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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Sharia-compliant finance operates within the Islamic finance financial model. What this means is that any financial product or service must adhere to Islamic rules relating to financial transactions.
The increasing popularity of Sharia-compliant finance is being driven by the growth in the global Islamic finance industry. However, many businesses and individuals are looking to Sharia-compliant finance to provide them with ethically based options and solutions. Ethical investors and the growing trend for socially responsible investing means Sharia compliant services are aligning with the values of many people across the world.
Sharia-Compliant Finance
Sharia-compliant finance must have the following qualities:
- Aligns with Islamic values
- Prohibition on interest/riba
- Ethics and morality screening
- Social responsibility
- Risk management
- Profit and loss sharing
- Ongoing monitoring and compliance
- Asset backed finance
- Avoiding speculation and ambiguity
Promoting Inclusion
Sharia-compliant finance is a great draw for ethical investors in the market looking to invest their money in ethical enterprises that promote individual inclusion and diversity. By providing equitable access to financial services, Sharia-compliant finance serves underprivileged communities who may not previously had access to products and services.
The focus on building inclusion and equity through transparency, information, and sharing of profits enables Sharia-compliant finance to promote inclusion.
There are several ways in which Sharia-compliant finance promotes inclusion.
- Prohibition of interest: the charging or receiving of interest is seen in Islam as an exploitative practice that is unjust and unfair.
- Avoiding speculation: keeping transactions transparent and equal makes them more inclusive.
- Ethical investment screening: screening for industries such as gambling and alcohol means that more focus is placed on environmental, social, and corporate governance.
- Asset backed finance: having transactions backed by assets leads to more clarity and equity between all parties.
- Risk sharing: this leads to greater inclusion as it removes the respective power of each party when coming into the financial deal. It also means that payments owing to the parties are fair and proportionate.
- Socially responsible investing: the onus on being socially responsible when investing or managing a portfolio places a responsibility on the investor to be conscious of working with marginalised groups.
- Sustainability: having a future focus on long term goals is a key element of Islamic finance.
- Fairness in contracts: Islamic finance emphasises the importance of having fair contracts and contract terms. Parties to a contract should act with integrity, honesty, and mutual consent.
Microfinance In Islamic Finance
Islamic finance recognises the importance of supporting small and medium businesses. Investment in these sectors and industries is encouraged.
Sharia-compliant finance understands that microfinance for small businesses is imperative for growth and sustainability. Often, small businesses can struggle to secure funding and capital. Islamic microfinance offers SMEs a lifeline with Sharia compliant finance solutions that are tailored to the business needs.
For investors, it means they can invest ethically, enabling entrepreneurs to access capital for business growth.
Risk And Profit Sharing
Risk and profit sharing is a key element of Islamic finance. What it means in principle is that partnership models such as Mudarabah and Musharakah are encouraged.
These partnerships enable entrepreneurs and financiers to agree on the terms of any profit sharing in a fair and transparent way.
Community Development Initiatives
Islamic finance encourages community development initiatives through mechanisms that align with Islam. The central principles of social responsibility and ethical investing mean that investors are required to act in a philanthropic way for the greater good of society. The outcome is that society benefits from the actions of the individual.
Sharia-compliant investments are directed towards the type of fund and project that positively impacts society. Investors looking for Sharia compliant investors prioritise investments in sectors that require funding such as healthcare, education, renewable energy, housing, and poverty alleviation.
These sectors have seen huge growth in recent years, so investing in them is often a win for the socially conscious investor and the initiative.
Staying Stable In Volatile Markets
Sharia compliant finance has demonstrated resilience and stability in volatile markets. This is due to its core principles of risk sharing, asset backed finance, and avoiding interest. Ethical investors are not looking for a quick and easy return, instead they want to invest in a stable and ethical sector.
As changes in interest rates affected the global markets in recent years, the Islamic finance investment market remained relatively stable as it is not dependent on interest backed lending or borrowing.
The value of the assets the finance is backed against provides some stability when the market becomes unpredictable.
Global Growth
Islam encourages a long term approach when it comes to investments. The focus is not on immediate profits, but long term sustainability and societal benefit. The principles of sabr (patience) and fairness in Islam mean that ethical investors investing using a Sharia-compliant framework are not always looking for an immediate return on investment. The aim is long term benefits and stable returns.
As the Islamic finance industry continues to grow, so too do the Sharia compliant finance options. Ethical investors from all backgrounds are pushing the drive for ethical and socially responsible investments.
Crowdfunding
Crowdfunding is a process of raising money for a business or idea. Unlike traditional methods of raising finance, crowdfunding is innovative and based on the concept of raising funding via crowds of people.
