Estate Planning (FIN533) Chapter 8 Wills and Faraid PDF

PERSONAL FINANCIAL PLANNING (FIN533) CHAPTER 8 ESTATE PLANNING Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Wills and Faraid TOPICS OUTLINE Introduction to Estate Planning ⚫ Conventional Will ⚫ Islamic Will ⚫ Harta Sepencarian @ Matrimonial Property ⚫ Trust ⚫ Far...

PERSONAL FINANCIAL PLANNING (FIN533) CHAPTER 8 ESTATE PLANNING Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Wills and Faraid TOPICS OUTLINE Introduction to Estate Planning ⚫ Conventional Will ⚫ Islamic Will ⚫ Harta Sepencarian @ Matrimonial Property ⚫ Trust ⚫ Faraid ⚫ Hibah ⚫ STATISTICS FOR UNCLAIMED ESTATE RM BILLION Sources: Bahagian Pembahagian Pusaka, Jabatan Tanah dan Galian Persekutuan Kementerian Sumber Asli dan Alam Sekitar Latest As At January 2019… ⚫ ⚫ Pakar Perancang Harta Pusaka Islam As Salihin Trustee Berhad, Norisah Ibrahim berkata, sejumlah RM66 bilion harta pusaka umat Islam tidak dituntut, malah harta pusaka khusus rumah dan tanah dibiarkan bertahun-tahun tanpa diurus. Artikel Penuh : https://www.sinarharian.com.my/article/8951/ BISNES/Hartanah-pusaka© 2018 Hakcipta Terpelihara Kumpulan Karangkraf More news… And more news… Latest in the news… DEATH IS CERTAIN!! Legally effective arrangement for the disposition and management of a person’s estate according to Syariah and Civil law Introduction to Estate Planning Estate planning is more than just writing a will as it involves a lot of processes. ⚫ There are many aspects of will writing that requires proper planning to ensure that it is a functional will. ⚫ It is also to ensure that the instructions stated in the will can be carried out. ⚫ Definition ⚫ A Will is a declaration in prescribed form of the intention of the person making it of the matters which he wishes to take effect on or after his death, until which time it is revocable. ⚫ Section 2 of the Will Act 1959 defines a will as "a declaration intended to have legal effect of the intentions of a testator with respect to the property or other matters which he desires to be carried into effect after his death and includes a testament, a codicil and an appointment by Will or by writing in the nature of a Will in exercise of a power and also a disposition by Will or testament of the guardianship, custody and tuition of any child". Definition ⚫ For Muslim, Muslim Wills Enactment (Selangor) 1999 defined Will as an "Iqrar of a person made during his life time with respect to his property or benefit thereof, to be carried out for the purposes of charity or for any other purposes permissible by the Islamic Law, after his death“. ⚫ The Act further specifies that "it shall not apply to the Wills of person professing the Muslim religion whose testamentary powers shall remain unaffected by anything in this Act contained". ⚫ Therefore, a will is a legal instrument used by a person to distribute his wealth to his beneficiaries upon his death. WHAT IS A WILL? From conventional perspective: A legal document in which you declare your wishes for your loved ones and how to distribute your assets after you pass away Conventional Will Conventional Will WHAT DOES A WILL CONTAIN? ▪Testator’s name, IC number, date of birth, address, religion, contact numbers ▪Name of the testator’s spouse and date of marriage (if any) ▪Name of all of the testator’s children (if any) ▪Distribution instructions for the property owned by the testator. ▪You will need to provide the beneficiary’s name(s), IC number(s), relationship to testator, percentage of share of estate ▪Nomination of the Executor (a person appointed by a testator to carry out the terms of the Will) ▪Designation of a guardian for minor children ▪Funeral arrangements. You can choose whether you want to be buried or cremated, specify where the funeral should be held and other specific instructions. ▪Personal comments. You can also add any personal comments and if you wish. PERSONS IN A WILL Testator • A person who write a Will. Executor(s) • - A person(s) or a trust corporation appointed by the testator to administer his/her estate. Trustee(s) • - Person(s) or Trust Corporation appointed in a Will to hold on trust for beneficiaries who inherit assets in a Will. Guardian • A person appointed to take care of the welfare of minor children Beneficiaries • A person(s) or entities (eg. a charity) who receive gifts under a Will. Two witnesses • - 2 independent parties who witnessed the testator signing the Will REASONS FOR MAKING A WILL Protect Your Assets and Provide for Your Loved Ones Speed up Distribution Process Appointing a Trustee or Executor Appoint Guardian(s) for Your Children Setting Up Trust Fund for Children Instructions on Funeral Arrangements Less Quarrel and Confusion Gifts to Love Ones CONSEQUENCES OF NOT HAVING A WILL ⚫ Your assets or estate will not be distributed according to your personal wishes ⚫ The beneficiaries under the intestacy law may not include the people you want to give your property to ⚫ It takes a long time for money and other assets to be passed to the beneficiaries or the assets may be frozen. ⚫ ⚫ You might be liable to unnecessary tax conflict and squabbles between family members and love ones TYPES OF WILLS ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ INDIVIDUAL WILL MUTUAL WILL JOINT WILL PRIVILEGED WILL ISLAMIC WILL (WASIAT) HOLOGRAPHIC WILL LIVING WILL INDIVIDUAL WILL ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ It is the most popular type of will written by an individual. It allows the testator to state, among others, the following: The right to appoint executor(s) and trustee(s) The right to name persons to receive the gift in the will and to state when and how the beneficiary is to receive the gift The right to appoint guardian for the testator's minor children The right to give instruction the executor with regards to the assets to be used for payment of debts and liabilities The Wills Act 1959 would govern the validity of such a will. MUTUAL WILL It is where 2 persons or more write their wills in one document (where it is a joint will) or in separate documents (in separate individual wills). ⚫ The terms of the wills are the same and confer reciprocal benefits to each testator and their common beneficiaries such as their children. The mutual wills contain an agreement between the parties that during the lifetime of each other, they cannot revoke their wills without the consent of the other testator. ⚫ Therefore, mutual wills can be revoked with the consent of the other testator but upon death of a joint testator the mutual will becomes irrevocable. If the surviving testator revokes it, he will be subjected to a breach of contract or breach of trust by the beneficiaries. ⚫ The Wills Act 1959 would govern the validity of such a will. ⚫ JOINT WILL ⚫ ⚫ ⚫ It is where 2 persons write their wills in one document. Essentially, it is 2 wills in one document. Usually it is used by husband and wife. Upon death of one person, probate is applied for the deceased and the will can still be used for the remaining person. It is not recommended because it no longer provides confidentiality for the surviving person when Probate is applied for the first person. The Wills Act 1959 would govern the validity of such a will. PRIVILEGED WILL ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ This type of Will is governed under Section 26 of the Wills Act 1959. It applies only to: members of the armed forces of Malaysia being in actual military service (this would mean at a time of war), and a mariner or seaman (including a member of the naval forces of Malaysia) being at sea. Privileged wills need not be in writing or signed by the client or attested by 2 witnesses. Such a will, as like individual wills, allows for the distribution of his assets and/or of the appointment guardian, custody and tuition of a child. A privileged will no longer will be valid if the testator survives the expiry of 1 month. ISLAMIC WILL (WASIAT) ⚫ ⚫ ⚫ The Wills Act 1959 does not apply for Islamic wills and Syariah law governs creation of Islamic wills and law of succession. In some states such as the Muslim Wills Enactment (Selangor) 1999, Muslim Wills (Negeri Sembilan) Enactment of 2004 and the Muslim Wills (Malacca) Enactment of 2005 governs the validity of a Muslim will written in Selangor. Muslims are allowed only to dispose up to 1/3 of the estate to non-specified heirs at the time of his death. The remaining 2/3 shall be distributed according to Islamic law to specified heirs under Faraid. HOLOGRAPHIC WILL & LIVING WILL ⚫ HOLOGRAPHIC WILL: It is a handwritten will and signed by the testator but without the attestation of witnesses. Such will is not recognized in Malaysia as all wills must comply with Wills Act 1959. ⚫ LIVING