwise they are irrevocable. You may also like to give more than the one-eight (1/8) portion to your wife (as stated in the Faraid) and declare the ‘harta sepencarian’ (giving acquired property) to her. At the same time, you may consider making a testamentary contribution by way of a Wasiyyah to a charity or religious organisation or to anyone (eg. an adopted child) who is not an heir.
All said and done, there cannot be a complete understanding of Islamic inheritance planning unless one understands all the three components -- the Faraid, Civil Law and financial planning -- just like the elephant. It is my contention that for a Muslim to plan his estate, he must know the Faraid laws as it is the cornerstone of Islamic inheritance planning. But how many adult Muslims in Malaysia -- totaling almost 10 million -- do you think know or even care about this matter?
A couple of months ago, a Muslim, using the pseudonym of Kassim Selamat, e-mailed me to solicit my advice on his estate planning objectives. He wrote:
My family comprises of my wife, Kamariah, and my two daughters, Sofia and Hana, aged 25 and 17 respectively. My wife is not well educated and is a full-time housewife. Sofia is divorced with a two year old daughter, and is presently working as a clerk in a legal firm, while Hana is still in school. I have a brother and an 85 year old mother; my father has passed on. My estate planning objectives are as follows:-
(a) To create a trust fund – using the RM100,000 monies from my life insurance policy, for my wife and granddaughter so that they can continue living without financial support from anyone. I feel that both my daughters, Sofia and Hana can take care of themselves;
(b) To allocate the sum of RM10,000 of my EPF monies to my mother, if she survives me; otherwise, the monies will go to my brother. I have put my
granddaughter as a nominee and I estimate the savings to be about RM100,000.
(c) To ensure that my matrimonial home is not sold and to be a family home for my future generations.
Kasim’s estate planning objectives shows that he does not know who his heirs (waris) are and what their Faraid ratio of distribution is. (For the sake of explanation they are: mother (4/24 share), wife (3/24 share), Sofia (8/24 share), Hana (8/24 share) and brother (1/24 share). Kasim must be told that his granddaughter is not an heir (waris) and therefore she may not be able to ‘inherit’ all the EPF monies but only a one-third portion as a Wasiyyah. Also, he must calculate his total asset value (after the deduction of the trust fund as Hibah and Wasiyyah to his granddaughter) and calculate the value of the Faraid distribution to each of his heirs. With regards to the matrimonial home, he may declare it as ‘harta sepencarian’ to his wife ( subject to 50% value of the total estate value) and may convey his wish to her that it remains in the family but that will be entirely her decision which he cannot control.
The above example shows that the Muslims in Malaysia are still thinking like non-Muslims where estate planning is concerned. This is indeed a sad state of affairs and it is hoped that the powers that be really appreciate the extremely low level of awareness and understanding of Islamic inheritance planning in Malaysia and begin to make a holistic study of the ‘elephant’. Maybe, enacting an Islamic Wills Act would help.
Islamic Inheritance Planning
The three components of Islamic inheritance planning are the Faraid (Islamic Law of inheritance), the Civil Law, and financial planning. The Faraid determines who the heirs are and what the ratios of distribution are, as stated in the Holy Quran (Surah An Nisaa’ verses 11 and 12). In this area, the Syariah scholars are the experts. It is also important to understand the principles of justice fairness and equality behind the Faraid as many Muslims feel that the Faraid is unjust and restricts their right to determine ‘who gets what’ upon their death.
The second component, the Civil Law is important because in Malaysia, the legacy of the British Administration still remains intact and the procedures of estate administration and settlement are regulated by the Small Estates Distribution Act 1959 and the Probate and Administration Act 1959. In such matters, it is the advocate and solicitor who knows the law; however, people only come to them when a member of the family dies. Basically, lawyers are needed to solve the ‘problem’.
Why then is financial planning – the third component -- important? Well, estate planning or inheritance planning as I call it, is part of financial planning as it is the closing chapter known as wealth distribution (the others being wealth creation, and wealth preservation). It is only normal that people, Muslims and non-Muslims alike, would love to have their way in the distribution of wealth. The problem is; if you give away before death (by way of inter-vivos gift), you lose control of the asset. Conversely, if you leave it too late, and you ‘kick the bucket’ before making the bequest, then it becomes part of your estate. Upon death, the difference is that non-Muslims can make the bequest through a written will and if all formalities of the Wills Act 1959 has been complied with, your intentions will be implemented. Muslims, or the other hand, are ‘guided’ by the Faraid, the Islamic law of inheritance. Also there are no strict formalities to follow because the Wills Act does not apply to Muslims. As such, financial planning here means not only who are your heirs and their distribution ratio but also the value of their distribution ratios which shall be based on your net asset value (value of asset minus liabilities). Planning also means that as Muslims, you need to know the priorities or ranking of distribution rights, which is as follows:
- Settlement of burial expenses;
- Payment of debts to Allah swt eg. Nazar (solemn pledge) and uncompleted haj;
- Payment of debts to other people or banks;
- Wasiyyah (Islamic bequest limited to one-third of the estate, to non-heirs);
- Harta Sepencarian (jointly acquired property), and lastly;
- Distribution according to Faraid
Once you know the ranking of distribution rights, you can then finalise your estate planning objectives or goals. For example, to reduce the incidence of the Faraid, you can make a Hibah (gift) during your lifetime, be it directly or through the mechanism of a living trust. These gifts are revocable if made to your children; otherwise they are irrevocable. You may also like to give more than the one-eight (1/8) portion to your wife (as stated in the Faraid) and declare the ‘harta sepencarian’ (giving acquired property) to her. At the same time, you may consider making a testamentary contribution by way of a Wasiyyah to a charity or religious organisation or to anyone (eg. an adopted child) who is not an heir.
