How to Avoid Islamic Inheritance Laws in Malaysia

There are many things I love about Islam. But the default faraid laws or Islamic inheritance laws is not one of it. Islamic inheritance laws stipulate that male relatives shall receive at least twice the amount of female relatives (of equal standing). The determinant factor is literally… genitals.

Islamic Inheritance Laws is Not Fairly Implemented and That Sucks

I would be okay with Islamic inheritance laws, I really would, IF the implementation is just. If Muslim men take care of Muslim women’s financial needs.

But that’s not always the case is it? It breaks my heart to hear case after case of mothers, daughters, sisters, grandmothers, nieces who get ruined financially because their male relatives got greedy.

The sad thing is you probably know someone or have personally heard of cases like this too.

In an ideal world, I’d love for Malaysia to make the same move as Tunisia. In November 2018, they submitted a draft law to remove gender discrimination in Islamic inheritance laws. It may take a while, but I hope we Malaysians will follow the same path, too.

In the meantime, I want to invite you to this open discussion. What can we do if we don’t want to follow the default Islamic Inheritance laws in Malaysia? This article is for those of you who

  • (a) have assets to leave behind, and
  • (b) value your male and female relatives equally, genitals be damned, and/or
  • (c) have people that you want to give assets to, including those who have no claim under the Islamic inheritance laws (like life partners of gay couples, or adopted children, or Muslims with non-Muslim parents/relatives).

Disclaimer: I have done my share of research for this topic. I have talked to Islamic estate planning professionals. I’ve made sure the information is accurate to the best of my ability. However, my knowledge may be limited. I invite you to share what you know in the comments section.

Related: The Comprehensive Personal Finance and Support Guide for LGBT in Malaysia

First – Accept that you CAN’T Opt Out of Islamic Inheritance Laws

In Malaysia, a Muslim will always be bound by Syariah laws, no exceptions. He or she has no way to opt out of this. Formal and legal apostasy is not an option. I wish it was different, but it’s not.

So the best thing to do is to work with the system. The good thing is there are two methods that I know of that allows you to avoid faraid / Islamic inheritance laws.

Additional benefit: doing one or both options will also make things simpler for your beneficiaries after your passing. Billions of RM are locked because of inheritance disputes/bureaucracy. See how mafan it is for people to get inheritance without any legal docs in place??

 islamic inheritance laws
Pic credit to amanahraya.my

Method #1 – Hibah everything out

Best for: B40/M40

Hibah is basically ‘gifting’. You give away your assets, it’s considered like charity. Here’s an easy-to-read article explaining hibah (Malay language).

Pros:

  • You can give your assets to whoever you want. Not limitations to religious background, family ties, etc
  • You can hibah via takaful, ie if anything happens to you, the sum assured under your policy will go directly to people you name as your beneficieries. This will supercede faraid

Cons:

  • Not everything can be hibah-ed out (someone clarify this / correct me if I’m wrong)
  • You can only hibah assets that are clear of debt. Therefore property and vehicle that are still under mortgage and hire-purchase loan cannot be hibah-ed

*Edit: This section was updated to add more pros/cons based on feedback received (see comments section)

If you are doing insurance, make sure to double-confirm the beneficieries. If you don’t have insurance money to leave behind (and just assets like properties, money in bank etc – see types of assets below), contact your bank or trustee companies like Amanahraya Berhad to set hibah up. I believe it’s a simple document.

Any of you reading have done it? If yes, please share your experience in the comments section below. I’d love to know the cost, process and exclusions (if any).

Method #2 – Do a Wasiat+Trust combo

Best for: M40/T20

Wasiat is for distribution of assets after death. Trust is like a contract document, you can set conditions for distributions to your beneficiaries. It’s cool because you can add clauses like:

  • ‘to allocate person X money for medical care if you’re in a coma/have permanent disability or cannot make sound judgement’, and
  • ‘to give person Y staggered payments according to agreed schedule after your passing (ie RM2000 per month until the money runs out)’

The reason why I said do Wasiat+Trust combo is because Wasiat alone is not enough. First of all, you can only give up to 1/3 of your wealth to non-faraid (simplistically, non-family) members.

Secondly, even if you define your beneficiaries in your wasiat (and give equally between male/female relatives), your male relatives can challenge and cite faraid laws, and the Syariah courts will consider it.