WILL: It is a legal document that a person uses to make known his wishes regarding life prolonging medical treatments. It can also be referred to as an advance directive, health care directive, or a physician's directive. It is not recognized in Malaysia. VALIDITY OF A WILL Written form No will shall be valid unless it is in writing as stated in s.5 Wills Act 1959. An exception is allowed for privileged will as stated in s.26 Wills Act 1959. The will can be handwritten or typed and can be in any language. However, a will done by video or audio is not valid as it is not considered to be written. ⚫ Execution s.5 Wills Act 1959 states that the testator must sign or affix his mark (e.g. thumbprint) at the end of the Will or so placed that it shall appear that it was intended to give effect to the writing as a Will. Where necessary, s.5 Wills Act 1959, allows another person to sign the will on behalf of the testator at his direction (which means that the testator must have sound mind when giving such direction). This is usually done when the testator is physically disabled and could not execute his will by way of thumb print. ⚫ Attestation A will must be attested by at least 2 witnesses present at the same time when the testator or the person signing on his behalf sign. ⚫ LEGAL CAPACITY When executing the will, the testator must have the following capacities: Age The testator had attained the age of 18 for Peninsular Malaysia and Sarawak (s.4 Wills Act 1959) or had attained the age of 21 for Sabah (s.4 Wills Ordinance 1953). ⚫ Mental capacity The testator is of sound mind at the time of signing the Will (s.3 Wills Act 1959). Where the testator is under medical treatment and/or suffering from an illness that may affect the sound mind of the testator, it is recommended to have a doctor as one of the witnesses and where possible the doctor is to record of the testator's mental state at that time and the record be kept together with the will. ⚫ REVOCATION OF A WILL ⚫ ⚫ A will is revocable before death. This would allow the testator to terminate the will where it is suitable to do so or to amend the terms of the will. A will is revoked when there is: Marriage - s.12 Wills Act 1959 / s.12 Wills Ordinance 1953 ◦ The testator's valid marriage will automatically revoke a will written prior to the marriage. This would also apply to remarriages. ◦ An exception would be when the testator states in the will the name of the person he intends to marry in the future and also state that the will is not to be revoked when he marries the person so named (called "in contemplation/expectation of marriage"). This exception will not be valid if the name of the person the testator intends to marry is not stated or where the testator marries another person. ⚫ ⚫ Divorce will not revoke a will and it is important for the testator to rewrite his will as the ex-spouse will still be able to inherit. Intentional destruction - s.14 Wills Act 1959 / s.14 Wills Ordinance 1953 ◦ When the testator destroys the will with the intention to revoke the will, it is a valid revocation. REVOCATION OF A WILL…continue ⚫ However, accidental destruction or malicious destruction by a third party does not constitute effective revocation. This is where a copy of the last will and testament could be used to obtain Probate. ⚫ A later will - s.14 Wills Act 1959 / s.14 Wills Ordinance 1953 ◦ A will that is dated later will always revoke the earlier one. It can be done either expressly by having a revocation clause e.g. 'I revoke all my earlier wills' or by implication with reference to the date of the last will and testament. ⚫ Duly executed writing declaring an intention to revoke - s.14 Wills Act 1959 / s.14 Wills Ordinance 1953 ◦ Revocation is made where the testator executes a written statement to revoke his will and this document is signed by himself and 2 witnesses. The execution and attestation of this document follows the same rules as execution and attestation of a will. ⚫ Conversion to Islam ◦ The Wills Act 1959 does not apply to Muslims as stated in s.2 Wills Act 1959. Further, when a person converts to be a Muslim, Islamic law takes effect. Therefore, the will of any person who converts to be a Muslim is no longer valid. LAWS OF TESTACY AND INTESTACY ⚫ ⚫ ⚫ ⚫ ⚫ When a person passes away, his estate can be categorized as: Testate - where there is a valid will