All said and done, there cannot be a complete understanding of Islamic inheritance planning unless one understands all the three components -- the Faraid, Civil Law and financial planning -- just like the elephant. It is my contention that for a Muslim to plan his estate, he must know the Faraid laws as it is the cornerstone of Islamic inheritance planning. But how many adult Muslims in Malaysia -- totaling almost 10 million -- do you think know or even care about this matter?
A couple of months ago, a Muslim, using the pseudonym of Kassim Selamat, e-mailed me to solicit my advice on his estate planning objectives. He wrote:
My family comprises of my wife, Kamariah, and my two daughters, Sofia and Hana, aged 25 and 17 respectively. My wife is not well educated and is a full-time housewife. Sofia is divorced with a two year old daughter, and is presently working as a clerk in a legal firm, while Hana is still in school. I have a brother and an 85 year old mother; my father has passed on. My estate planning objectives are as follows:-
(a) To create a trust fund – using the RM100,000 monies from my life insurance policy, for my wife and granddaughter so that they can continue living without financial support from anyone. I feel that both my daughters, Sofia and Hana can take care of themselves;
(b) To allocate the sum of RM10,000 of my EPF monies to my mother, if she survives me; otherwise, the monies will go to my brother. I have put my
granddaughter as a nominee and I estimate the savings to be about RM100,000.
(c) To ensure that my matrimonial home is not sold and to be a family home for my future generations.
Kasim’s estate planning objectives shows that he does not know who his heirs (waris) are and what their Faraid ratio of distribution is. (For the sake of explanation they are: mother (4/24 share), wife (3/24 share), Sofia (8/24 share), Hana (8/24 share) and brother (1/24 share). Kasim must be told that his granddaughter is not an heir (waris) and therefore she may not be able to ‘inherit’ all the EPF monies but only a one-third portion as a Wasiyyah. Also, he must calculate his total asset value (after the deduction of the trust fund as Hibah and Wasiyyah to his granddaughter) and calculate the value of the Faraid distribution to each of his heirs. With regards to the matrimonial home, he may declare it as ‘harta sepencarian’ to his wife ( subject to 50% value of the total estate value) and may convey his wish to her that it remains in the family but that will be entirely her decision which he cannot control.
The above example shows that the Muslims in Malaysia are still thinking like non-Muslims where estate planning is concerned. This is indeed a sad state of affairs and it is hoped that the powers that be really appreciate the extremely low level of awareness and understanding of Islamic inheritance planning in Malaysia and begin to make a holistic study of the ‘elephant’. Maybe, enacting an Islamic Wills Act would help.
REGISTER FOR MUSLIM ESTATE PLANNING & DISTRIBUTION WORKSHOP (18/3/2008) & MUSLIM BUSINESS WILL WORKSHOP (19/3/2008) NOW!!!!!!
CALL 03-41491192
Wednesday, March 5, 2008
Islamic Will Explained
In the last issue, I wrote about the Malay Inheritance Dilemma. Basically, it was about the dilemma brought about due to the lack of understanding of the Faraid (Islamic Law of Inheritance) and the family feuds which resulted therefrom, which was compounded by the unscrupulous and dishonest administrators appointed to settle the estate.
In this issue, I wish to highlight the Islamic Will, a much misunderstood document.
What is an Islamic Will?
To understand the concept of an Islamic Will, one must understand a few other Islamic concepts:-
(1) Wasiyyah :
In this issue, I wish to highlight the Islamic Will, a much misunderstood document.
What is an Islamic Will?
To understand the concept of an Islamic Will, one must understand a few other Islamic concepts:-
(1) Wasiyyah :
The Muslims in Malaysia call this document a ‘Wasiat’. It basically means the testamentary bequest limited to one-third (1/3) of the Testator’s estate and can only be given to non-heirs as defined in the Holy Quran. This means that the general bequest can be made to adopted children and adopted parents and is usually meant for charitable purposes including to the mosques, religious organizations and orphanages. It has to be reminded that under Islamic Law, heirs and family members do not exactly mean the same people.
