You are a Muslim

“Prescribed for you when death approaches [any] one of you if he leaves wealth [is that he should make] a bequest for the parents and near relatives according to what is acceptable - a duty upon the righteous”,

Surat Al Baqarah, Koran 2: 180.

This particular verse from the Koran, the Holy Book of Islam, underlines the importance of a Muslim to plan for his wealth and estate transfer. You could be a Muslim by birth, marriage or conversion. Though Singapore is not an Islamic country, the Muslims here are governed by the Administration of Muslim Law Act (AMLA) in the area of marriage, divorce, property rights and estate distribution.

Islam is not only a religion; it is also a social-economic-political system. Therefore, to a Muslim, Islam is a way of life. Hence, sometimes it is quite difficult for a non-Muslim to understand or appreciate certain Islamic estate planning ideas. For example, the first step of an Islamic estate settlement process is to make full settlement of ALL liabilities, both to men and to God. In contrast, the secular system’s approach may be to avoid full settlement of the liabilities by any lawful means. Full settlement of debts is considered a serious matter under the Muslim Law.

Estate Planning Implications and Problems

1. The estate of a Muslim must be distributed in accordance with Islamic law (Faraid – Muslim Inheritance)
2. It is important that the estate be distributed according to the Islamic law of the school of thought* of the deceased. (*The four main schools are Hanafi, Maliki, Shafii & Hanabali. In Singapore and Malaysia, the dominant schools are Hanafi & Shafii)
3. The main sources of law come from the Holy Koran and the Hadith. A substantial part of Faraid regarding the distribution of the estate among rightful heirs is found n the Koran. At the same time, there are rulings (i.e. fatwa) issued by MUIS (an authorised Islamic Body in Singapore) concerning estate distribution matters like CPF and life insurance nominations. The Certificate of Inheritance (COI) is issued by the Syariah Court. On the other hand, letters of administration, if necessary, are dealt with in the civil court. To a lay-person, and even to a Muslim, these laws and procedures can be overwhelming.
4. A Muslim may write a will (i.e. Wasiyyah), in which he can only bequeath 1/3 of his net-estate to non-heirs, all of whom must be Muslim.
5. The current practices of Muslims in Singapore with regard to the understanding and application of the Faraid sometimes lead to unjust and unfair results.
6. Some of your family members who need your estate the most might not get it.
7. Non-Islamic family members will be excluded from your COI.
8. Certain schools of Islamic thought forbid life insurance. Therefore, if a Muslim who follows these schools of thought dies, the absence of a life policy to provide immediate liquidity for the family could lead to a cash flow problem.
9. ALL debts, to men and to God, are to be settled before Faraid or Wasiyyah can be executed.
10. In some situations, a third party will have a share in your estate. For example, if you die leaving a widow and a daughter, Baitumal, a public treasury for the Muslim community, will have a legal share of the estate.

Estate Planning Solution

(Below are some general suggestions, and they are not comprehensive. It is advisable for you to engage with a professional consultant familiar with Islamic estate planning matters.)

1. The estate planning objective is to be fair and just in order to reflect the spirit of Islam.
2. Consider the following tools to do estate transfer while alive
   • Hibah (Gift inter-vivos)
   • Sadaqah (Donation)
   • Waqf (Permanent dedication of property by a Muslim)
   • Wadiah (Trust)
   • Nazar (Vow)
   • Wasiyyah (Will)
3. Consider the following tools to do estate transfer upon death
   • Hibah (Gift)
   • Sadaqah (Donation)
   • Waqf (Permanent dedication of property by a Muslim)
   • Wadiah (Trust)
   • Nazar (Vow)
   • Iqrar (Pledge)(*item (a) to (f) subject to Wasiyyah Principle)
   • Statutory Disposition
   • Faraid (Muslim Intestate Succession Law)
   • Iqrar (Pledge)
4. S49M revocable nomination of a life policy is permissible under a fatwa issued by MUIS.
5. S49L irrevocable nomination of a life policy is permissible under a fatwa issued by MUIS.
6. CPF nomination is permissible under fatwa issued by MUIS.
7. Muslim estate planning emphasises the settlements of debts and liabilities to God and to men. Therefore, the amount of estate distributable under Faraid or Wasiyyah is Net Estate. Net estate is = Estate – Funeral Expenses – Last Expenses – Debt – Harta Sepencarian (jointly acquired property).
8. All transfers of assets must not be for anything considered haram (prohibited).