Pros:

  • Much stronger than Wasiat alone
  • You can add clauses

Cons:

  • I believe you need to lock in a fairly large amount of cash for this option (I believe I heard RM50k min for Trust). So you need to be wealthy enough
  • Wasiat and Trust are two separate services. You will be charged separately. Expect the fees from RM1k onwards each
  • As I understand it, the majority of assets can be Wasiat+Trust-ed, but not all (someone clarify this / correct me if I’m wrong)

Types of assets to give your beneficieries

When I was in the process of setting up my Wasiat+Trust combo (which unfortunately did not proceed – bad experience with As-Salihin overall), I had to submit lots of documents listing what I own. Here’s what is classified as assets:

  • Properties/Land
  • Bank accounts
  • Stocks and securities in Bursa Malaysia
  • Vehicles
  • Unit trust accounts
  • KWSP/EPF
  • Insurance policies
  • Companies I own / have shares or equity in
  • Safe deposit boxes
  • Club memberships (that can be inherited)
  • Jewellery

Note: I own cryptocurrencies, and asked if I could Hibah / Wasiat+Trust it out. The best way, according to my agent, is to put the keys in a safe deposit box and leave the details in the legal documents.

Invitation to share your views

To Islamic Financial Planners/ Estate Planning Professionals – If any info above is wrong or lacking, please comment and share your knowledge. Leave your contacts if you want, so others interested to set up Hibah, Wasiat and Trust can contact you.

To everyone who have a Hibah, Wasiat and/or Trust system in place. Share your experience – which company you used, how’s the process like, how much was the cost, things like that.

140 Shares

Author

15 comments

  1. Hi Suraya!

    I think that the article is really great in highlighting the challenges in Islamic inheritance. I do have a few responses that I think your readers could really find useful.

    Firstly, it is important for us to have a mutual understanding of gender roles in Islam especially when it comes to filial duties. In the context of the management of a family estate, a male family member has a responsibility towards the female and minors, a role that is not required to be reciprocated. While the understanding may differ from actual practice, the responsibility is still there and we will all be accountable for these actions at some point.

    Secondly, the tools that you have correctly pointed out are not the only ones available e.g. harta sepencarian, insurance trusts. I urge anybody wanting to know more to contact a licensed Islamic financial planner to know more.

    Thirdly, just having access to a vehicle to express our intentions that may deviate from faraid law distribution is not the end of the story. Consent from legal heirs on top of ensuring the intentions are lawfully recorded and acknowledged is still required (and still subject to legal challenge!) which is why nobody should take this matter lightly.

    However, it is also just as important to ensure that our intentions in doing so are correct and not merely to “avoid” faraid because one disagrees with the math. Everybody is entitled to their share as what has been written and the last thing we want to do is to misappropriate assets in the estate, all the while thinking that it was within our rights to do so. “Niat” is very important and He knows our intentions at all times. Even if our noblest intentions are to ensure that the welfare of our dependents and loved ones are taken care of upon passing away, it should be done in a way that does not deprive those who are entitled to that wealth.

    I welcome more discussion with respect to estate planning.
    I am a Licensed Financial Planner, and also can advise on Islamic Financial Planning matters

    Rozanna Rashid, CFP, IFP
    rozanna.rashid@gmail.com
    +6012-3089060

    1. Hi Rozanna,

      Thanks for commenting here!

      Can you share more about the other tools that are available, and briefly what they are?

  2. There are almost 1 million land titles currently being frozen in Malaysia since Merdeka amounting to more than RM66 billion. Some estimates put it at 90% as belonging to the muslims population.

