What is Bequest in Islamic and Secular law?
Typically the word "Will" refers to the "Last Will." but not the "Testamentary bequest." Suppose you are referring to "Will" as a "Bequest" (which is the true meaning). In that case, traditional Islamic law restricts Testamentary Bequest or Testamentary Gift to one-third for the poor, needy, charity, etc. The remaining two-thirds of a total estate (tarikah) is distributed among Islamic legal heirs per Muslim succession law. Generally, under secular law, there are no restrictions in making a testamentary gift or bequest; you can make part of your Will except for tax consequences, and also, testamentary freedom may be restricted to some extent due to forced heirship requirements which may be applicable in a handful of countries. The other notable difference in Secular law is, anyone including legal heirs can receive Testamentary Bequest generally, but under the Islamic religion, the Islamic heirs (who are beneficiaries) cannot receive a Testamentary bequest based on Hadith (Sunan Ibn Majah 2714, Book 22, Hadith 20 that states: "Allah (Subhanahu Wa Ta alla) has given each person who has rights his rights, but there is no bequest for an heir." This means you cannot bequeath to your spouse, children, parents, and grandparents; those are Islamic heirs (warith). Islamically, You can bequeath up to one-third as a part of your Islamic Will or Trust to any relatives or non-relatives who are not your Islamic heirs, needy people, Muslim registered charitable organizations or associations, mosques, the Muslim community, or world community at large, etc.
What is Hiba in Islam? And are Gifts allowed in Islam?
Hiba or Hibah is a lifetime gift you can give away to your spouse, children, parents, or relatives. In Islam, giving away gifts is one of a Muslim's most meritorious acts. If we refer to large gifts given to family members, it is one of the best estate planning strategies a Muslim follows for reducing estates going to Probate. There is a religious implication of giving away Hibah and differences of opinion among Madhab (i.e., Hanafi, Shafii, Maliki, Hanbali) regarding Hibah; those do matter. If you plan to give away gifts to children, treat them equally, as stated in the Hadith Book, Bulugh al-Maram, Book 7, Hadith 928.
What is the common misconception about Gifts, Bequests, and Inheritance?
There is a widespread misunderstanding about these three terms, and the following are common misconceptions that make your Islamic estate plan non-compliant. Believe it or not but these are common practices in many countries.
Gifts and Testamentary Gifts are equal.
Gifts and Bequests are equal.
Bequests and Inheritance are equal.
Gifts and Inheritance are equal, and Lifetime gifts can serve as Inheritance.
You can declare gifts in your Will or Trust.
You can give inheritance in advance of death.
Inheritance can be given as part of the marriage ceremony.
Bequests can be given to any person, including Quranic heirs.
Lifetime gifts to spouse and children are forbidden in Islam.
How do people consider gifts as an inheritance?
We will consider an example to illustrate the point. Let us take an example of a family that includes a Spouse, children, and parents. The husband owned a house and land and had some cash in the bank. The husband has created Islamic Will to give 50% to his Wife and the remaining 50% to be divided equally among all three children. Husband dies, leaving Spouse, Children, and Parents. Let us observe the outcome in this situation. The Islamic Will would function as a non-Islamic Will in this situation. Legally, there is no concern, and the estate will be divided according to Will's terms. However, the Husband has declared the Testamentary Gift amount for the Spouse and children but not the Islamic Inheritance shares. Also, the parents did not receive a share despite being Islamic heirs. Also, the Husband fails to make provisions for debts such as Funeral or Burial expenses, Zakat, Kaffarat, Pending Mahr (i.e., a marital gift to wife), Unperformed Hajj, Prayer, and Fasting, taxes, administration expenses, personal or commercial debts.
How do people consider a bequest as an inheritance?
The Testamentary Bequest is considered as a Donation, Charity, or Lending to the needy or to an organization but cannot be considered part of an Inheritance. However, in the real world, the bequest applications are found improperly. This is a serious issue worldwide, and few people realize its misapplication ignorantly or unknowingly. We will consider an example to illustrate the point. Let us take an example of a family that includes a Spouse, children, and parents; the husband owns a house, land, and some cash in the bank. The husband has created Islamic Will to give the gift or bequest of 25% of all assets to the Spouse, and the rest is to be distributed per Islamic law of Inheritance. Let us observe the outcome of this situation. Husband cannot gift 25% to the Spouse in the Islamic Will because Spouse is a legal Islamic heir (or beneficiary). There is no Islamically concern for the remaining 75% amount assets distribution. What should Husband have done? A husband should have given a 25% gift amount to his Spouse during his life separately from the Islamic Will, which would be the correct way to gift Islamically.