(2) Wisoyah :
(2) Wisoyah :
This concept is hardly known in Malaysia, however, it is widely practiced in the Middle East especially in Egypt, whose Islamic Inheritance procedures are quite well established. The Wisoyah is basically a trust document which appoints a Wasi (Trustee) almost akin to the Executor appointed under the English Will. The responsibility of the Wasi (Executor) is to assemble the assets of the deceased, to pay off debts, implement the wishes of the Testator in respect of the Wasiyyah , the ‘Harta Sepencarian’ (property acquired and accumulated during marriage), the unexecuted ‘Hibah’ (Islamic lifetime gift) if applicable, and finally to distribute the residue of the estate to the Heirs (Waris) according to the Faraid, the Islamic Law of Inheritance. It is the over-riding principle that all the above matters must not be in contravention or contradiction to the basic principle of the Islamic Law. This Islamic concept must be compared and contrasted against the English Law concepts of testate and intestate properties :-
(i) Testate :
(i) Testate :
This term basically means that the property left behind by the deceased is provided for in a Will and an Executor has been appointed by the deceased before his death to implement his wishes relating to the distribution of the property to the chosen beneficiaries who may or may not be his family members which in the English Law is also called heirs. All properties movable and immovable must be stated in the Will otherwise they will become intestate properties. *Upon death, the Executor will apply for the Grant of Letters of Probate by proving the Will or authenticating the Will ie getting the Will endorsed by the High Court by showing that the Will had complied with all the formalities and procedures under the Wills Act and the Probate and Administration Act .*
(ii) Intestate :
(ii) Intestate :
This term refers to the properties of the deceased person who has not left a Will i.e he has not appointed an Executor prior to his death nor has he planned his estate i.e he has not provided who is supposed to get what upon his death. His family members will, by consensus, appoint an Administrator who will apply for the Grant of Letters of Administration.
To grasp a clear understanding of the Islamic Will, one must have a clear understanding of the concept of Wasiyyah and Wisoyah in the Islamic Law and the English Law concept of the testate and intestate properties. This is imperative as the Islamic Inheritance Procedures in Malaysia are still governed by the Civil Law (read English Law) and regulated by the Probate and Administration Act 1959 and the Small Estates Distribution Act 1959. In addition, the non-Muslim estates are regulated by the Distribution Act 1959 and the Wills Act 1959.
The Administration of Estates : A common problem.
So why write a Will or an Islamic Will for that matter? For non-Muslims, writing a Will would be to expedite the process of the settlement of the estate; the assets of the estate are unfrozen or unlocked faster compared to if they were intestate properties without a Will. It is common knowledge that extracting a Grant of Letters of Administration would take a longer time (sometimes double the time) than that to extract a Grant of Probate, where there is a Will involved. In addition, one can determine the distribution to one’s loved ones instead of allowing the same to be decided by the Distribution Act 1959.
For Muslims, the essence of writing a Will only relates to the appointment of the Wasi (Executor). Since the Islamic Will does not come under the purview of the Wills Act, there are presently no such provisions in the Civil Law which provides for the procedures for the Islamic Will saved and except that, the Islamic Will can be construed as the testamentary document within the context of the Probate and Administration Act 1959, which will allow it to be submitted as the document to obtain the Grant of Probate thereby allowing Muslims the same advantages as Non-Muslims. The distribution of the estate properties is already determined by the Faraid (the Islamic Law of Inheritance) i.e who gets how much etc; however, the same can be waived if all the heirs consent to a differing distribution formula.
*If I may make an analogy to put the Will-writing problem in a proper perspective, I would like to compare writing a Will, be it for Muslims and non-Muslims alike, to buying a ‘touch & go’ card. By buying a ‘touch & go’ card, our journey on the highway through the tollgate would be smooth sailing as opposed to those having to pay cash. Similarly, on the highway of life, the tollgate also marks the ‘end of the road’. The only difference is, the tollgate is for your assets you leave behind while you go through another ‘gate’. Your assets would then be ‘expeditiously processed’ at the tollgate as an Executor had been appointed to do the ‘processing’.
Meanwhile, as you have passed on, your loved ones are anxiously waiting on the ‘other side’ of the tollgate for the ‘arrival’ of the assets. Compare this with a situation where the ‘touch & go’ card is not used, it becomes like an airport baggage carousel where there are bags without tags and where no one is ‘administering them’. Obviously your loved ones will have a longer wait and will have to endure prolonged ‘anxiety’ due to our lack of foresight.*
Let us now revert to the Wasiyyah and Wisoyah concepts. It is the writer’s contention that there has been a serious misconception on the understanding of the Islamic Will concept which has led Muslims in Malaysia, at least, to be confused that writing a Will is not important and relevant. What is critical to understand is that writing a Will, whether be it for Muslims or non-Muslims, does not mean that you are planning to die; you are merely ensuring your assets are not stuck longer than is necessary and that your final wishes and last instructions are followed.
This means appointing a trustworthy Executor prior to death who will expedite the process of settlement of the Estate i.e unlocking the frozen assets and settling your debts and following your last instructions as long as it complies with the Wills Act for non-Muslims and the Islamic Law of Inheritance for Muslims.
