How is an estate is divided under Shariah principles?

Muslims in South African can choose to have their estates distributed after their deaths in line with Shariah (Islamic law).

This does not mean that South African law and taxes relating to estates do not apply – it only means the way in which the heirs are identified is in line with Islamic laws of succession.

Muslims who choose to have their estates comply with Islamic law need a will that is valid in terms of the Wills Act. In that will, a Muslim should clearly state in their will whether they want Shariah principles to apply. If nothing is recorded in a will, the estate will be distributed in terms of the will or, in the absence of a will, in line with the law of intestate succession.

Stating in writing that you want your estate distributed according to Shariah helps avoid family disputes after your death and ensures your faith and family values are respected.

If an estate is to be distributed in terms of Shariah principles, there are three steps:

• The debts will be settled first (any loans or credit agreements not covered by credit life) together with any taxes owed – including income tax owed until the date of death, estate duty and capital gains tax (GGT)).
  
  
• Any bequests or Wasiyyah which Muslims are expected to keep within a third of the value of the estate will be paid thereafter. These bequests can generally be made to charities, third parties or family members who are not the prescribed heirs in terms of Shariah law.
  
  
• The balance or remainder of the estate, known as the residue of the estate, must be left to the heirs as determined in accordance with the Islamic Laws of Succession.  

Their heirs are not named in the will but are determined after death in line with rules set out in the Qur’an and comprise the family members who survive the deceased. The identity of these family members are confirmed by Islamic scholars or judicial bodies who provide certification which is accepted by the Master of the High Court. These scholars or judicial bodies identify spouses, children and other family members as legitimate family members entitled to inherit.

The role that Islamic scholars and judicial bodies have does not take away the need for Muslims to appoint an executor for their estates.

Islamic laws of succession

Shariah inheritance rules are based on the Qur’an, the Sunnah (teachings of the Prophet Muhammad), and the consensus of Islamic scholars.

These rules set out fixed shares for heirs based on which family members survive the deceased.  

In cases where male heirs inherit double the share of female heirs from the same generation, they are expected to provide and care for the female heirs throughout their lives, be it their wives, mothers, daughters or sisters.

Some examples of the specific rules are:

• If a man dies, his wife can inherit a quarter of the residue of his estate if there are no children, but only one eighth if there are children (including minors).
  
  
• If a woman dies, her husband can inherit one half of the residue of her estate if there are no children and one quarter if there are children.
  
  
• When a person dies leaving children and parents, their parents each receive one-sixth of the residue of the estate.
  
  
• If a person dies leaving sons and daughters, the sons will each inherit double what their sisters inherit. The proportion distributed to the children is calculated after any spouse or parent’s fixed share has been provided for.
  
  
• If a Muslim dies leaving only one daughter, she will inherit half of the residue of the estate and two or more daughters will share two-thirds of the estate.
  
  
• A grandparent will not inherit if a parent of the deceased is alive.
  
  
• Siblings of the deceased may inherit if the deceased leaves no sons or parents and any sons previously deceased did not leave any sons (grandsons of the deceased).

The full rules are lengthy and how they apply to any Muslim at any point in time depends on their family configuration. Inheritance calculators such as http://inheritance.ilmsummit.org  or http://www.islamicsoftware.org/irth/irth.html  can help you determine who would inherit if you were to suddenly pass away.

Excluded family members

Certain people do not automatically inherit under Shariah, such as ex-spouses, adopted children, and certain categories of children born out of marriage. Muslims who wish to provide for these family members need to make provision for them using the one-third bequest.

Tax in the estate

Remember that distributing an estate in terms of Shariah law means there could be estate duty and capital gains tax implications. Estate planners often make use of the exemptions that apply when assets are left to a spouse, but in terms of Shariah inheritance rules, the spouse may inherit only a small portion of the residue of the estate, making Shariah-compliant estate planning a necessary exercise.

Estate duty is applicable when the value of an estate exceeds the estate duty exemption or abatement.

The current abatement is R3.5 million. In the case where the first-dying spouse did not use the abatement, the abatement could be up to R7 million for the second-dying spouse.

The part that exceeds the exemption is known as the dutiable estate.

Estate duty is payable at 20 percent of the first R30 million of dutiable estate and 25 percent of amounts higher than R30 million.

All assets in an estate, other than those bequeathed to a spouse, are regarded as having been disposed of on the date of death for the purposes of capital gains tax. Only the first R300 000 of capital gains are exempt in the year of your death.

Costs to be paid

All costs, such as the executor’s fees, taxes, debts and claims against the estate, are deducted from the estate before any residue is calculated and distributed to the heirs.

• This article was compiled with the assistance of Showkat Mukadam, who holds the Fiduciary Practitioner of South Africa (FPSA) accreditation, is a member of the Fiduciary Institute of Southern Africa (FISA) and a director at Legacy Fiduciary Services.