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.
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??
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).
- 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 beneficiaries. This will supercede faraid* (if implemented right; check properly with your agent)
- 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 takaful, 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 (plus Hibah if you want)
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.
- Much stronger than Wasiat alone
- You can add clauses
- 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:
- Bank accounts
- Stocks and securities in Bursa Malaysia
- Unit trust accounts
- Insurance policies
- Companies I own / have shares or equity in
- Safe deposit boxes
- Club memberships (that can be inherited)
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.
If you’re interested to take up Takaful for the express purpose of leaving behind money for family members, read this article: 9 Things You MUST Know Before You Buy Insurance in Malaysia