About Shariah compliant estate planning

Estate planning for Muslim families is not just about dividing wealth; it’s about protecting it in a way that benefits your heirs and upholds Islamic ethics.

The primary objective of Shariah succession planning is to ensure the preservation of life, and stability and continuity of the deceased’s family.

The Holy Quran has explicitly prescribed, in detail, the way in which the estate of the deceased must be distributed to the heirs.

When a Muslim passes away, their estate should follow the below, in sequence:

1.Payment of funeral costs

2.Payment of debts and liabilities

3.Fulfilment of any bequests from 1/3 (if any have been made), and

4.Distribution of the residual estate to the entitled heirs

Estate Distribution

The residual estate is then distributed in accordance with a hierarchy of three classes of heirs:

1. The first is often referred to as the Quranic Heirs. These are six heirs who will always inherit if they survive the deceased. They are, the: husband, wife, son, daughter, father and mother

They will be entitled to specific shares, however, their shares may, at times, vary in terms of proportionality. For instance, a husband is entitled to half of his deceased wife’s estate if she has no children. If she has children, he is entitled to a quarter. On the other hand, a wife is entitled to a quarter share of her deceased husband’s estate if she has no children. If she has children, she is entitled to one eighth. Sons usually inherit twice as much as the daughters when one of their parents passes away. In the absence of children, the grandchildren or remoter issue will inherit, although the daughter’s children are unlikely to inherit even if the daughter has died.

Residuary Heirs

The remaining two classes are the residuary heirs:

2. The second consists of grandparents and any siblings. In the absence of siblings, the nephews and nieces will inherit.

3. All other residuary heirs, who do not form part of either of the first two categories, will fall into the third category.

In Shariah succession, there are two integral elements in relation to the estate of the deceased:

1. Distribution – this constitutes winding up of the estate, establishing entitled individuals and calculating their corresponding shares, transferring ownership of the assets to them, or giving them the power/access to their entitlements.

2. Apportioning or physically dividing assets – this is not a condition or indeed necessary for the distribution phase (explained above). Put simply, if the heirs want the assets to remain as they are, for example, to maintain joint ownership in a property or business, and that they want to continue to benefit in this manner then they have every right to do so.

Of course, any or all heirs may, at any time, wish to apportion their joint ownership. For convenience and practical purposes, they may choose to do this at a later date.

Shariah succession planning in accordance with the laws of England and Wales needs to be thought through carefully to ensure that families do not inadvertently create an inheritance tax problem that could be avoided by the use of “trusts”.

It is important to seek advice from a specialist in this area of law to ensure that all of the shariah law and English succession and tax principles are carefully applied.

For further advice, please contact Omair Aziz at [email protected] 

Original article