Islamic Wills
Wills
A will is a legal document that sets out the wishes of a person with regard to the distribution of their wealth, income, and assets once they pass away. An Islamic will is a will that documents how your wealth, property, and gifts will be distributed when you die and is prepared in accordance with Islam and Sharia law. The last will and testament specifies exactly what happens to your assets and wealth when you die. What you leave behind is known as your estate, and this inheritance will be passed down to those mentioned in the will upon your death.Islamic wills are also known as wasiyyah, and are one of the many important elements of Islamic financial planning.This article will discuss Islamic wills, why they are important, and how to ensure you have one prepared.
Wills In Muslim And Non-Muslim Countries
Islamic wills are used by Muslims who want to ensure that their finances and responsibilities are dealt with in a Sharia compliant way once they have passed. In Muslim countries, the rules of the country dictate the laws of intestacy, which is the law that will apply on the death of a person.
However, in non-Muslim and western societies (such as the United Kingdom) where Sharia law does not apply, Muslims look to having an Islamic will in place before their death to ensure that it complies with their Islamic obligations and the rules stipulated in Islam when it comes to inheritance.
Why Islamic Wills Are Important
For Muslims, it is critical that they have an Islamic will in place before they pass away. Not only is the importance of having an Islamic will highlighted in the Quran it is also mentioned in the hadith.
If a Muslim does not have an Islamic will, this means that their property and wealth will not be distributed in accordance with Islamic Sharia rules and regulations.
Islam places great emphasis on making sure you live your life in an orderly manner, and this duty for orderliness and preparedness also applies to leaving this world.
If a Muslim dies without having made an Islamic will then they should expect their wealth to be distributed by the rules of intestacy of the country they live in. In the UK and the United States, the rules of intestacy are not in line with Sharia rules and are therefore not Sharia compliant.
Importance Of Having An Islamic Will
It is especially important to have an Islamic will for those with dependants, a spouse, children, or other beneficiaries. Not only will an Islamic will deal with the distribution of your assets, it will also ensure that any charitable donations you wish to make are dealt with, but your family is provided for adequately, and your funeral is managed in line with your wishes.
It is always best to make your Islamic will as early as possible, and whilst you are of sound mind.
The incentive in doing this is that once you sort your will it can remain in place until you die unless of course you decide to make any changes in which case your Islamic will can be updated.
Dying Intestate
If you die without a will in a non-Muslim country then the intestacy rules of that country will apply. For example, in England, if you have no surviving relatives then your estate will automatically pass to the Crown.
Dying intestate not only means that your assets will be distributed without your instructions, but it also makes dealing with your estate long-winded and difficult. It can also take months and sometimes years to unravel the estate and distribute the assets.
Usually, a close member of the family such as a spouse or parent has the legal right to distribute and manage the estate and the real property within it.
Islamic Wills Explained
An Islamic will is a legal document that will outline how a Muslim's assets will be distributed on their death. What sets the Islamic will apart from the traditional will is that the Islamic will is drafted based on the guidance and rules set down by Islam and Sharia law.
The Islamic will not only deals with the distribution of your assets but should also cover what happens to your debts and monies you owe to third parties.
Islamic wills should always comply with Islamic laws of inheritance, this is why you need to use the services of a solicitor who understand Sharia law and compliance.
Islamic Laws Of Inheritance
Islamic laws relating to inheritance are set out in the Quran and the teaching of Prophet Muhammad (peace be upon him).Some of the main principles of Islamic inheritance laws are as follows:
- Equality - a key component relates to equality between female and male heirs. Sharia rules state that male and female heirs should receive equal shares in the estate of the deceased
- Differentiating between debt and assets - debts and assets should always be separated and any debt should be settled before any assets are distributed to heirs and beneficiaries
- Shares - Islamic rules and guidance states that there are certain heirs (such as husband / wife/ children) who are entitled to what is considered to be a mandatory share of the estate
- Beneficiaries and heirs - for those writing and preparing wills, they should be mindful of the determination of heirs. That is those heirs who are specifically entitled to a share in the deceased estate (this includes spouses, children, parents, and grandparents)
Requirements Of Islamic Wills
When it comes to Islamic wills there are some key principles you need to be aware of:
- Compliance with Sharia law - make sure you know and understand the intestacy rules of the country you live in. Do not just assume that Sharia rules apply, do your due diligence and make any relevant inquiries
- Finding the right professional - when it comes to writing the will you should always seek the services of an Islamic lawyer who understands Sharia rules and the Islamic distribution of assets. The cost and expense will likely be the same as appointing a non-Muslim probate solicitor.