that distribute the entire estate of the testator. Intestate - where there is no valid will and the distribution of the estate is according to the intestacy laws. Partial intestacy - where there is a valid will but it does not distribute the entire estate but partially. Assets in the will are to be distributed according to the will and the remainder according to the intestacy law. Probate - legal process of proving the will and settling a testate estate of the testator. LAWS OF TESTACY AND INTESTACY Wills Act 1959 / Islamic law . • • • Proving executor (who is willing and able executor) makes the application; Application for Grant of Probate is made to clothe the executor with authority and to determine the validity of the will; Distribution is according to the terms of the will to the beneficiaries. If there is a non-proving executor, the Administrator (who is unanimously appointed by the beneficiaries and approved by the court) makes the application for Letters of Administration with Will Annexed. Distribution is • • • Distribution Act 1958 Intestate Succession Ordinance 1960 Faraid distribution • Administrator (who is unanimously appointed by the beneficiaries and approved by the court) makes the application; • Application for Letters of Administration is made to clothe him with authority; Administration Bond provided by 2 sureties are required (note - see Administration Bond below); 13-39 Distribution is according to intestate • • SUMMARY ADMINISTRATION • Application is made to Amanah Raya Berhad • Administrator (DLA) (ARB) being the public trustee of Malaysia • Value of gross estate must not exceed Application for Distribution Order is made to the District Land • DLA has exclusive jurisdiction in the administration of intestate small estates RM2,000,000 • The estate consists of only movable assets • Value of gross estate must not exceed RM2,000,000 • The estate can be testate or intestate • The estate consists wholly of immovable assets or partially immovable • No administration bond is required. • Intestate distribution is according to the • The estate must be intestate Distribution Act 1958 or Intestate Succession • The DLA of the district where the greater part in value of the property Ordinance 1960 or Islamic law assets is situated has exclusive jurisdiction to deal with the distribution and administration of the whole estate wherever situated but the Director of Lands and Mines may transfer the petition to the DLA in another district if it can be shown that such a transfer would be to the general convenience of the parties involved and it would be expedite the administration process. 13-40 ISLAMIC WILL Settlement of all funeral expenses; Settlement of debts (actual or spiritual); Testamentary disposition (Wasiat); Settlement of any claim of Matrimonial Property @ “Harta Sepencarian”. Division of the residuary estate of the deceased accordance with the principles of Faraid. in Wasiat is an iqrar or declaration of a person made during his lifetime with respect to his property or benefit thereof, to be carried out for the purpose of charity or for any other purpose permissible by Islamic law after his death. Iqrar is an admission made by a person, in writing or orally or by gesture, stating that he is under an obligation or liability to another person in respect of the same right. WASIAT Even though Faraid is the predominant inheritance law, a Muslim is encouraged to write a will (wasiat). "It is not permissible for any Muslim who has something to Will to stay for two nights without having his Last Will and Testament written and kept ready with him“, Prophet Muhammad s.a.w s a i d, as narrated by Abdullah bin Umar BASIC PRINCIPLES OF WASIAT ⚫ ⚫ ⚫ ⚫ Muslims can give 1/3 of his estate to non-Faraid heirs. 