What is estate planning?

Estate is includes everything you own. All property that legally belongs to a deceased or alive that have
values either physical assets, rights, interest etc.

Estate planning refers to transferring assets or investments from generation to generation. Estate
planning is the way your assets are managed after your death. Age is not a factor, as death can happen
at any time, at any age, for any cause.

Importance of estate planning

1. Protect beneficiaries
 It can prevent family discord and costly legal expenses by taking time to designate a
guardian and trustee for your minor beneficiaries. Or, if the beneficiary is already an
adult that’s bad at managing money or has an overbearing spouse or partner who fear
will squander the beneficiary’s inheritance or take it in a divorce, you can create an
estate plan that will protect the beneficiary.
2. Protect assets
 To protect the intrinsic value of the properties, one should pursue secure investment.
Growth in profitably and liquidity should be allowed. By doing this planning it will avoid
the problem of insufficient income provision for heirs.
3. Protect young children
 This will specifically involving setting up a will, which is just a portion of estate planning.
In your will, you will designate how any children under the age 18 are taken care of, and
what items in your estate are to be inherited by them when they come of age.
4. Avoid Probate
 A probate is the process of validating a deceased person’s will and placing a value on
their assets, paying their final bills and taxes, and distributing the rest of beneficiaries.
Avoiding probate is by far the most common reason why people seek out the advice of
an estate planning attorney.
5. Prevents unwanted inheritors
 If you die without a will, then the state will decide who will be your beneficiaries. To
avoid your wealth to unintended beneficiaries. An estate planning lawyer can easily
solve this problem. He can ensure that your property goes to your intended inheritors
hand.

The estate planning process

1. Ascertain how much assets you own. Includes, itemize all your assets i.e. liquid assets, financial
assets, real properties and personal properties. Find out the proportion of ownership in each
asset.
2. Determine how you want your estate distributed. List all of individual beneficiaries that you wish
to pass your assets after you die. Determine what proportion of your wealth you wish to allocate
to each beneficiary.
 3. Decide on the means of transferring assets. You may divide your assets over your lifetime or at
death. While you live, you can allocate assets to your beneficiaries in two ways. First, direct gift
where this gifts have the benefit of avoiding estate duties as well as seeing your beneficiaries
enjoy these gifts while you are alive. Second, set up a trust to distribute your assets to your
beneficiaries. After the death, the assets will be passed to the beneficiary in the form of will,
trust, intestacy law (die without will) and beneficiaries designated in the contract.

Estate planning instruments

1. Wills - A written instrument by which a person expresses his desires for the allocation of his
estate after his death. Since it takes affect only after death, a will by its very nature is revocable
and can be modified at any time before the will-maker dies.
2. Trust – A legal arrangement or relationship by which a person transfers properties to a third
party called a trustee who are bound to follow a set of directives, rules and regulations for the
benefit of others known as the beneficiary or distributee. A trust creates an equitable obligation,
either expressly undertaken or strictly imposed by the court of law. The trustee is duty bound to
handle the trust property for the benefit of the beneficiaries.
3. Power of attorney - This document will ensure that your financial affairs continue to be manages
by someone you trust even if you become incapacitated. This document allows someone you
name, called your attorney-in-fact or agent, to manage your bank accounts, your real estate,
sign things on your behalf and in general perform any act with relation to your property that you
could have performed if you were able.
4. Health care proxy - A document that appoints another person as your health care agent to make
health care decision for you in the event you cannot. It is very important to tell your health care
agent what you want before you become unable to do so. It is intended to make a guardianship
unnecessary, saving your caregivers time, money and aggravation.

Islamic Estate Planning

Wills

In Islamic estate planning, will is known as Wassiyah which derived from the root word ‘wasa’ which
means be conveyed. Determines the appointment of an executor or trustee/guardian to manage post-
death matters and even the potential appointment of a trustee under the age of 18 years.
Will/Wasiyyah writing stipulates the direction and distribution of estate. For the Non-muslims, they are
free to distribute all their assets/estate to the beneficiaries of their choice. For Muslims, they can make
provisions of up to 1/3 of the total assets to non-heirs.

Faraid

Faraid is a concept in Islamic Law, which determines the distribution of a deceased’s property to heirs in
portions as set out in Al-Quran, As-Sunnah and Al-‘Ijma.

Rules:

I. Beneficiaries is fixed
II. The proportion of distribution to beneficiaries is fixed
 III. Non-Muslim next of kin of the deceased Muslim are not eligible for Faraid distribution
IV. Adopted and illegitimate relations are not recognized for Faraid distribution.

Hibah

One of the important instruments used in Islamic wealth management. Hibah occurs where an individual
confers his valueable asset to another during his lifetime unilaterally, without any due consideration.
Hibah in its original form is considered as a tabarru’ contract which is made without any reverse
intention. Hibah instrument is usually used by Muslims in planning assets distribution to the intended
beneficiaries in relation to specific assets, whereby the ownership of the asset is transferred to the
beneficiary during the donor’s lifetime or in certain circumstances, conditionally passes over after the
donor’s death.