- Writing the will - the wording in the Islamic will should be clear and concise with no room for ambiguity or uncertainty
- Signing the Will - make sure your signature is applied in the right place and witnessed by two credible, Muslim witnesses. The last thing you want is for your will to be challenged in the future.
- Review - once your Islamic will has been prepared and signed you should review it periodically to make sure it still meets with your requirements and wishes.
Why Islam Recommends Having An Islamic Will In Place
There is a huge emphasis in Islam for Muslims to have an Islamic will. Ensuring that our assets and property are distributed in accordance with Sharia principles is the last legacy for Muslims before they exit this world and enter the next.Every Muslim will want to leave this world and leave their estate in a way that pleases Allah.
Benefits Of Islamic Wills
For Muslims, the main benefit of an Islamic will is that it ensures the estate is distributed in accordance with Sharia rules.Let's have a look at the main benefits of having an Islamic will prepared:
- Islamic estate planning - as mentioned above, there is peace of mind knowing your estate will be managed as per your wishes
- Islamic compliance - Islamic wills are Sharia compliant
- Avoids disputes - having the Islamic will prepared means that disputes about the distribution of your assets in the future are minimised
- Protection for heirs - of course, having the will ready means that your beneficiaries are protected and your assets, property, gifts, and money are shared in accordance with your wishes
- Burial - your Islamic will can outline plans for your funeral and burial and make sure it is all done in an Islamic way and in accordance with your belief and choice. This not only gives you reassurance but also makes the whole experience easier for those you leave behind.
In addition, Islamic wills can also address the importance and appointment of a legal guardian when minor children are left behind. Islamic law states that a legal guardian should be appointed in accordance with the best interest of the children.
Islamic wills can deal with such appointments, and this means that your son or daughter will be adequately supported by your nominated guardian.
ISLAMIC WILLS - WHAT IF THERE IS A DISPUTE?
If you find yourself in a situation where there is a dispute relating to an Islamic will then the first thing you should do is seek the services and advice of a professional Islamic wills lawyer.
Your lawyer will be best placed to advise you of your options, and many of them offer telephone call consultations and advice. If the dispute cannot be sorted via discussion and negotiation with the other parties involved, then you could seek a resolution through the Islamic Sharia court system.
Sharia courts are able to deal with disputes and help resolve disputes in accordance with Islamic principles.
What you should remember though, is that having a well-drafted, water-tight Islamic will means that it is less likely to be challenged or to lead to disputes in the future.
A good professional solicitor with knowledge of Sharia principles will help you prepare your Islamic will and ensure that it meets your requirements and remains Sharia compliant.
You should also make sure you speak to a financial expert who can advise you about tax planning making sure your property, assets and money are distributed in the most tax efficient way. Inheritance tax rules differ from one country to the next so it is always important to understand how they will impact you.
In addition to this, you should also consider having an executor you trust and who will abide by your wishes. The executor could be your solicitor, your child, or your parent, sibling, husband or wife.
Always be conscious of the fact that the rules about inheritance laws vary from one country to another, so always make sure you have the correct information you need. Seek the advice and opinion of a lawyer who specialises in Islamic Sharia law and Islamic wills.
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Islamic finance has historically played a significant role in financial inclusion in countries where Islam is a major religion, but it has not been accessible to Muslims in the West until very recently. The growth of Islamic finance has catapulted financial inclusion in previously overlooked groups and has ensured that businesses operating under Islamic principles have opportunities to access funding options and scale their growth.
The foundations of Islamic finance that rest on the principles of anti-usury and no interest have traditionally seemed to be at odds with the concept of successful business and entrepreneurship. After all, usury - leveraging interest rates – is a key component of traditional business growth. However, when it comes to Islamic finance one of the central foundations is that money should not make money, hence receiving or paying interest is not permissible.