1/3 of the estate is determined at the time of applying for Probate in the High Court. The testator may stipulate what assets form part of the 1/3 of the estate to be received by the wasiat beneficiaries. In the event more than 1/3 of the estate is given in the wasiat to the wasiat beneficiaries, the Faraid heirs are to approve the gift because their 2/3 portions will be reduced. If the 1/3 is given to one of the Faraid heirs, the rest of the Faraid heirs are to approve the gift as it would be unfair to them. CONTENTS OF ISLAMIC WILL ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ The contents of a wasiat include: Appointment of executor (wasi) - the executor must be a male Muslim or a trust corporation registered under the Trust Companies Act 1949; Appointment of guardian; To make provisions of up to 1/3 of the estate to be distributed for adopted children, step-children, family members who are non-Muslims, charities and poor non-Faraid heirs or friends; Make specific declarations for e.g. declare to be holding assets on trust for loved ones; Witnesses of the will - require 2 male Muslim witnesses. BENEFITS OF HAVING AN ISLAMIC WILL ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ There are various benefits, among them are: Avoid disputes between Faraid heirs who should be appointed as Administrator as testator can appoint his chosen Muslim male executor; Avoid having to apply for Letters of Administration that causes delay; To ensure that the distribution of the estate will be fast and efficient using Probate; Probate has lesser formalities, thus avoiding possible erosion of the value of the estate; Freedom to distribute 1/3 of the estate to the testator's chosen beneficiary. With a wasiat, the testator can determine the amount of inheritance and when the beneficiary stands to inherit the 1/3 of the estate. Testacy (with will) Intestacy (without will) Asset Frozen Asset Frozen Application for Letters of Administration (appointment of administrator and Sijil Faraid) Administrator appointed finding Administrator Consent in writing from All beneficiaries Application for grant of Probet and Sijil Faraid Executor Application for dispensation of Sureties or Application for Appointing 2 sureties (Administration Bond) L.A granted Asset free Probate granted Asset free Typical Time Frame Testacy Petition Probate obtained* Estate distributed Death 2 months 6 months 1 year 18 months Intestacy Letters of Administration (LA) process Petition Application to have sureties appointed LA obtained* Estate distributed 1 year 2 years 4 years 5 years Death 30 months 3 years Notes * May take longer in some jurisdiction ** Petition for LA may take even longer if even one heir does not agree on the appointment or if the appointee is not willing to act *** Finding suitable sureties can be a hassle and this may further delay the process of obtaining the LA LOCATE THE WILL Applying for a Grant of Probate Calling in testator’s assets Paying testator’s debts Preparing a statement of account Distributing testator’s assets according to Wasiat Distributing testator’s assets according to Faraid Administration of deceased’s estate Avoid Family Contention Vesting of deceased’s estate and the right to carry on with deceased’s affair Calling in deceased’s assets Exemption from Administration Bond Appointment of Guardian Right to bequeath away 1/3 of the deceased heirs estate to non- HARTA SEPENCARIAN Property acquired; • by husband and wife during the subsistence of a valid marriage • both parties have contributed either directly or indirectly towards the acquisition of such property. • PENYELESAIAN LENGKAP PERANCANGAN HARTA PUSAKA ANDA Direct Contribution RM100k RM60k RM40k PENYELESAIAN LENGKAP PERANCANGAN HARTA PUSAKA ANDA Indirect Contribution RM100k RM0k RM100k CASES • Hajjah Saudah v. Hanafi; (Harta Sepencarian claim can be made after the death of the spouse) • Boto’ v. Jaafar; (Accompanying husband during fishing trips was considered as contribution) • Robert @Kamarulzaman v. Ummi Kalthom (Husband and Muslim convert can also claim Harta Sepencarian) PROPERTIES NOT DEEMED HARTA SEPENCARIAN • Gift received by way of inheritance; • Gift received by way of hibah before and marriage during WHETHER EPF CONTRIBUTIONS CAN BE CONSTRUED AS HARTA SEPENCARIAN? Fatwa Majlis Kebangsaan Bagi Hal Ehwal Agama Islam Malaysia kali ke-49 pada 10 September 2000 EPF contribution cannot be construed as Harta Sepencarian EPF AS HARTA SEPENCARIAN ⚫ ⚫ ⚫ Selangor turut mewartakan Hukum Simpanan Wang KWSP pada 9 Mei 2002 bagi ahli beragama Islam yang meninggal dunia. Fatwa itu menjelaskan perkara berikut: Wang KWSP yang disimpan ahli dianggap harta pusaka; Kaedah pembahagian harta pusaka adalah tertakluk kepada hukum faraid. Berdasarkan fatwa-fatwa yang dinyatakan di atas, jelaslah bahawa wang simpanan KWSP adalah hak milik mutlak pencarum yang perlu dibahagikan mengikut hukum faraid apabila pencarum meninggal dunia dan bukan harta sepencarian. ADVANTAGES