This misconception arose because Muslims felt that the Wasiyyah was actually the Islamic Will (as defined by the English Law) and since the bequest was limited to non-heirs (which are normally not family members with the exception of adopted children), they saw no purpose in writing a Will because they felt that it is their family members which needed to be protected and not anyone else. This gave an unfair description of the divine Quranic laws.
The Wasiyyah is actually meant for charitable and philanthropic purposes. It is meant for non-heirs because the Quran had already provided for heirs and to protect the heirs, the Quran limits the charitable bequests to one-third of the Estate because the heirs should not be left wanting and in financial difficulties. This is to be contrasted and compared to Non-Muslims’ Wills where one can make a bequest to anyone even non-family members and for whatever value of the estate for as long as it complies with the Wills Act and does not go against public policy.
It is further the writer’s contention that the Wisoyah document is the real Islamic Will Document and not the Wasiyyah Document. The writer goes further to call the Wisoyah document the Islamic Will Document and to make the differentiation complete, the Wasiyyah document should be called the Islamic Bequest Document. The essence of the Wisoyah (Islamic Will) is the appointment of the Wasi (Executor) and is based on the trust concept, which is carrying out the last wishes and instructions of the Testator for as long as they are not in contravention of the Islamic Laws. On the other hand, the essence of the Wasiyyah document is the gifting, which is the testamentary bequest for charitable purposes limited to one-third of the estate to non-heirs.
In conclusion, it is the writer’s opinion that this misconception in the understanding of the true nature of the Islamic Will, has resulted in the large majority of adult Muslims in Malaysia, totalling almost 10.0 million people in not writing Wills. *For the record, according to a newspaper report from the Small Estates Department of the Ministry of Lands and Mines (as it was then known), in 2002,* more than RM3.0 billion worth of assets are stuck pending settlement of estate due to family squabbles or non-distribution, which could have been settled had the deceased planned his inheritance. Just imagine the loss to the country in terms of unproductive assets. It must be remembered that writing a Will does not mean that you are planning to die; you are planning for your loved ones to live well after you are gone. To do so, one should appoint a trusted person to administer one’s estate; this applies to everyone, Muslims or otherwise.
To grasp a clear understanding of the Islamic Will, one must have a clear understanding of the concept of Wasiyyah and Wisoyah in the Islamic Law and the English Law concept of the testate and intestate properties. This is imperative as the Islamic Inheritance Procedures in Malaysia are still governed by the Civil Law (read English Law) and regulated by the Probate and Administration Act 1959 and the Small Estates Distribution Act 1959. In addition, the non-Muslim estates are regulated by the Distribution Act 1959 and the Wills Act 1959.
The Administration of Estates : A common problem.
So why write a Will or an Islamic Will for that matter? For non-Muslims, writing a Will would be to expedite the process of the settlement of the estate; the assets of the estate are unfrozen or unlocked faster compared to if they were intestate properties without a Will. It is common knowledge that extracting a Grant of Letters of Administration would take a longer time (sometimes double the time) than that to extract a Grant of Probate, where there is a Will involved. In addition, one can determine the distribution to one’s loved ones instead of allowing the same to be decided by the Distribution Act 1959.
For Muslims, the essence of writing a Will only relates to the appointment of the Wasi (Executor). Since the Islamic Will does not come under the purview of the Wills Act, there are presently no such provisions in the Civil Law which provides for the procedures for the Islamic Will saved and except that, the Islamic Will can be construed as the testamentary document within the context of the Probate and Administration Act 1959, which will allow it to be submitted as the document to obtain the Grant of Probate thereby allowing Muslims the same advantages as Non-Muslims. The distribution of the estate properties is already determined by the Faraid (the Islamic Law of Inheritance) i.e who gets how much etc; however, the same can be waived if all the heirs consent to a differing distribution formula.
*If I may make an analogy to put the Will-writing problem in a proper perspective, I would like to compare writing a Will, be it for Muslims and non-Muslims alike, to buying a ‘touch & go’ card. By buying a ‘touch & go’ card, our journey on the highway through the tollgate would be smooth sailing as opposed to those having to pay cash. Similarly, on the highway of life, the tollgate also marks the ‘end of the road’. The only difference is, the tollgate is for your assets you leave behind while you go through another ‘gate’. Your assets would then be ‘expeditiously processed’ at the tollgate as an Executor had been appointed to do the ‘processing’.
Meanwhile, as you have passed on, your loved ones are anxiously waiting on the ‘other side’ of the tollgate for the ‘arrival’ of the assets. Compare this with a situation where the ‘touch & go’ card is not used, it becomes like an airport baggage carousel where there are bags without tags and where no one is ‘administering them’. Obviously your loved ones will have a longer wait and will have to endure prolonged ‘anxiety’ due to our lack of foresight.*
Let us now revert to the Wasiyyah and Wisoyah concepts. It is the writer’s contention that there has been a serious misconception on the understanding of the Islamic Will concept which has led Muslims in Malaysia, at least, to be confused that writing a Will is not important and relevant. What is critical to understand is that writing a Will, whether be it for Muslims or non-Muslims, does not mean that you are planning to die; you are merely ensuring your assets are not stuck longer than is necessary and that your final wishes and last instructions are followed.
