Updated: Jun 22, 2023
The Deed of Gift or present (or Hiba, Hibah) is a strong Islamic estate plan, especially if you are wealthy. It helps minimize inheritance tax impacts down the road. It's a way of contract (i.e., aqd) in a legal term. The use of lifetime gifts is not limited to legal or specific religious applications but is broad. The Hibah differs from Faraid, which is automatic transfer upon death. Also, Hibah can be given in a lifetime to family members or others without restrictions. The Hibhah also differs from Waqf (i.e., Charitable endowment), which limits the ownership to some extent and requires granting perpetuity. Hibah, on the other hand, has no restrictions. There are other types, including Hibah Amanah (by Permodalan Nasional Berhad) and Hibah, the benefit distribution (by Takaful Ikhlas) however, Wassiyyah did not verify their validity. The use and abuse of a Deed of Gift can happen among children or family members, which is strongly prohibited in Islam. You can not give unequal or unjust gifts to children and must treat them equally without preferential treatment (or act of favoritism) and injustice, as stated in the Hadith: Bulugh al-Maram, Book 7, Hadith 928. This is the most Islamic jurist view (Ibn Qudāmah, al-Mughnī, vol. 8, 257). However, there are some differences of opinion among Sunni Islamic jurisprudence Madhab regarding preferential treatment among children that you will learn more about below. Generally, in the real world, Most attorneys agree that treating children equally is of utmost importance in estate planning. For those who treat children with inequality, their inheritance issues end up in court and remain unresolved for decades. Wassiyyah provides an intensive Deed of Gift (or Hiba) estate plan to meet your legal and shariah compliance. Wassiyyah will provide detailed instructions to complete your Deed of Gift (or Hiba) with your purchase. There are differences of opinion among Sunni Madhab (Hanafi, Shafii, Maliki, and Hanbali) that are included in all types of Deed of Gift (or Hiba) mentioned above. Wassiyyah has worked with highly qualified (Doctorate/Ph.D.) Sunni Islamic scholars for delivering the most comprehensive and quality Deed of Gift (or Hiba). Wassiyyah's expert also covered legal compliance, ensuring your Deed of Gift (or Hiba) complies legally in addition to Shariah. Wassiyyah has detailed instructions on all cross-border relations between legal and Islamic compliance.
Wassiyyah provides the comprehensive Deed of Gift (or Hiba) estate plan to meet your Legal and Shariah compliance. Before you create a Deed of Gift (or Hiba), you must know these seven important things (i.e., assessment, tax implications, Types of Gifts, Invalid gifts, delivery of possessions, revocability, and legalization) to make your Deed of Gift (or Hiba) valid. This blog is available for Premium and Ultimate members.
Narrated Abu Hurairah (RA) that the Prophet (Sallallahu Alayhi Wasallam) said: "Give gifts to one another, and you will love one another." - Bulugh al-Maram, Book 7, Hadith 935
It's an extremely extraordinary deed if done like the Islamic rule, and it is encouraged under verses of the Holy Quran 2:177. You should be aware of large differences of opinion among Sunni Madhab. Wassiyyah ensures to meet Madhab's specific needs for meeting your estate planning goal. Hibah is a permissible transaction under Islamic rule (Ref: Sarakhsī, Abū Bakr Ibn Aḥmad Ibn Abū Sahl, al-Mabsūṭ, Kutub al-‘Ilmiyyah, 2001), 56). Before you make a gift, the followings are the important things to consider.
Making gifts in a lifetime is not mandatory, whether legally or Islamically. Also, you should assess your wealth before deciding to avoid any issues in the future in case you lose some assets and get into financial issues. Once the gift is delivered and you commit it, it will be more difficult to retract due to legal and Islamic implications. Keep away from emotions, take time, and think outside the box to see if it is viable to offer gifts based on your financial situation. Making gifts without thinking will be very costly in the future if you do not complete the proper assessment before making a decision.
The residence country is the first thing that plays a role. If you live and have gifts transferred in one or more non-Muslim majority countries, your Deed of Gift must comply with legal and Islamic laws. You should avoid making gifts beyond your annual tax-free allowance, i.e., tax-free gifts. Consult an accountant or tax specialist to ensure there will not be any tax implications. Generally, it is allowed to gift certain amounts, so if you have a large gift, please divide it for a few years to save you from tax implications. If your Donor and/or Gift is from one country and Donee is from another, you need to consult the jurisdictions of both and ensure there will not be any national or international tax or other implications. If your Gift is just money, then it may not be an issue as long as it is within the allowance from one country to another. However, if you transfer any physical assets (such as House, land, Car, etc.), there may be an issue with providing ownership to Donee for such a Gift. It will need more than a Deed of Gift or Hiba for such a transaction, and you may consult jurisdiction or tax consultants experienced and specialized in overseas tax who may provide further guidance.