OF HARTA SEPENCARIAN DECLARATION All parties can decide and agree upon the way of distribution Absolute satisfaction of parties as regards their respective shares Rights of both spouses fully protected Peace of mind Expedite distribution process Cost saving No contention@ dispute Convenient and easy TRUST ⚫ A Trust is a legal obligation that comes into existence when an individual (known as Settlor) transfers the legal ownership of his assets to another person (Trustee) to hold for the benefit of the beneficiaries Operation of Living Trust Sets the terms and conditions of the trust & transfers the ownership of trust assets to as-Salihin SETTLOR TRUSTEE as-Salihin carries out the wishes of settlor as per the Trust Deed The settlor may also name himself as one of beneficiaries of the Maintenance Trust BENEFICIAR IES Advantages of Living Trust • • • • Trust property is not considered part of the settlor’s estate You may decide on the terms of the distribution and these are not subject to Faraid There is no limit as to the amount you can place in a trust and your beneficiaries can be anyone, Muslim or non Muslim alike. Governed by the Trustee Company Act 1949 and the terms of the Trust Deed FARAID FARAID ⚫ Literally means something which has been fixed or determined ⚫ It is called “faraid” because Qur’an has fixed the shares of different heirs in the estate of the deceased What is Faraid? ⚫ A part of syariah law which stipulates how the estate of a Muslim is to be dealt with and distributed among the heirs after his or her death Basis of Faraid ⚫ Al-Quran ◦ Surah an-Nisa: Verse 11, 12 & 176 Surah an-Nisa’, verse 11: ⚫ “Allah commands you as regards your children (inheritance); to the male, a portion equals to that of two females; if (there are) only daughters two or more, their shares are two thirds of the inheritance; if only one, her share is half. For parents, a sixth share of inheritance to each if the deceased left children; if no children and the parents are the (only) heirs, the mother has a third; if the deceased left brothers or (sisters), the mother has a sixth. (The distribution in all cases is) after the payment of legacies he may have bequeathed or debts. You know not which of them, whether your parents or your children, are nearest to you in benefit, (these fixed shares) are ordained by Allah. And Allah is Ever All Knower, All Wise.” ⚫ ◦ (summary: 2:1, 2/3, ½, 1/6, 1/3) Basis of Faraid ⚫ Al-Quran ◦ Surah an-Nisa: Verse 11, 12 & 176 Surah an-Nisa’, verse 12: ⚫ “In that which your wives leave, your share is a half if they have no child, but if they leave a child, you get a fourth of that which they leave after payment of legacies that they may have bequeathed or debts. In that which you leave, their (your wives) share is a fourth if you leave no child; but if you leave a child, they get an eight of that which you leave after payment of legacies that you may have bequeathed or debts. If the man or woman whose inheritance is in question has left neither ascendants nor descendants, but has left a brother or a sister, each one of the two get a sixth; but if more than two, they share in a third; after payment of legacies he (or she) may have bequeathed or debts, so that no loss is caused (to anyone). This is a commandment from Allah; and Allah is ever All Knowing, Most Forbearing.” ⚫ (summary: ½, ¼, 1/8, 1/6, 1/3) ⚫ Basis of Faraid ⚫ Al-Quran ⚫ Surah an-Nisa’, verse 176: “They ask you for a legal verdict. Say “Allah directs (thus) about Al Kalalah (those who leave neither descendants nor ascendants as heirs). If it is a man that dies, leaving a sister, but no child, she shall have a half the inheritance. If (such a deceased was) a woman, who left no child, her brother takes her inheritance. If there are two sisters, they shall have two-thirds of the inheritance; if there are brothers and sisters, the male will have twice the share of the female. (Thus) does Allah make clear to you (His Law) lest you go astray? And Allah is the All Knower of everything.” (summary: ½, 2/3, 2:1) ⚫ ⚫ ◦ Surah an-Nisa: Verse 11, 12 & 176 What is the basis of Faraid? ⚫ The Quran: An-Nisa’ Ayat 11, 12 ,176 Which give specific details on inheritance share ⚫ Hadith: The Prophet Muhammad (peace be upon him) said: "Give the appointed portions to those entitled to them. Then whatever remains is for the nearest male." (Narrated by Bukhari). ⚫ Ijmak and Ijtihad* of the companions of the Messenger of Allah, imams of mazhab and mujtahid of proven knowledge. *Ijtihad (the process of making a legal decision by independent interpretation of the legal sources, the al-Quran and the Sunnah). Wealth Excluded From Inheritance 1-Wealth acquired by haram means 2-Collaterals given to the deceased person for debt owed to him ( unless debtor surrenders it in settlement of debt owed to the deceased person. 