This means appointing a trustworthy Executor prior to death who will expedite the process of settlement of the Estate i.e unlocking the frozen assets and settling your debts and following your last instructions as long as it complies with the Wills Act for non-Muslims and the Islamic Law of Inheritance for Muslims.
This misconception arose because Muslims felt that the Wasiyyah was actually the Islamic Will (as defined by the English Law) and since the bequest was limited to non-heirs (which are normally not family members with the exception of adopted children), they saw no purpose in writing a Will because they felt that it is their family members which needed to be protected and not anyone else. This gave an unfair description of the divine Quranic laws.
The Wasiyyah is actually meant for charitable and philanthropic purposes. It is meant for non-heirs because the Quran had already provided for heirs and to protect the heirs, the Quran limits the charitable bequests to one-third of the Estate because the heirs should not be left wanting and in financial difficulties. This is to be contrasted and compared to Non-Muslims’ Wills where one can make a bequest to anyone even non-family members and for whatever value of the estate for as long as it complies with the Wills Act and does not go against public policy.
It is further the writer’s contention that the Wisoyah document is the real Islamic Will Document and not the Wasiyyah Document. The writer goes further to call the Wisoyah document the Islamic Will Document and to make the differentiation complete, the Wasiyyah document should be called the Islamic Bequest Document. The essence of the Wisoyah (Islamic Will) is the appointment of the Wasi (Executor) and is based on the trust concept, which is carrying out the last wishes and instructions of the Testator for as long as they are not in contravention of the Islamic Laws. On the other hand, the essence of the Wasiyyah document is the gifting, which is the testamentary bequest for charitable purposes limited to one-third of the estate to non-heirs.
In conclusion, it is the writer’s opinion that this misconception in the understanding of the true nature of the Islamic Will, has resulted in the large majority of adult Muslims in Malaysia, totalling almost 10.0 million people in not writing Wills. *For the record, according to a newspaper report from the Small Estates Department of the Ministry of Lands and Mines (as it was then known), in 2002,* more than RM3.0 billion worth of assets are stuck pending settlement of estate due to family squabbles or non-distribution, which could have been settled had the deceased planned his inheritance. Just imagine the loss to the country in terms of unproductive assets. It must be remembered that writing a Will does not mean that you are planning to die; you are planning for your loved ones to live well after you are gone. To do so, one should appoint a trusted person to administer one’s estate; this applies to everyone, Muslims or otherwise.
Sunday, March 2, 2008
Estate Planning & Business Will Workshops
Programme : Muslim Estate Planning & Distribution Workshop
Date : 18th March 2008 (Tuesday)
Time : 8.30 am - 5.30 pm
Venue : Zar Perunding Pusaka Sdn Bhd, Wangsa Maju, Kuala Lumpur
Fee(s) : RM490 (for SIDC & MFPC Member)
RM590 (for Individual / Non-Member)
RM690 (for Individual / Corporate Organization)
Programme : Muslim Business Wills Workshop
Date : 19th March 2008 (Wednesday)
Time : 8.30 am - 5.30 pm
Venue : Zar Perunding Pusaka Sdn Bhd, Wangsa Maju, Kuala Lumpur
Fee(s) : RM490 (for SIDC & MFPC Member)
RM590 (for Individual / Non-Member)
RM690 (for Individual / Corporate Organization)
Kindly contact Ms Fitriah / Linda at 03-4149 1192 or email to zar_perunding@yahoo.com for registration.
Thank you.
Regards,
The Manager
Zar Perunding Pusaka Sdn Bhd
49-1, Wisma Aziz Hassan, Jalan 2/27F
Seksyen 5, Pusat Bandar Wangsa Maju (KLSC)
53300 Kuala Lumpur
Tel : 03-41491192
Fax: 03-41424962
MUSLIMS AND NON-MUSLIMS ARE WELCOME
SEATS ARE LIMITED!
Date : 18th March 2008 (Tuesday)
Time : 8.30 am - 5.30 pm
Venue : Zar Perunding Pusaka Sdn Bhd, Wangsa Maju, Kuala Lumpur
Fee(s) : RM490 (for SIDC & MFPC Member)
RM590 (for Individual / Non-Member)
RM690 (for Individual / Corporate Organization)
Programme : Muslim Business Wills Workshop
Date : 19th March 2008 (Wednesday)
Time : 8.30 am - 5.30 pm
Venue : Zar Perunding Pusaka Sdn Bhd, Wangsa Maju, Kuala Lumpur
Fee(s) : RM490 (for SIDC & MFPC Member)
RM590 (for Individual / Non-Member)
RM690 (for Individual / Corporate Organization)
Kindly contact Ms Fitriah / Linda at 03-4149 1192 or email to zar_perunding@yahoo.com for registration.
Thank you.