In recent years the financial sector has realised the potential of Muslim entrepreneurship and investment, and has offered more inclusive Sharia-compliant financial services. The Islamic finance sector is growing up to 25%[1] each year, and this shows the demand is there for Sharia-compliant finance and banking.
Islamic Finance Principles
What are the main Islamic finance principles that impact on businesses? Islamic finance includes certain prohibitions, rules, and restrictions:
- Gambling (maisir): any form of gambling or speculation is prohibited.
- Contractual ambiguity (gharar): contracts with too many uncertainties or risks are considered gharar.
- Payment and receipt of interest (riba) is not permissible.
- Endowment (Waqf): this refers to a philanthropic actions where the benefit serves specific beneficiaries.
- Interest free loan (qard) where there is no interest payable by the borrower on the loan.
- Insurance (takafuI) refers to a common pool or fund where monies are redistributed to members as and when the need arises.
Combined with the principle of charity (zakah) these Islamic finance principles are centred on inclusion and social solidarity. Promoting socio-economic inclusion, benevolence, and growth via the redistribution of wealth is one of the central concepts of any Islamic finance system.
Islamic Financing Arrangements
Examining the Islamic finance principles above, it is easy to wonder how financial institutions that offer finance based on Islamic Sharia principles actually make money. The answer is that the different types of financial vehicles enable financiers to make money through various financing arrangements. These arrangements facilitate profit sharing and risk management [2].The most common Islamic Financing arrangements include:
- Murabaha: this refers to an arrangement based on profit and loss sharing where both financier and businesses share in the profits and losses. This principle is applied in mortgage transactions where the bank would typically buy the property and resell it to the customer for a price that includes a profit margin.
- Musharakah: this is a joint venture arrangement where both parties contribute capital and agree on the share of profits.
- Ijarah relates to leasehold arrangements whereby the lessor leases the property to a lessee in return for rental payments.
Financial organisations that offer risk-sharing financial solutions, and interest-free banking help to achieve financial inclusion. As you can see from the principles mentioned above, the structure of the arrangement means the bank can make their money by charging rent, sharing profits, or agreeing on a price above market value.
What is Financial Inclusion?
Financial inclusion is defined by The World Bank as a concept that ensures that people and businesses ‘have access to useful and affordable financial products and services’.
When it comes to Islamic finance, one of the key principles that facilitates financial inclusion is ensuring that there is access to savings and credit that is compliant with Sharia law. Research has found that in Muslim-majority countries up to 13% of people do not use conventional banks due to religious reasons [3]. The figures relating to financial inclusion in non-Muslim countries are likely to be much higher.
The United Nations and G-20 have both stated that financial inclusion is high on the agenda if globally we are to achieve sustainable development goals. Financial inclusion, therefore, goes beyond finances and relates to social and economic inclusion.
Why Is Financial Inclusion Important?
Financial inclusion is imperative because access to financial services is a driver of development, growth and opportunity. For Muslims, conventional financial services that are not compliant with Sharia law can result in a period of self-exclusion [4]. What Islamic finance facilitates and promotes is the inclusion of those who have been excluded on the grounds of religion. There cannot be equality of opportunity, access and sustainability without financial inclusion.
Financial services that are affected by self-exclusion:
- Lending and financing
- Insurance
- Savings
- Credit history
Evidence from countries such as Malaysia and Saudi Arabia has shown that Islamic finance not only improves outcomes for businesses but also helps the economy and presents opportunities for investors. Financial inclusion is an enabler of growth that is inclusive, compliant, and sustainable.
How does Islamic Finance Promote Financial Inclusion?
A system of well-designed financial services based on Islamic principles will not only enable Muslims to build financial resilience but ensure that they become active economic participants in the countries they live in.
Digital finance and mobile technologies mean Islamic finance is more widely accessible. The World Bank survey (2017) found that Muslims can often exclude themselves from using the formal financial institutions in place due to religious reasons [5].