3- Collaterals given to a creditor by the deceased person unless the debt is paid or forgiven by creditor 4-Insurance or endowment policies that are categorized as riba (usury). What is an estate? Estate is all the assets and liabilities of a deceased person, which, according to Islamic law, may be inherited by the deceased person's heirs. WHAT ARE THE TYPES OF ESTATES? ❑ - Immovable property such as a building, a piece of land, a plantation, etc. - Movable property such as money, shares, jewelry, equipment, vehicles, clothes, etc. - Money owed to a deceased person. - Property that has been mortgaged or pawned by a deceased person and that is redeemable. - Property purchased by a deceased person during his lifetime for which payment has been made by him but which has not been delivered to him until his death. - Mahr (Dowry) that has yet to be paid to a wife until the wife's death. - Other assets such as savings, employee provident fund money, shares, unit trusts, bonds and insurance policies approved by Islamic law. - All the aforesaid property in and outside the residence of a deceased person. - All other assets of material value. WHAT MUST BE SETTLED FIRST BEFORE DISTRIBUTION TO THE HEIRS ARE MADE? ⚫ ⚫ ⚫ ⚫ ⚫ Settlement of all funeral expenses; Settlement of debts (actual or spiritual); Testamentary disposition; Settlement of any claim of Harta Sepencarian; Division of the residuary estate of the deceased in accordance with the principles of Faraid. PERSONS NOT ENTITLED TO GET INHERITANCE ⚫ A fugitive slave who has fled away from his master ⚫ One who has murdered one's ancestor intentionally or unintentionally ⚫ One who professes a religion other than Islam WHO ARE THE BENEFICIARIES? ⚫ Beneficiaries are the persons who have the right to inherit the estate of a deceased person on the basis of their relationship with the deceased by descent and marriage. ⚫ Male: son, grandson (and his direct male descendants), father, paternal grandfather, brother, half-brother (by the same father), half-brother (by the same mother), nephew (brother's son), nephew (half-brother's son), paternal uncle, father's half-brother (by the same father), son of paternal uncle, son of father's half-brother (by the same father), husband ⚫ Female: daughter, granddaughter (son's daughter), mother, maternal grandmother, paternal grandmother, sister, half-sister (by the same father), half-sister (by the same mother), wife Different Types of Heirs Zawul Furoodh Asabah -binafsih -bil Ghoir -maal ghoir Zawul Arham ACCORDING TO ISLAM, THE HEIRS HAVE BEEN DIVIDED INTO THREE CLASSES. (A) ZAWUL FUROODH ⚫ are those persons who have a right to definite shares in assets left by the deceased. These sharers are thirteen in number: ⚫ four males: father, grandfather, uterine brothers and husband ⚫ nine females: wife, daughter, son's daughter, mother, grandmother (paternal), grandmother (maternal), full sister, consanguine(descended from the same ancestor) sister, uterine sister. (B) ASABAH ⚫ When the heirs of the first group have received the respective shares, the residue of the assets falls to the share of those relatives who are called ASABAH which, according to the Shari'ah, implies those relatives in whose line of relationship no female enters. This is the second group of inheritors. (C) ZAWUL ARHAM ⚫ The last category of inheritors are known as Zawul Arham, i.e. relations connected through females, but it is in extremely rare cases that they get any share in the inheritance. Example of calculation (1) Formula Faraid Father - 1/6 + Balance ⚫ Mother - 1/6 ⚫ Wife- 1/8 ⚫ Daughter - 1/2 ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ 1/6(Father) + 1/6(Mother) + 1/8(Wife) + 1/2(Daughter) Then make the denominator equal = 4/24 + 4/24 + 3/24 + 12/24 =23/24 Residue(baki) is 1/24. Residue 1/24, will be given to the father. Example of calculation (2) Father - 1/6 ⚫ Mother - 1/6 ⚫ Wife- 1/8 ⚫ Son & Daughter - Ratio 2:1 ⚫ ⚫ 1/6(Father) + 1/6(Mother) + 1/8(Wife) ⚫ Then make the denominator equal ⚫ So, 4/24 + 4/24 + 3/24 = 11/24 ⚫ 24/24 - 11/24 = 13/24 (balance after been distributed to father, mother and wife) ⚫ The balance 13/24 then will given to Son and Daughter with the ratio of 2:1 In this case we have a son and a daughter ⚫ ⚫ ⚫ ⚫ ⚫ So 1X2 = 2 (for a son), 1X1=1 (for a daughter)= 3 Then 13/24 divide into 3 13/24 x 1/3 = 13/72 13/72 is the portion for 1 daughter Son will get 2 portions of daughter ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ So for father - 4/24 becomes 12/72 For mother - 4/24 becomes 12/72 For wife – 3/24 becomes 9/72 Sub Total 33/72, Balance 39/72 will be for son (2 portions) and daughter (1 portion). The new balance then becomes: Father = 12/72 Mother =12/72 Wife = 9/72 Son = 26/72 Daughter = 13/72 TOTAL = 72/72 HIBAH ❑ Hibah is transfer of ownership of the property free of charge by the person entitled to the property ❑ Hibah can be used to complement wasiat ❑ Ulike wasiat, which is limited to 1/3 of the estate, hibah is ulimited ❑ It is effective immediately whilst wasiat is effective after one’s death ❑ Hibah Terus and Hibah Amanah Hukum dan Pensyariatan Hibah Hibah ialah suatu amalan sunat dan digalakkan dalam Islam terutama sekali kepada kaum keluarga terdekat. Firman Allah S.W.T yang bermaksud: “Dan berikanlah kepada perempuan-perempuan itu maskahwin-maskahwin mereka sebagai pemberian yang wajib. Kemudian jika mereka dengan suka hatinya menyerahkan kepada kamu sebahagian daripada mas kahwin itu, makanlah (ambillah) pemberian (yang halal) itu sebagai nikmat yang lazat, lagi baik kesudahannya. (Surah Al-Nisa: ayat 4) Firman Allah S.W.T yang bermaksud: “.... dan memberikan harta yang dicintainya kepada kerabatnya, anak-anak yatim, orang-orang miskin, musafir (yang memerlukan pertolongan) dan orang-orang yang meminta-minta dan (memerdekakan) hamba sahaya” (Surah Al-Baqarah: ayat 177) Hadis Rasulullah S.A.W. yang bermaksud: “Saling memberi hadiahlah, nescaya kamu akan berkasih sayang” (HR. Malik 2/908) HIBAH ⚫ ⚫ ⚫ ⚫ It is a gift of love by the donor to the donee without any consideration being provided by the donee. However, such a gift is only complete when the offer made by the donor is accepted by the donee and upon taking delivery of the transferred property. The hibah must be created during the lifetime of the donor. When a hibah is created, the asset under hibah no longer forms part of the estate of the donor. As a result the hibah asset is not subjected to Faraid. For a hibah to be created, the following must be fulfilled: Donor - he must be at least the age of 18 years old, be of sound mind and has full ownership of the assets to be given away. If the asset is encumbered by a loan, then that assets cannot be part of a hibah. The donor when creating the hibah must be in good health. A hibah that is made upon death or due to an illness that causes death will be subject to the 1/3 rule. HIBAH ⚫ ⚫ ⚫ ⚫ Donee - he can be a minor or not and need not be of sound mind. In the event the donee has no sound mind then the guardian or trustee for the donee may accept on the donee's behalf of the gift. Assets - The asset placed under hibah must be halal, have economic value and must be given in total, not partially. If the donor owns an undivided share in a property, hibah can be done on the donor's entire undivided share in the property but not, for example, 1/4 of the donor's undivided share. However, it is not recommended that the donor create a hibah based on his undivided share in a property because it will give rise to complications where the joint owner of the property may not consent to it. Siahah - this is where the donor communicates clearly to the donee that the donor is giving the asset under a hibah and the donee must accept the hibah. Hibah Hibah is effective immediately (in one’s lifetime), whilst wasiat is effective after one’s death. Hibah can be used to complement wasiat. Unlike wasiat, which is limited to 1/3 of the estate, hibah is unlimited However Hibah Trust should be really thought out POP QUIZ ⚫ Encik Fattah dies and leaves a wife, a mother, 3 sons and 2 daughters. Calculate the respective faraid portions. ⚫ Puan Wardah dies and leaves a husband, a son and a daughter. Calculate the respective faraid portions. FARAID CALCULATOR ⚫ http://faraid.usm.my/msl/faraid.asp