How much gifts can I give away to my children during my lifetime?
If you are making Gifts in the lifetime to your children, you must be fair and treat them equally; a smart estate planning strategy. You can give away Gifts as you wish in your lifetime to your family members, and there are no specific limits, but we strongly suggest consulting a Knowledgeable Islamic scholar if you are making a Gift that is very large because there is a difference of opinion among different Madhab and Scholars for eligible Gift amount. In general, legally, you may give Gifts amounting up to your annual income with no tax implications, but it may differ from one country or jurisdiction to another.
What is the difference between Endowment and Hibah?
Both can be given during a lifetime; however, recipients are different. The endowment is given to an organization or institute. Hibha (i.e., Deed of Gift) is given to your family members including Husband or Wife, Sons, Daughters, Father, Mother, Relatives, or friends. Testamentary Bequest is given only after death which is different than Endowment and Hibah.
What is the difference between Testamentary Bequest and Gifts?
In estate planning terms, a Gift refers to the contribution or donation you make in your lifetime. You can give a gift to registered charitable organizations and get a tax credit. Another Gift you can give your family members is not tax deductible in most countries. Also, you need to see the gift tax impact, especially if you are giving away large gifts. On the other hand, Testamentary Bequest refers to the contribution or donation you are making after your death. You can write down your contribution details of the Testamentary Bequest in your Islamic Will or Trust. The Bequest will not give any tax benefits in most countries even though you make it towards registered charitable organizations. However, the law regarding making Bequest differs from one country or jurisdiction to another. There is a lifetime limit and annual limit of tax exclusion (which varies from one country or Jurisdiction to another); you should get more information from a tax consultant before making any bequest. It is important to consider Estate tax planning strategy while planning for Testamentary Bequests or Gifts to avoid adverse income or business tax consequences.
How does Testamentary Bequest calculation work?
There is no difference Legally or Islamically, as the Bequest is calculated as part of the Total assets you own at the time of death. Depending upon the amount but it will reduce the overall inheritance to heirs. If you have significant assets, you should allow a maximum (one-third) bequest by considering tax consequences and legal tax allowance. You deduct the debts, expenses, and taxes from total assets after death and then apply a maximum of up to one-third to the Testamentary Bequest per terms in the Wills or Trust. So, the remaining amount is Inheritance after deducting expenses, debts, taxes, and Testamentary Bequest. There is no limit to a minimum amount of Testamentary Bequest, as you may choose not to allow any amount.
How does Testamentary Bequest concerning Radd or Awwal (or Aul) situations?
There is no impact on Testamentary Bequest because it is given before inheritance is calculated. The radd case is when a total share is less than 1 (or 100%), and the residuary does not survive, so all shares are proportionally increased. Awwal case is when a total share is greater than 1 (or 100%), so all shares are proportionally reduced. Both cases do not apply to Testamentary Bequest.
How can Wassiyyah help to optimize my estate plan?
Wassiyyah can help you in three ways.
Wassiyyah provides exclusive blogs and articles for Premium and Ultimate members on gifts, bequests, and inheritance, making you knowledgeable about these terms. Also, you will learn about the requirements for choosing executors, trustees, agents, and witnesses. Additionally, Wassyyah's Islamic inheritance course is an intensive learning course that includes sources (i.e., Holy Quran, Sunnah, Ijma, Qiyas), Al-Faraidh (i.e., Fixed or prescribed shares), Al-Asabat (i.e., Residuary), Dhawu Al-arham (i.e., Distant Kindred or kins), Blocking or Exclusing rules, Radd and Awwal calculations, and practice examples. The course suits a student, individuals, professionals, lawyers, attorneys, scholars, or researchers. The course is available at the lowest cost of US$10 with lifetime access, including many benefits.
Wassiyyah will provide an instructions guide for purchasing an estate plan with specific information about creating and optimizing.
Wassiyyah's estate plan has the default protections to utilize your assets towards testamentary bequests in scenarios like the absence of heirs or others. Wassiyyah's estate plan will ensure your estates will go to the right heirs with all in-built protections through legal clauses.
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