Regards,
The Manager
Zar Perunding Pusaka Sdn Bhd
49-1, Wisma Aziz Hassan, Jalan 2/27F
Seksyen 5, Pusat Bandar Wangsa Maju (KLSC)
53300 Kuala Lumpur
Tel : 03-41491192
Fax: 03-41424962
MUSLIMS AND NON-MUSLIMS ARE WELCOME
SEATS ARE LIMITED!
Muslims Dilemma
Zainal was a successful businessman. He had all the trappings of success- a Mercedes Benz E-class, his own building named “Wisma Zainal” and was a respective amongst his peers. He was in the construction industry and had a ‘Class A PKK License’ construction company registered with the Ministry of Entrepreneurial Development and the Ministry of Finance. However, to secure and perform the contracts, his company had to borrow from the Bank and he had to give his personal guarantee as a company director.
One day, he had a fatal stroke and had to undergo immediate surgery. The effect was that he was rendered semi-paralysed; the right side of his body was immobilized and his speech was slurred. He also could not walk and was wheel-chair bound. Needless to say, his business suffered thereafter less than a year after the stroke. Zainal died aged 49, leaving behind two (2) wives, five (5) daughters and an adopted son, all minors.
The family then realized that Zainal had not planned for them as he had not expected to die soon. He had no taken any insurance nor had he planned for anyone to succeed him in his business. Also his two (2) wives were not getting along well and he had also not provided for any bequest (Wasiyyah) for his adopted son. Coupled with that, his brothers who were heirs to his estate were making inquiries about their share. His company totally collapsed and everything was in shambles.
The above story may look familiar to many of us. Why don’t people do something about it, you may ask. Well, there are a number of reasons. So the question arises as to why Malays (used interchangeably with Muslims) do not plan their estate?
To the Malays, inheritance planning does not seem to be an important issue in their lives. They probably do not understand the inheritance planning principles and strategies and are not aware of the importance of inheritance planning. Many also do not realize the negative repercussions which may arise from not planning one’s estate.
Many times have I asked my friends “Don’t you think you should do inheritance planning for the future well-being of your family?” Their replies would be “It is not a critical matter. As Muslims, our rights for the inheritance have been pre-determined under the Hukum Faraid (the Islamic Law of Inheritance) and therefore, we cannot distribute assets any way we want upon death.” This is generally how most Muslims in this country view inheritance planning.
The Muslims’ misunderstanding of the Hukum Faraid have resulted in many insisting on Faraid distribution as the only recourse. However, if followed there may be too many splits of the shares undivided property, to the extent that all parties will lose out. In fact, if properly understood, the Syariah Law allows for inheritance distribution to be done through consensus as long as everyone agrees and no one is a minor.
Yet another reason would be that, the Malays have always been brought up too courteous and well-mannered. Therefore, seldom do they do anything to expedite the process of distributing the family inheritance. Some say; “Hush, the grave is still fresh, how can you think of gathering the family to discuss the inheritance distribution?” Unfortunately, soon after the burial ceremonies are over, everyone would have returned to their own homes and would once again be caught up in the routine of daily living. In the end, the issue of inheritance remains unresolved and inevitably gets delayed.
When the process for inheritance distribution is finally initiated, the heirs will be faced with the problem of obtaining all the information needed for the distribution of the inheritance, such as information about the property, the heirs and any debts owed by the deceased person. When the deceased person did not leave clear information, sometimes the names of certain heirs may be deleted when it is later determined that they were adopted children. There have also been instances when suddenly non-family members will emerge, claiming to be the heirs. In the end, it turns out that unknowing to the family, the deceased person had been polygamous.
Whatever the reasons, the fact remains that the Muslims do not see inheritance planning as a critical matter. In Malaysia, out of 25.7 million population, about 10.0 millions are Muslims between the age of 20-65. Sad to say, up until 2002, Amanah Raya Berhad has reported that less than 500 Muslims have written Wills.
Planning the inheritance is a noble effort to ensure the smooth administration of property by ensuring assets are unfrozen soonest possible and to ensure that the properties are not split into too many portions, thereby diminishing its potential value. Through inheritance planning, family harmony can be maintained and justice ensured. The beneficiaries will also be protected from being cheated by unscrupulous parties, such as debt collectors and false beneficiaries.
Besides benefiting the waris (heirs) a person who has planned his inheritance has in essence planned for his own salvation in the afterlife. Debts to other people or Allah such as Haj, Zakat etc can be settled by the appointed Executor (Wasi). The role of the Wasi is similar of that of a representative of the deceased person in ensuring that all unfinished matters are settled and completed. Life is only temporary (short or long, it is temporary nonetheless) and no one knows when he or she will be called to face the Creator. As such, it is crucial for us to plan ahead and ensure we do not leave problems behind.
Coming back to Zainal, had he not died prematurely, how could he have planned in such a way as to alleviate the anticipated problems? Amongst the strategies he could have executed were as follows:-
(i) Business Succession Planning.
He could have taken a partner or two who can takeover the business upon his demise and maintain the value of the business. Also, he could execute a buy-sell insurance strategy to ensure an exit strategy had he died unexpectedly.
