IN the previous article, we discussed Zakat and Tax, and how Zakat is obligatory charity for Muslims to purify and protect wealth. We now look at Islamic Estate and Waqf, the fourth major component of Islamic financial planning. The major theme of this component is wealth distribution according to Islam and how Muslims can plan for their life even in the hereafter.
That this topic is unfamiliar to many Muslims and non-Muslims is evidenced in the reported RM40 billion worth of unclaimed cash and assets left by those who died intestate or without leaving a valid will.
We shall begin with the definitions. Islamic estate means the property or assets of a Muslim upon his death. Waqf is Arabic for charitable endowment. There is no equivalent in English to convey the meaning of Waqf.
Islamic Estate and Waqf deals primarily with what a Muslim leaves behind upon death and how he should plan his estate according to Shariah. While the issue of Hukum Faraid (the Islamic law of inheritance) quickly comes to mind, we shall not discuss this here. Suffice to mention that this law is obligatory for Muslims to follow, especially by the heirs of the deceased. From the perspective of the Muslim who is making plans for his estate, there are many other issues that he should be aware of.
We look at the rationale for such a plan. It is simply to ensure that our dependents are looked after when we die.
When estate planning becomes necessary
Such a plan becomes a necessity when dependents are infants, elderly parents or disabled. In these circumstances, the plan is deemed an act of worship (ibadah) because it secures a benefit and livelihood for the dependents.
Another issue people must be aware of is that administrative matters must be settled before any estate of the deceased can be distributed. The reality is that the estate is locked by law, with financial support cut off abruptly and possibly, for a long period of time. It is for this reason that some planning measures must be put into place for our loved ones.
Having a will for Muslims is highly recommended
Can a Muslim have a will? Yes, of course. Must a Muslim have a will? It depends. Generally, it is not obligatory for Muslims but a recommended act.
According to a hadith, it is not right for a Muslim who has property to bequeath to pass two nights without having his will written down. And, in another hadith, a Muslim who has made a will is he who dies on a clear path (having peace of mind), on a recommended practice, on being fearful of Allah wanting martyrdom and he dies forgiven.
A Muslim preparing to have a will needs to know some basic rules.
He must keep in mind the concept of wealth ownership in Islam, namely, all wealth belongs to Allah and man acts as trustee. As such, he cannot will away according to his wishes. Two basic rules are: (1) He cannot bequeath to his legal heirs. Legal heirs are those who have a fixed share of the deceased's estate according to Faraid, and (2) Bequests shall not exceed one-third of the estate after settling debts.
Even though the settlement of debts is a more important matter than having a will, these two matters can be resolved concurrently in estate planning. In fact, an effective financial plan must deal with all material issues comprehensively. It must be noted that there could be other claims against the estate, such as matrimonial assets and legal suits made in good faith before the distribution amount is ascertained.
For all Malaysians, Muslim and non-Muslim, having a will is highly recommended because of the estate administration laws. When a person dies without a will, the process to get the letter of administration from the court to unlock the estate of the deceased might take a long time.
Islamic Estate and Waqf planning is planning for the hereafter
So, how is estate planning related to charitable endowment (Waqf)?
Basically, the former is making plans for the loved ones we leave behind when we die, while the latter is making plans for ourselves in the hereafter.
In the Islamic worldview, the objective of undertaking Waqf planning is to achieve al-Falah, that is being successful in this world and in the hereafter. The body of knowledge on Waqf is rich and matters can be rather technical; legally and Shariah-wise.
Nevertheless, for a Muslim, his planning for Waqf is because he wants to achieve a "recurring charity".
In a hadith reported by Sahih Muslim, "Abu Huraira reported Allah's Messenger (may peace be upon him) as saying: When a man dies, his acts come to an end, but three; (1) recurring charity, or (2) knowledge (by which people) benefit, or (3) a pious son, who prays for him."
A recurring charity is a charitable act whereby the benefits of the act flow to the needy repeatedly. Through a Waqf, a Muslim can achieve a recurring charity. So, what is really a Waqf? A Waqf is akin to a trust, but with features that are unique only to Waqf.
For example, a Muslim bequeaths a house as charity to a Waqf, with instructions that the rental proceeds are donated to orphanages. As long as there are tenants, there will be money for the orphans. Depending on the Waqf manager, this giving away of an enduring asset, such as a house, can result in the charity being repeated many times. If the Waqf is properly structured, the benefits can even last in perpetuity.
A Muslim can create a Waqf during his lifetime or upon death by using the one-third provision for bequests. It is in this way that Islamic Estate and Waqf planning is planning for the hereafter.