Heirs need not lose out
By SHAHANAAZ HABIB (The Star : Sunday April 4, 2010)
The Muslim inheritance is a complicated matter and many are uninformed of the numerous ways to effectively provide for their heirs, especially women.
"Faraid provides the solution if a family can’t reach a settlement"- RAFIE OMAR
HASSAN died leaving behind his wife, two daughters and two sons.
But before he died, he drew up a will for his assets to be divided equally among the five.
His wishes differ from the faraid (Islamic law of inheritance and distribution) system.
Under faraid, his wife gets 1/8 of his assets, the two sons are entitled to twice the portion of their sisters which means each boy receives 7/24 of the assets while the sisters take 7/48 each.
(In Islam, it is the male member’s responsibility to take care of the female members lik e his wife, daughters, mother, sisters and aunts, he nce the male is entitled to two portions of the female’s share.)
So would Hassan’s last wishes be accepted or would the faraid system override it?
The final decision rests with the family member.
AmanahRaya Legacy Services’ CEO Rafie Omar says Hassan’s wishes will be carried out if all his heirs agree to it.
“Many Muslims mistakenly think that the faraid comes first.
But in Islam, faraid is in fact second to family settlement.
“Faraid is the law for distribution of estate upon death if the family can’t reach a settlement themselves. If all the heirs agree that everything should go to the mother – despite the faraid portion they are entitled to – will that be a problem?
No, there won’t be any problem.
A fair solution
“Faraid provides the solution if a family can’t reach a settlement,” he says.
So in the case of Hassan, if they all agree and say: “Yes, let’ s follow father’s wishes and divide it equally”, then it will be done, says Rafie.
One crucial point is that the agreement from the heirs must come after the person’s death. It is not enough to have them agree – even in writing – before the person’s death.
Because they can change their minds after their loved one is gone, the agreement made prior to the death becomes null and void.
However, from experience, Rafie finds when the heirs rea d the will, they normally agree with it and it i s carried out.
In the case of Hassan, if one of his sons opposes the equal distribution and fights for his two portion share, then the faraid system kicks in.
“The son who objects gets his two portions first, then the balance of the estate would be distributed equally among the remaining four,” explains Rafie.
And from AmanahRaya’s experience, he says, usually even if one family member disagrees with the will and insists on collecting his portion, the others would stillgo along with the will.
AmanahRaya Legacy Services Sdn Bhd (ARLS) is the wholly owned subsidiary of AmanahRaya Bhd, the country’s premier trustee company; its services include will writing, trust accounts, legacy management and estate administration services.
It is the main player in the market for writing wills for Muslims. So far, ARLS has written 302,972 wills or wasiat for Muslims and 34,480 for non-Muslims.
The faraid inheritance list apportions the asset based on more than 100 combinations of heirs.
For full list, refer to the AmanahRaya website www.arb.com.my
Unlike a non-Muslim will, the Muslim wasiat is unique because a person is allowed to will only up to 1/3 of his assets – a nd generally that goes to non-heirs.
This is because the share for heirs is already provided for through the faraid system.
The 1/3 ruling came into existence during the Holy Prophet’s time when one of his companions who was sick, wanted for all of his assets after his death to be given to charity and the Prophet said ‘no’.
He then asked if he could donate half to charity and again the Prophet said ‘no’; and when asked what about 1/3, the Holy Prophet said ‘yes’ adding, however, that “it is better to leave your heirs rich than poor and begging.”
Despite the 1/3 rule, Rafie says a Muslim h ere can still will all his assets or more than 1/3 to a non-heir, including a charity. “But when he dies and the wasiat is to be implemented, if his next-of-kin objects, then the non-heir is entitled to 1/3 maximum.
However, if all the heirs agree that the whole estate goes to the non-heir as stated in the will, t hen it w ill be done,” he says.
“With the Muslim wasiat, consent of the heirs is fundamental,” explains Rafie. So can a person then name an heir for the 1/3 portion?