    The reasons are:
    1. Lack of understanding on faraid and the procedural law relating to the process of managing the estate (obtaining the Letter of Administration, transfer of names etc)
    2. Lack of or the total absence of planning on the part of property owners during his/her lifetime
    3. Lack of immediate funds on the part of the beneficiaries to initiate the process of obtaining the LA or probate
    4. Beneficiaries don’t always agree on how the estates are to be distributed
    5. Procrastination on the part of the beneficiaries or in most cases they simply don’t have the knowledge on the steps and actions need to be taken

    The 4 steps anyone who wishes to spare his/her loved ones the agony of having to deal with the often complicated issues are as follows:
    1. Nominate/appoint an Executor/Administrator
    2. Make sure the document is clearly written, dated and witnessed (preferably by 2 independent parties)
    3. The availability of immediate access to cash upon one’s demise (eg named nominee for EPF, Tabung Haji account, Takaful plans etc. This is to facilitate step number 4 below.)
    4. The access to professional advisors/specialists to assist the beneficiaries

    MyPusaka can help you prepare a will and appoint an administrator/executor using a prescribed format. Depending on your needs MyPusaka is able to advise you on other solutions such as will/donation to third party or non-faraid beneficiaries, Hibah, Takaful, Private Trusts including business succession plan for business owners. MyPusaka also acts as an advisor that will assist your beneficiaries on what needs to be prepared and done to ensure the process of dealing with your estates is done expeditiously at a reasonable cost. This process may entail advising all faraid beneficiaries their rights AND responsibilities at the time and location most convenient to all involved.

    For further information/assistance please drop me an email at fazil@mypusaka.info or visithttps://mypusaka.info/mohamad-fazil-bin-ismail/

  3. In islam, the are two parts in managing the inherited wealth. First part on how the wealth was obtain and the second part is how it will be distributed later to the rightful heirs.

    I’ve seen lots of discussions on the second part, but the first part is equally important since how you obtain your wealth will determine on how those wealth will be distributed.

    Take takaful for instance, let say Mr A is taking the investment linked takaful policy. There are 2 portions of fund managed by the takaful operator, the sum assured and the investment portion.

    Based on the takaful policy, the sum assured is a hibah from the operator upon Mr. A’s passing and the total amount can be distributed directly to the beneficiary.

    Although, the investment portion needs to go through faraid process since the fund was accumulated while his is still living.

    I wish to see more discussions on the first part as it is a key to develop a new financial instrument.

  4. So, in the end.. how do you set up your Wasiat+Trust combo? Or, what do you opt for now? Any planner/ lawyer you recommend us using?

  5. Thank You Suraya for this article! Being an earning muslim woman myself, I too wondered abt this. Do update, would love to know what option you ended up taking 😊

    1. Hi JC,

      If I’m smart, I would settle this, but nope, still procastinating on it.

      But hey, most of my savings and insurance already have my mom and sisters as nominees. Hope that’ll work.

      As for you, hibah seems to be the safest option. Wills/Wasiats are still contestable. Ie if your male relatives are not happy with their portion as you dictated, it can be voided. So its best to gift/hibah it out, if you can.

  6. Hibah is only for assets that are clear of debt. So property or vehicle that are still with mortgage or hire-purchased loan can’t be hibah.
    Nomination in conventional insurance can still be challenged by Faraid heir. Only takaful has a advantage of hibab that supersedes Faraid.

  7. Faraid is the last resort of estate planning, and it’s only applicable once we passed away.

    But during our lifetime, we can do:
    1. Wasiat
    2. Hibah
    3. Trust
    4. Sedekah
    5. Wakaf

    I believe many not understand this, even for me and now still learning.

    We have Islamic Estate Planners for that say Amanahraya, As Salihin, Wassiyah Shoppe, Mypusaka.

    Just how they structures their fee is what many people re-think, to do it or leave it to our waris?

    Some company provides flexible charging for example if you passed away, they only take the fee charges in the deceased EPF, or some charge monthly tabarujj contribution during lifetime.

    Though still an alienate to many Muslims..

  8. Hi Suraya , it’s good article..

    if talks about inheritance, it always not fair to women or men whether islamic or other religious however i found one of the solution my father (the most wise man) teach me.
    this remind me about my family story. My grandma passed way 2 years ago, my father and his 6 siblings(3 men and 4 women) got inheritance from my grandma. As Islamic laws states ,men will get most inheritance however before any procedure happen. my father talks to all his siblings and get their consent to give inheritance fairly to 4 his younger sister. so, they decide to give inheritance equally. My father make a good decision and no argument happen.

    1. Hi Nuraini,

      I’m aware that’s being done informally. In some cases, it works. But when it doesn’t, it doesn’t. I’ve heard enough stories. We can’t be at the mercy of greedy men, we can’t. Not at our future’s expense.

Leave a Reply

Your email address will not be published. Required fields are marked *

Close