(ii) Write an Islamic Will (Wisoyah) Document.
The Wisoyah Document is a testamentary document which will enable the application for the Grant of Probate to be made (instead of the Grant of Letters of Administration ) under the Probate and the Administration Act 1959. The essence of the Wisoyah Document is the appointment of the Executor(s) which can be an individual or a Trustee Company who will execute all instructions of the Testator (in this case, Zainal) upon death, for as long as they do not contravene the Syariah Law. In the Wisoyah Document, Zainal can appoint Trustees and Guardians for his children, bearing in mind that all of them are still minors.
(iii) ‘Harta Sepencarian’ (Jointly acquired property) Document.
‘Harta Sepencarian’ is defined as property jointly acquired by the husband and wife during the subsistence of marriage in accordance with the conditions stipulated by Hukum Syarak. In simple language, it means the earnings, or property acquired as a result of the joint labour of two spouses and includes the income derived from the capital which is itself the result of joint labour. Since Zainal is polygamous, it is only fair and proper that he declares and allocates to each spouse by way of a written declaration of this right to ‘harta sepencarian’ which can be used to prove and claim the right.
(iv) Wasiyyah (Islamic Bequest) Document
Since Zainal has an adopted child, he can bequeath up to one-third of his estate to his adopted child. Hence to plan, Zainal must know his net asset value (assets minus liabilities) before he can ascertain the value of the one- third. Anything above the value must be consented by all the heirs, otherwise the ‘extra’ must be refunded or returned to the estate.
(v) Insurance.
To provide for sufficient insurance cover to ensure that the financial needs of the family can be maintained in the event of one’s demise, is an absolute necessity. Zainal should contact a financial planner to have a needs-analysis check-up to ensure sufficient insurance cover for his family and dependants. At the same time, he could have covered himself for the ‘total permanent disability’ insurance in anticipation of situations where he could no longer work.
Maybe if Zainal could ‘come back’, he would have done a lot of things differently. We still have a choice , don’t we? Let’s not waste the opportunity.
One day, he had a fatal stroke and had to undergo immediate surgery. The effect was that he was rendered semi-paralysed; the right side of his body was immobilized and his speech was slurred. He also could not walk and was wheel-chair bound. Needless to say, his business suffered thereafter less than a year after the stroke. Zainal died aged 49, leaving behind two (2) wives, five (5) daughters and an adopted son, all minors.
The family then realized that Zainal had not planned for them as he had not expected to die soon. He had no taken any insurance nor had he planned for anyone to succeed him in his business. Also his two (2) wives were not getting along well and he had also not provided for any bequest (Wasiyyah) for his adopted son. Coupled with that, his brothers who were heirs to his estate were making inquiries about their share. His company totally collapsed and everything was in shambles.
The above story may look familiar to many of us. Why don’t people do something about it, you may ask. Well, there are a number of reasons. So the question arises as to why Malays (used interchangeably with Muslims) do not plan their estate?
To the Malays, inheritance planning does not seem to be an important issue in their lives. They probably do not understand the inheritance planning principles and strategies and are not aware of the importance of inheritance planning. Many also do not realize the negative repercussions which may arise from not planning one’s estate.
Many times have I asked my friends “Don’t you think you should do inheritance planning for the future well-being of your family?” Their replies would be “It is not a critical matter. As Muslims, our rights for the inheritance have been pre-determined under the Hukum Faraid (the Islamic Law of Inheritance) and therefore, we cannot distribute assets any way we want upon death.” This is generally how most Muslims in this country view inheritance planning.
The Muslims’ misunderstanding of the Hukum Faraid have resulted in many insisting on Faraid distribution as the only recourse. However, if followed there may be too many splits of the shares undivided property, to the extent that all parties will lose out. In fact, if properly understood, the Syariah Law allows for inheritance distribution to be done through consensus as long as everyone agrees and no one is a minor.
Yet another reason would be that, the Malays have always been brought up too courteous and well-mannered. Therefore, seldom do they do anything to expedite the process of distributing the family inheritance. Some say; “Hush, the grave is still fresh, how can you think of gathering the family to discuss the inheritance distribution?” Unfortunately, soon after the burial ceremonies are over, everyone would have returned to their own homes and would once again be caught up in the routine of daily living. In the end, the issue of inheritance remains unresolved and inevitably gets delayed.
When the process for inheritance distribution is finally initiated, the heirs will be faced with the problem of obtaining all the information needed for the distribution of the inheritance, such as information about the property, the heirs and any debts owed by the deceased person. When the deceased person did not leave clear information, sometimes the names of certain heirs may be deleted when it is later determined that they were adopted children. There have also been instances when suddenly non-family members will emerge, claiming to be the heirs. In the end, it turns out that unknowing to the family, the deceased person had been polygamous.
Whatever the reasons, the fact remains that the Muslims do not see inheritance planning as a critical matter. In Malaysia, out of 25.7 million population, about 10.0 millions are Muslims between the age of 20-65. Sad to say, up until 2002, Amanah Raya Berhad has reported that less than 500 Muslims have written Wills.
