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Wasiat, Hibah, Trust: 3 Tools to Circumvent Faraid / 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.

For example, this is how my assets will be distributed if I leave it to faraid calculation – my partner gets half, then my dad gets TWICE the amount my mom gets. And *if* my father is not around, my brother gets TWICE the amount my sisters get. (I used this faraid calculator).

Islamic Inheritance Laws is Fair in Theory But Not in Practice

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? Gender =/= money management skills nor ability to care for others. What if you have irresponsible/greedy male family members who you KNOW will not take care of female family members?

This is not an ‘if’ situation, it’s reality. 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. There are also people who purposely take advantage of grieving widows and take away their share under Harta Sepencarian!

The sad thing is you probably know someone or have personally heard of cases like this too. Many Syariah lawyers and Islamic estate planners said they handled a lot of cases like this as well.

Unfortunately, Syariah laws are unlikely to change to protect women better, so you have no choice but to be proactive in estate planning. 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/family members, or Muslims with non-Muslim parents/relatives).

Disclaimer: I have done my share of research on 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

You can work AROUND it, but cannot opt OUT of it.

In Malaysia, a Muslim will always be bound by Syariah laws, no exceptions. He or she has no way to opt out of this. The good thing is there are financial tools that can help you distribute your assets more fairly.

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 – Wasiat+Hibah whatever you can

Best for: B40/M40

Wasiat document is important and is the bare minimum in Islamic estate planning but not enough to protect against irresponsible male family members, so you need Hibah as well.

Again: 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.

Hibah circumvents this because it is basically ‘gifting’ – the assets you give away will now no longer be included under assets that needs to be distributed under faraid. 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 beneficiaries. This will supercede faraid* (if implemented right; check properly with your agent)

Cons:

  • Not everything can be hibah-ed out (for example, you can’t hibah EPF/KWSP money)
  • 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)

To do this option, you need to set up legal documents – go approach companies like AmanahRaya and As-Salihin, both of which are reputable Islamic estate planning service providers. Personally, I helped my mom do her document at the latter – it costs RM2,050 in total (2021 price)

I’m aware the price can be steep for many. One budget-friendly yet convenient option is through Pewarisan.com. For RM330, you will get these legal documents:

  • Surat Wasiat
  • Perisytiharan Harta Sepencarian
  • Perisytiharan Hibah

Method #2 – Do a Wasiat+Trust combo (+Hibah if you want)

Best for: M40/T20

If Wasiat is for the distribution of assets after death, and Hibah is gifting assets away, then 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)’

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, 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 has 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





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