Islamic finance is against the concept of asymmetric risk where one party has to lose if another gains. Instead, Islamic finance promotes risk-sharing that is not rooted in interest rates and speculative deals [6]. Certainly, in terms of micro-finance, Islamic finance is an emerging and fast-growing niche that aims to redress the current global imbalance when it comes to micro-finance and enabling marginalised groups to access financing options that work for them.
Islamic finance promotes financial inclusion, and by default creates significant financial migration. It provides an avenue for people with religious boundaries and principles to access financial services that were previously inaccessible to them. Islamic finance is not only about financial inclusion for businesses and individuals, it also attracts Islamic investors. This results in positive impacts at a local, community and global level.
Islamic finance is one of the fastest-growing industries in the finance sector. Governments and organisations including the World Bank and United Nations have all recognised that financial inclusion is imperative if global economic and sustainability goals are to be met. Also, if governments (particularly in the West) want political participation and empowerment for Muslims then financial inclusion is key to achieving that inclusion.
It is also important to remember that Shariah-compliant services are based on principles of equality and social justice. Therefore, financial inclusion and Islamic finance really do have the same end goal in mind – social equity.
References
1. https://corporatefinanceinstitute.com/resources/knowledge/finance/islamic-finance/2. https://www.theguardian.com/money/2013/oct/29/islamic-finance-sharia-compliant-money-interest3. https://www.brookings.edu/blog/future-development/2017/06/08/can-islamic-finance-boost-financial-inc...4. https://www.emerald.com/insight/content/doi/10.1108/IJIF-07-2018-0074/full/html5. https://globalfindex.worldbank.org/sites/globalfindex/files/2018-04/2017%20Findex%20full%20report_0....6. https://developingeconomics.org/2019/04/05/islamic-finance-and-financial-inclusion-who-includes-whom...
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Introduction:
In a world increasingly driven by consumer culture and financialisation, debt has become a ubiquitous aspect of life for many individuals and nations. Islam offers profound insights into the handling of debt, encouraging timely repayment and promoting a life free of debt. Debt is a serious matter in Islam. It is a responsibility that should not be taken lightly or neglected. The Prophet (peace and blessings of Allah be upon him) used to seek refuge with Allah from being overburdened by debt and he warned against lying and breaking promises when dealing with debt. In this article, we will explore some of the Islamic teachings and principles regarding debt and how to repay it in a timely and ethical manner.
The Islamic View On Debt
Islam does not prohibit debt; it recognises the fact that people may face circumstances that necessitate borrowing. However, it emphasises caution, responsibility, and most importantly, the intention and effort to repay the debt promptly. One of the foundational elements in Islamic financial ethics is the prohibition of 'Riba' (usury or interest). This reflects, among many other things, the Islamic principle of social justice, ensuring that the burden of risk is not disproportionately placed on the borrower and preventing exploitative lending practices. Here, the Shariah protects the borrowers and debtors. The Shariah encourages lenders to go easy with debtors, and in fact, Shariah promotes helping those struggling with interest-free loans as well as grants.
The Virtue Of Prompt Repayment
Shariah is a perfect balance. Whilst it has guidance addressed to the creditor to guide their conduct, Shariah also protects creditors and lenders, and has guidance addressed to borrowers and debtors. The following guidance shows how Shariah balances the rights and ensures everyone’s rights are upheld.
The virtues of repaying debts promptly are emphasised throughout the teachings of the Prophet (peace and blessings of Allah be upon him). Paying off debt is a virtue and a means of attaining Allah's reward and forgiveness. It is a way of fulfilling one's duty and honouring one's trust. It is also a way of expressing gratitude and kindness to the creditor who helped the debtor in his time of need.
The Prophet (peace and blessings of Allah be upon him) said, "Whoever takes a loan intending to repay it, Allah will help him, and whoever takes a loan intending to waste it, Allah will destroy him." [Sunan Ibn Majah]
He also said, "If anyone remits anything from a debt owed to him, he will have that amount recorded for him as a charity." [Sunan Abu Dawud]
In another Hadith it was reported: "The soul of the believer is suspended because of the debt until it is settled." [Tirmidhi] This Hadith indicates the serious implications of dying in a state of debt and underscores the urgency of repayment.