You can give away any gifts that may include but are not limited to a Movable property, Immovable property, House, Land, Farm, Recreational Property, Car, Equipment, Money, Belongings, Jewelry, or anything you may think of that has either monetary value or without cost. If you include your business as a gift, ensure all other requirements (i.e., taxes, titles, ownerships, digital assets) are met. Consider a consultant making such extraordinary gifts because it may include much more than the Deed of Gift. You can utilize our Deed of Gifts, but it may require other legal documentation in addition to the Deed of Gift.
Legally and Islamically, there is a large variation in which gift you consider valid. Many forbidden (i.e., Haraam) gifts have no issues legally but are big compliance issues Islamically. So, the source and the type of Gift you can give away are important to know. And there are many categories of gifts, such as contingent gifts, future gifts, and conditional gifts, which all come into play when creating your Deed of the Gift estate plan. Wassiyyah will suggest how and what to consider for these types of gifts in the instructions guide.
Delivery of possession is an important both legal and shariah point of view. Delivery of possession decisions has to do more with Sunni Islamic jurisprudence opinions. If not correctly done, your Deed of Gift would be invalid Islamically. From the legal point of view, it depends on what you prefer.
Revocability is an important area to know for everyone as once you sign the Deed of Gift or Hiba and possession of delivery of the gift is complete with "IRREVOCABLE," it cannot be changed unless Donees agree, and in some cases, it may require a court order for making it revocable. There are large opinion differences among the four Madhab (i.e., Hanafi, Shafii, Maliki, and Hanbali) about the revocability of Gift. Wassiyyah's instructions guide goes in-depth and helps you decide on this critical topic.
Based on the Hadith; Bulugh al-Maram, Book 7, Hadith 928, most jurists agree that the preferential treatment among children is a prohibited act however, the following are some of the differences of opinions. (This topic is greatly explained in the article: ARE PARENTS FREE TO BESTOW THEIR WEALTH ON TO THEIR CHILDREN? A JURISTIC DISCOURSE ON EQUALITY AND JUSTICE IN HIBAH by Abdul Bari Awang and Amilah Awang Abd Rahman, Shariah Journal, Vol. 22, No. 3 (2014) 407-426)
Hanafi: Abu Hanīfah, as reported by Sarakhsi, ruled that when someone is healthy, it is permissible to favor some children over others. He based his opinion on the act of Abu Bakr (R.A.), who had allocated some gifts to his daughter Aishah (R.A.) when he was healthy. It was also his opinion that if one wants to present gifts to his children, it is preferable but not an obligation for him to distribute them equally and to be just in distributing them between sons and daughters. (Ref. Sarakhsii, Abuu Bakr Ibn Aḥmad Ibn Abuu Sahl, al-Mabsuṭ, vol. 12, 66)
Shafii: According to al-Shaafi, preferential hibah is valid if a parent favors a specific child over others. He based his opinion on the practice of some of the Companions (r.a.), such as Abu Bakr in giving 20 wusqan of dates to Aishah (R.A.) or ‘Umar (R.A.) favoring his son ‘Alim, or ‘Abd al-Raḥman ibn ‘Awf and his gifts to the son of Umm Kalthum. He also argued that if it is permissible for some children to give gifts to only one of their parents, then it is equally permissible for parents to give gifts to only one child and not to the others (Ref. Al-Imrani, al-Bayan fi Madhhab al-Imam al-Shafii, vol. 8, 111)
Maliki: As recorded by Ibn Rushd, Imam Malik ruled that it is permissible to show preference but not permissible if one gives all wealth to some of his children while excluding the rest. Imam Malik was very concerned if the distribution involved the whole wealth and property as it would deny others’ rights to them. (Ref. Ibn Rushd, Bidayah al-Mujtahid Nihayah al-Muqtasid, vol. 1-2 (Beirut: Dar al- Kutub al-Ilmiyyah, 2004), 709.)
Hanbali: Aḥmad Ibn Ḥanbal ruled that the bestowal of gifts to some children but not to others is not permissible (haram). In his esteemed view, the text of the ḥadith itself points clearly and unmistakably to the fact that the Prophet (Sallallahu Alayhi Wasallam.) indeed prohibited any preferential treatment of siblings.
As per Shafii, Maliki and Hanbali are of the opinion that equality in this context means treating sons and daughters equally by giving them the same amount of gifts. While Hanafi and Maliki justify that since Hibah is bestowed when both the giver and recipient are still alive, the argument is that the same principles should apply as in inheritance laws, i.e., Males get double the share of Females. (Ref. Ibn Qudamah, al-Mughni, 259)
Converting a Deed of Gift into a legal document is simple but may differ from one country or jurisdiction to another. Wassiyyah has a detailed step-by-step procedure with your Deed of Gift purchase, so you do not have to worry but follow it to make your Deed of Gift a legally valid document.