Again, Rafie says, this is subject to approval from all the other heirs. If an heir is named for the 1/3 portion, then he would in f act be getting extra as he is already entitled to a share under the faraid distribution.
But if everyone agrees to it, then it will be implemented.
Rafie says heirs too can do a ‘takharuj’ which is renouncing their right to their share of the assets.
Citing a court case in the 1980s, he says a wealthy Muslim man in KL died, leaving a lot of assets and properties but since all his children were already doing well financially, none of them wanted a share of the assets.
“So they all agreed to ‘takharuj’ and give it all to the grandchildren.
That’s not faraid. But that’s not a problem since all the heirs agreed to it.”
Unique features
There are other unique features in the Muslim wasiat.
The debts of the dead person must be settled first, however, before the assets can be distributed.
After that, comes the 1/3 portion as stated in the will – that must be given out next.
Only after that will the family get their share through either family settlement or faraid.
By comparison, in a non-Muslim will, a person can deliberately exclude an heir from inheritance by making that intention very clear in the will.
But with Muslim wills, such an exclusion is not possible.
An heir is an heir and regardless of w hat is stated in the wasiat he is entitled to a share of the inheritance under faraid – unless he himself takharuj (gives up the right).
The faraid system is not without its critics, particularly when it comes to women and Muslim converts. With regards to family settlement, it does not work when it comes to families with all female heirs (see Seeking a just and fair share for all).
Some argue that present day realities are different and rules should evolve to meet the times while others argue th at faraid is God’s law and is not be tampered with.
With regards to family settlement, it does not work when it comes to families with all female heirs.
Rafie suggests that Muslims use other instruments available to them such as hibah (gifts) and trust funds to distribute their assets whichever way they want and to whoever they want while they are still alive.
“Wasiat is not the solution,” he ad ds. Citing an example, he says, if a father with three children wants to leave all his money and house to his second daughter because she is the one who takes care of him in his old age, he can do that.
What he should do is to give it to her now (inter vivos) and transfer everything to her name while he is still alive so it cannot be challenged later on.
Otherwise, he notes, even if his other two children give their consent during the father’s lifetime, once he is dead, they can withdraw their consent and make their claim for it under the faraid.
Similarly, Rafie advises Muslims to hibah (give) to those not entitled to a share under the faraid system such as a sister, an adopted brother or a non-Muslim family member if you would like them to get something from you.
“So give what you want now when you are still around,” he says.
An unusual feature of the hibah is that when it is from a parent to his child or grandparent to his grandchild, it can be revoked. If the parent or grandparent asks for his gift or house back, for whatever reason, the child or grandchild has a Syariah obligation to return it.
But if it is a gift to other people, then it cannot be revoked.
Another instrument is a trust fund for their loved ones.
Rafie says parents should consider transferring a sum of money or assets in a trust for their offspring.
“So when I die, I leave no estate behind; so there’s nothing others can claim. The trust fund for my child or children will not be frozen because it is theirs and not part of my estate.”
The parent can manage and control the fund while he is alive and when he is dead, the appointed trustee would manage it acc ording to what he has been instructed.
“Not many people know this but our trust funds give out a dividend of 4.5% annually. So if you put in RM100,000, you can enjoy a dividend of RM4,500 a year while you are still alive or you can plow it back to the fund so that it is compounded.”
Another interesting alternative much practised in the past, says Rafie, is for a parent to transfer a piece of land from himself to himself as a trustee for a particular child or children.
“So when he dies, what is the status of the land? The land is not his estate. The land is the trust property for those children.
And they can then organize the estate so that the land is transferred to them.
“A lot of people have forgotten this.
Muslims can do this and non-Muslims can too,” he says.
One other aspect not to be forgotten is, of course, insurance policies and the EPF savings.
For Muslims, the beneficiary does not take all the money. He plays the role as executor and is responsible for distributing it according to the faraid or family settlement.
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