Waqf, or Islamic Endowment, is not a new concept for Muslims but is fourteen hundred years old, which is evident in the famous Hadith below. Waqf in the modern era called "Endowment" is becoming an important modern estate planning instrument gaining popularity as time passes. The endowment needs to follow certain steps in general, starting from making intentions to carrying out affairs within and outside of Endowment.
"Narrated Ibn `Umar: Umar bin Khattab got some land in Khaibar and he went to the Prophet (Sallallahu Alayhi Wasallam) to consult him about it saying, "O Allah's Messenger (Sallallahu Alayhi Wasallam) I got some land in Khaibar better than which I have never had, what do you suggest that I do with it?" The Prophet (Sallallahu Alayhi Wasallam) said, "If you like you can give the land as endowment and give its fruits in charity." So `Umar gave it in charity as an endowment on the condition that would not be sold nor given to anybody as a present and not to be inherited, but its yield would be given in charity to the poor people, to the Kith and kin, for freeing slaves, for Allah's Cause, to the travelers and guests; and that there would be no harm if the guardian of the endowment ate from it according to his need with good intention, and fed others without storing it for the future."" - Sahih al-Bukhari 2737, Book 54, Hadith 24
If you want to make a large endowment gift, you first complete the assessment of your wealth and whether the endowment gift can be made or not based on your current financial status on wealth. This assessment is necessary to ensure you do not exhaust your wealth, which can adversely affect your family's financial situation. A famous Hadith indicates why you should need a financial assessment before you decide to contribute to Waqf that states: Sahih al-Bukhari 5668, Book 75, Hadith 28 states, "Narrated Sa`d: Allah's Messenger (Sallallahu Alayhi Wasallam) came to visit me during my ailment which had been aggravated during Hajjat-al- Wada`. I said to him, "You see how sick I am. I have much property but have no heir except my only daughter May I give two-thirds of my property in charity?"! He said, "No." I said, "Half of it?" He said, "No." I said, "One-third?" He said, "One-third is too much, for to leave your heirs rich is better than to leave them poor, begging of others. Nothing you spend seeking Allah's pleasure, but you shall get a reward for it, even for what you put in the mouth of your wife.""
Once you are satisfied with your financial decision, Discuss it with your family members for full alignment before you meet the financial advisor in the next step.
If you intend to donate stocks, bonds, mutual funds, or any other investment part of an Endowment gift, you better consult a financial advisor who is an expert in Halal financing. You can use the best shariah compliant options for making an Endowment gift for your investments. Also, discuss with a Tax consultant what potential government benefits you can receive, including tax rebates or refunds.
You may either decide to create your own Waqf if your endowment is very large, which can allow creating, for example, large educational institutes, boarding schools, or hospitals.
Another best option is to make endowment gifts to established Muslim charitable organizations. Complete comprehensive research on the organization for which you want to make the Endowment gift and ask questions about current finances, affairs, and legal and tax compliance until you answer all outstanding questions about your chosen organization. The key is choosing the oldest and the most reputed organization for your endowment. Not all Muslim charitable organizations are managed and operated similarly. So you need to be extra careful in choosing the best-managed organization for your endowment to help you achieve your goal of gift. Best managed organization is formed and operated with high standards of ethics, integrity, honesty, and transparency regarding financial, accounting, and management.
In this step, the founder will choose the name of Waqf. The name should not be confusing or already used by another charity. The name will also be subject to approval by the government authority in your country.
In this step, if you create and establish your own organization, the founder will choose the Trustee(s) for Waqf. The trustee(s) will help as the charity's governing body and will oversee the charity's policy, management, and administration. Additional persons may be appointed per country law for overlooking the Waqf.
After you decide which organization and what funds or property you want to invest in, create the endowment agreement to comply with Shariah, legality, and taxes. The Endowment agreements can be as broad and detailed as possible. In general, the endowment agreement should include the following information at a minimum to remove any future confusion or conflicts. Wassiyyah provides the initial draft document that you can further optimize as needed. Every organization may govern through its own endowment policy, which you should review, respect, and amend the Endowment agreement as long as it is not against the purpose of the Endowment gift. If you are making a large endowment gift, you may be able to choose the name for the investment and property you are making a gift. Do not let this opportunity go, as you can name yourself, family members, ancestors, or any name you wish to give which is not contrary to the country's law. Review your agreement with the organization taking over and once they agree, sign and notarize the document before two Muslim male witnesses.
Choose the name of the organization if you are establishing your own Waqf.
Aim, purpose, and intention of making an Endowment gift.
Information on Donors or contributors, funding, and investments.
Spending and reinvestment methods of funds. You can specify How much of the income will be reinvested and how much goes back to Donors and their designated beneficiaries. What will be the purpose of spending funds in the organization? If it is capital property, it will include the details about managing properties.
Provisions that allow the organization to amend the Endowment agreement with mutual consent to meet the charitable purpose and when it becomes impossible or impractical to carry out the affairs as stated in the agreement.
Provisions to revoke or winding off Endowment, which in most cases is found to be a cumbersome and expensive process, and in many scenarios, it becomes impossible to wind off Endowment. So, careful drafting of revocation statements if required.
Open the bank accounts for Waqf and make other financial arrangements to transfer funds. The tax office will require accurate and timely bookkeeping for all the transactions, so Waqif has to ensure this arrangement is made in advance before beginning operations of Waqf. Lastly, make arrangements to transfer the endowment gift as outlined in your Endowment gift agreement.