Planning the inheritance is a noble effort to ensure the smooth administration of property by ensuring assets are unfrozen soonest possible and to ensure that the properties are not split into too many portions, thereby diminishing its potential value. Through inheritance planning, family harmony can be maintained and justice ensured. The beneficiaries will also be protected from being cheated by unscrupulous parties, such as debt collectors and false beneficiaries.
Besides benefiting the waris (heirs) a person who has planned his inheritance has in essence planned for his own salvation in the afterlife. Debts to other people or Allah such as Haj, Zakat etc can be settled by the appointed Executor (Wasi). The role of the Wasi is similar of that of a representative of the deceased person in ensuring that all unfinished matters are settled and completed. Life is only temporary (short or long, it is temporary nonetheless) and no one knows when he or she will be called to face the Creator. As such, it is crucial for us to plan ahead and ensure we do not leave problems behind.
Coming back to Zainal, had he not died prematurely, how could he have planned in such a way as to alleviate the anticipated problems? Amongst the strategies he could have executed were as follows:-
(i) Business Succession Planning.
He could have taken a partner or two who can takeover the business upon his demise and maintain the value of the business. Also, he could execute a buy-sell insurance strategy to ensure an exit strategy had he died unexpectedly.
(ii) Write an Islamic Will (Wisoyah) Document.
The Wisoyah Document is a testamentary document which will enable the application for the Grant of Probate to be made (instead of the Grant of Letters of Administration ) under the Probate and the Administration Act 1959. The essence of the Wisoyah Document is the appointment of the Executor(s) which can be an individual or a Trustee Company who will execute all instructions of the Testator (in this case, Zainal) upon death, for as long as they do not contravene the Syariah Law. In the Wisoyah Document, Zainal can appoint Trustees and Guardians for his children, bearing in mind that all of them are still minors.
(iii) ‘Harta Sepencarian’ (Jointly acquired property) Document.
‘Harta Sepencarian’ is defined as property jointly acquired by the husband and wife during the subsistence of marriage in accordance with the conditions stipulated by Hukum Syarak. In simple language, it means the earnings, or property acquired as a result of the joint labour of two spouses and includes the income derived from the capital which is itself the result of joint labour. Since Zainal is polygamous, it is only fair and proper that he declares and allocates to each spouse by way of a written declaration of this right to ‘harta sepencarian’ which can be used to prove and claim the right.
(iv) Wasiyyah (Islamic Bequest) Document
Since Zainal has an adopted child, he can bequeath up to one-third of his estate to his adopted child. Hence to plan, Zainal must know his net asset value (assets minus liabilities) before he can ascertain the value of the one- third. Anything above the value must be consented by all the heirs, otherwise the ‘extra’ must be refunded or returned to the estate.
(v) Insurance.
To provide for sufficient insurance cover to ensure that the financial needs of the family can be maintained in the event of one’s demise, is an absolute necessity. Zainal should contact a financial planner to have a needs-analysis check-up to ensure sufficient insurance cover for his family and dependants. At the same time, he could have covered himself for the ‘total permanent disability’ insurance in anticipation of situations where he could no longer work.
Maybe if Zainal could ‘come back’, he would have done a lot of things differently. We still have a choice , don’t we? Let’s not waste the opportunity.
Who is Zar Perunding Pusaka?
ZAR Perunding Pusaka Sdn Bhd [ZPP] is a reputable and experienced firm providing consultancy services in the field of Islamic inheritance and business succession planning.
ZPP is backed up by a team of Civil and Syariah lawyers, financial planners, estate planning consultants and also supported by opinions from the experts in the Muslim estate administration and distribution. The Islamic estate planning products are endorsed by the International Islamic University of Malaysia [IIUM] as syariah compliance and Faraid calculation software from Universiti Sains Malaysia.
As the estate planning advisor / consultant, ZPP has introduced various Islamic Estate Planning [IEP] products / documents namely Surat Wisoyah [Islamic Entrustment Document], Surat Wasiyyah [Islamic Bequest Document], Surat Hibah [Gift During Lifetime Document], and Surat Harta Sepencarian [Mutually Acquired Property Document].
Besides providing the advisory / consultation on estate planning and distribution for both individual and company (business succession planning), ZPP also organized talks, seminars and workshops as to create awareness amongst the Muslims and to develop the knowledge in the IEP. We are conducting the Muslim Estate Planning & Distribution Workshop and Muslim Business Will Workshop monthly and those workshops are endorsed by Securities Commission of Malaysia.
For more information / enquiries, contact:-
Zar Perunding Pusaka Sdn Bhd
49-1, Jalan 2/27F, Section 5
Pusat Bandar Wangsa Maju (KLSC)
53300 Kuala Lumpur
Tel : 03-4149 1192 (Ms Fitriah / Linda)
Fax : 03-4142 4962 or
Email : zar_perunding@yahoo.com
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