Experts urge Muslims to plan for Shariah-compliant estates

Estate planning is for anyone who has property, savings and investments. But when you choose to have your inheritance shared with your family in line with Shariah principles, estate planning can ensure a smooth transfer in line with your values and unique circumstances.

While Shariah provides clear rules of inheritance, Muslim families can face serious challenges if no planning is done, Showkat Mukadam, a director of Legacy Fiduciary Services, warned that at the recent annual conference of the Fiduciary Institute of Southern Africa (FISA).

“The Qur’an sets out exact proportions of inheritance – who should get what – but if you want your family to be cared for in a certain way, you must make arrangements while you are still alive,” he said.

Family businesses can also be compromised if there is no planning on how the business interests will be shared with heirs identified in terms of Shariah principles, he added.

Rumana Mahomed, an attorney, fiduciary practitioner and member of the FISA council, told Smart About Money that fixed allocations to surviving family members under Shariah rules may not always take your unique family circumstances into account. Shariah-compliant estate planning can ensure family members who are particularly in need of care are catered for, she said.

Shariah-compliant estate planning can also greatly enhance the efficiency and cost-effectiveness with which your estate is distributed to heirs in line with Shariah principles, she said.

Protecting women

Mukadam said a key concern is the vulnerability of Muslim wives and daughters. Muslim men are required to maintain and protect their family and are therefore expected to provide for financially for the women. In certain circumstances, women do inherit less than men.

For example, in terms of Sharia inheritance principles a wife inherits only one-eighth of her husband’s estate if the couple have children.

Mahomed said if, for example, a man dies leaving a wife, a son, a daughter and an elderly mother, his estate will be distributed as follows:

• The wife: one eighth (12,5 percent)
• The mother: one sixth (16.67 percent)
• The residue is shared between the son and the daughter in the ratio of 2:1

This could leave the wife with only one eighth of the family home.

“If the wife feels insecure with that share, arrangements can and should be made during the husband’s lifetime – such as joint ownership of the family home or creating a usufruct that allows her to live in the house for life,” Mukadam explained.

Property could also be transferred into the wife’s name during the husband’s lifetime, Mahomed said.

As Muslim men are responsible for their families, there is no obligation on women to provide. But many women do assist their husbands with various payments, for example, contributing to the home loan, paying school fees and so on, Mukadam said.

A woman can make these payments without expecting to be repaid or she can keep a record of those payments and claim them back as debt against her husband’s estate, he said.

But often women only realise this after their husbands die and they do not have the records to prove their claim, he added.   

Mahomed said men who have accumulated some wealth can transfer assets to a trust set up for the benefit of women for whom they want to provide.

An inter vivos trust is an extremely useful tool to protect wealth for the benefit those who depend on you. A testamentary trust is also a very useful tool which gets created through your will to take care of minor or dependent family members over a fixed period of time, she said.

Mahomed said to protect a wife, a man can also increase of the Mahr (Dower) given to his wife when they marry so that it includes additional investments or even ownership of the property for her security.

Equal outcomes

Mukadam also pointed out that daughters inherit less than sons under Shariah as a consequence of the obligations placed on men. Muslims who want equal outcomes for their children can achieve this by making gifts during their lifetimes.

“A father who wants his daughters and sons to end up with equal shares can give his daughters, say, 20 percent of his wealth while he is alive, and then Shariah’s 2-to-1 division on the rest of estate will balance out fairly,” Mukadam suggested.

Children should be educated about why Sharia principles include sons being allocated  a double share, and the obligations placed on them as the protectors and maintainers (Qawwaam) of the vulnerable members of the family, Mahomed said.

Boys and men should be informed that they can decline this double share if they fear they may not be able to fulfil their obligations to women in the family, she added.

Avoiding family business disputes

Family businesses can also be a challenge when heirs are identified in line with Shariah rules.

“Imagine one son is running the business, but the shares must be split among all heirs. Without a plan, that business could be paralysed,” Mukadam said.

He urged Muslim business owners to make arrangements during their lives so that heirs who are not involved the business can be bought out, preventing disputes that delay or even destroy family enterprises.

Business owners should have succession planning conversations during their lifetimes to explore and put into place trusted individuals to buy-out or to continue and manage the business after the death of its owner, Mahomed said. Conversations can even to specify how profits should be distributed to support the heirs, she added.

Costs incurred in estates

Choosing to have your estate distributed to in accordance with Shariah principles does not mean you sidestep South African law or tax.

Estate planning helps to demystify the costs at death, the tax implications during our lifetime and after our death, as many people are unaware of these taxes and costs and tend to ignore them, Mahomed said.

Leaving property to your children can incur costs such as conveyancing fees and taxes such as capital gains tax (CGT) which the family may not be able to afford, she added.

A call for written instructions

Mukadam acknowledged that while Shariah-compliant distribution is regarded as incumbent, some Muslims prefer not to apply it.

“The key is to record your wishes in writing. If you want Shariah to apply, say so in your will. If you do not want it to apply, also say so. That way your family will not be left arguing after your death,” he said

Estate planning is not only about money. “Advisors safeguard not only wealth, but values, faith and family unity. Muslims should take this seriously and act while they are alive to protect those they love,” Mukadam said.

Planning can also help Muslims to ensure that their estates are administered in line with their personal interpretation of Islam, Mahomed said. Some people follow a strict interpretation while others embrace what they understand to be the ethos and spirit of Islam that makes sense to them in a modern world, she said.

Don’t get a tick-box will

A Shariah-compliant estate plan is the outcome of a guided conversation between you and a fiduciary professional — someone who understands both the shariah inheritance principles, the room for movement within that and South African fiduciary, tax, and property law, she added.

Estate planning should explore opportunities to reduce costs and ensure conversations with family members are had or structures are put into place before you die, she added.

Your will should be a product of such conversations and not a tick-box exercise which seeks to simply comply with Islamic obligations, Mahomed said.