The Prophet (peace and blessings of Allah be upon him) would supplicate to Allah to save him from debt. He would say, “O Allah, I seek refuge in You from a soul that does not satisfy and from a heart that does not humble itself and from a supplication not heard and from knowledge that does not benefit and from a deed not raised up and from a debt that never ends.” (Musnad Ahmad)
In another narration, the Prophet (peace and blessings of Allah be upon him) sought Allah’s refuge from debt. Abdullah ibn Umar narrates, "When the Prophet contracted a debt transaction, he would say: O Allah, I seek refuge in Thee from care and sorrow, from incapacity and laziness, from stinginess and cowardice, and I seek refuge in Thee from the burden of debt and from being humbled by people." [Abu Dawud]
Whilst prompt payment has been encouraged, unjustified delay has severe warnings. Abu Hurairah reported that the Messenger of Allah said: "Procrastination (delay) in repaying debts by a wealthy person is injustice." [Bukhari]
Hence, the AAOIFI Standards unequivocally state: “Default in payment by a debtor who is capable of paying the debt is Haram (prohibited).”
In one narration, he said: “Delay in payment by a solvent debtor would be a legal ground for his being publicly dishonoured and punished.” [Musnad Ahmad]
Advice To The Creditors
Islam is beautiful in that it addresses all parties with that which concerns them. Each party is given guidance to ensure that they are doing their best that they can do, that they are being the best version of themselves. Just as debtors are warned on delaying payment unnecessarily, creditors are encouraged to go easy. Giving loans to the needy is a noble act of charity and kindness in Islam. It is a way of helping others and relieving their distress.
The Prophet (peace and blessings of Allah be upon him) said, "A man would give loans to the people and he would say to his servant: If the debtor is in hardship you should forgive the debt that perhaps Allah will relieve us. So when he met Allah, then Allah relieved him." [Sahih Bukhari]
It is also encouraged to give respite or deferment to the debtor if he is unable to pay on time. The Prophet (peace and blessings of Allah be upon him) said: “Whoever gives respite to one in difficulty, he will have (the reward of) an act of charity for each day. Whoever gives him respite after payment becomes due, will have (the reward of) an act of charity equal to (the amount of the loan) for each day.” [Sunan Ibn Majah]
Moreover, it is permissible to reduce the amount of the debt or waive it altogether as a gesture of generosity and goodwill. The Prophet (peace and blessings of Allah be upon him) said, "If anyone remits anything from a debt owed to him he will have that amount recorded for him as a charity." [Sunan Abu Dawud]
Debt And Society: A Broader Perspective
Islam does not just focus on individual actions but also considers social responsibilities and collective well-being. Helping those in debt is seen as a meritorious act, leading to divine reward.
In one narration, it is stated, "Whoever relieves a believer's distress of the distressful aspects of this world, Allah will rescue him from a difficulty of the difficulties of the Hereafter… and whoever alleviates [the situation of] one in dire straits who cannot repay his debt, Allah will alleviate his lot in both this world and in the Hereafter." [Sahih Muslim]
The Practical Aspect: Managing Debt
Given the emphasis on prompt debt repayment and avoiding debt where possible, Islam encourages pragmatic approaches to financial management. This includes effective budgeting, prudent spending, and exploration of viable income sources before resorting to borrowing. Furthermore, when borrowing is deemed necessary, it encourages a clear understanding and documentation of the debt terms to prevent future disputes or misunderstandings.
Conclusion
In the Islamic worldview, debt is not merely a financial issue but a matter involving ethics, morality, and social responsibility. While borrowing is not prohibited, there is a clear emphasis on the virtues of prompt repayment and the spiritual and ethical implications of living a debt-free life. Furthermore, the alleviation of others' debt is seen as a meritorious act, showcasing the communal and compassionate dimensions of Islamic financial ethics.This holistic approach can offer valuable insights for contemporary societies grappling with the ethical and societal implications of widespread indebtedness. Ultimately, the Islamic teachings on debt prompt individuals to practice responsible borrowing, timely repayment, and to strive for a life free from the burdens of debt.
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