Some crowdfunding contributors will donate funds entirely altruistically, simply to support the business. Other crowdfunders will see their funding contribution as an investment into the business venture. In return, these investors will be rewarded with a return on their investment. The reason crowdfunding is so popular is that is has become a great way of raising money quickly. This means that no matter how ambitious or how small your project, there is a way to raise finance without resorting to asking financial institutions.
How Crowdfunding Works
Crowdfunding enables businesses and individuals to attract investors in the business through the practice of funding a project by raising sums of money from a crowd of people who are willing to invest in the business. Some of those offering funds will do so altruistically, expecting nothing in return, but for many of the donors they will expect a return on their investment. In order to start a crowdfunding campaign there needs to be a specific cause or project, and a specific goal amount in place. Businesses and entrepreneurs can then ask or invite a number of people to donate various sums of money (small and large) until the crowdfunding goal is achieved.
The unique part of crowdfunding is that it mainly takes place online. The digital revolution over the last decade, coupled with the increase in social media exposure and marketing means that crowdfunding campaigns can be widely shared and marketed. As crowdfunding tends to take place online, the use of social networks is key and makes it inherently easy for supporters of a crowdfunding campaign to share it widely, ensuring the project gains widespread exposure and funding.
Crowdfunding is used for all manner of projects, including charity projects, creative projects, start up businesses, entrepreneur ideas and small businesses. Crowdfunding is a great way for non-traditional businesses such as those businesses following Islamic finance principles, to raise funding in a Sharia compliant way.
Types Of Crowdfunding
The main types of crowdfunding models are as follows:
Investment Based Crowdfunding
This type of crowdfunding is often used by businesses looking to raise capital. Businesses will offer to sell ownership shares and stakes in return for a crowdfunding investment. Businesses will promise to use the funding to develop their business idea or product and in return the investor will receive a share of the business in return for the finance they provided. In this way, donors ultimately become shareholders of the company, with the possibility of owning some of the business equity. Often, these shareholders may also be provided with rights to be involved in the business process and project.
Donation Based Crowdfunding
Donation based crowdfunding is essentially a model where donors are asked to contribute to the project by way of a donation. Individuals will essentially donate funds with the aim of meeting the project finance goal, and in return the donors do not expect anything in terms of shares or financial returns. People who donate rather than invest are not backers of the business, they just offer finance on a not-for-profit basis.
Advantages Of Crowdfunding
For anyone looking to raise finance for their business or idea via crowdfunding, there are some important advantages you should be mindful of.Advantages:
- There are often minimal upfront fees or costs and this means there is some protection from risk when starting out
- There is little financial risk with almost no start up debt
- It's a great form of market testing and marketing research, seeking the opinion of your target audience
- Money can be raised quickly and campaigns can go viral
- Social networks, websites, and online platforms can result in speedy and widespread exposure
- You can use the crowdfunding campaign to gauge public perception, generate interest, and obtain feedback
- Investors and donors can become personally invested in campaigns and this will help you build loyalty programs and interest in your idea
- Crowdfunding enables start-ups, small businesses and innovative ideas to get financial backing
- It is a great way of raising finance and covering costs for those businesses without access to traditional forms of bank lending or in a difficult economy
- You can create community support for your project and build on these important relationships and customer loyalty
- Crowdfunding enables more effective risk management as there is often less risk for smaller businesses
Crowdfunding Tips
For a successful approach to crowdfunding you need to make sure you have a clear and strategic approach to the campaigns. The advice and tips will help you create a successful crowdfunding campaign:
- Pre launch: make sure you do your research, collate all the information you need, build email marketing lists and think of ideas for your campaign content
- Create compelling content: this could include a campaign video, written information relating to your goals and graphics/videos
- Tailor your PR: before your campaign goes live research your audience, find out where they hang out virtually (Twitter, Instagram, Facebook) and target them
- Strategic social media and influencer use: the greater your reach and the reach of the platforms you use the greater your chances of exposure and success. You don't have to limit your audience to the United Kingdom.
- Engagement: encouraging others to comment, share and post about your campaign will deliver your message to a wider audience
- Donations: don't ask for money immediately but do make sure you ask family, friends, colleagues to donate. Share your passion for your project and draw the reader in. Remember to also ask the right people for donations.
Crowdfunding Platforms
Some of the most popular crowdfunding platforms include the following:
- Kiva
- Kickstarter
- Patreon
- GofundMe
- Indiegogo
- Seedrs
All these platforms enable users to share the campaign and spread the word about your project on various social media platforms and via email.
Non Fungible Tokens
NFT stands for non-fungible token. Essentially, and explained very basically, NFTs are digital assets that can be traded online. Non-fungible tokens are not interchangeable with any other item and are therefore unique.
Currently, NFTs are taking the collectible and digital world by storm due to their popularity. NFTs enable creators to represent ownership of their very unique assets. The NFT itself is a token of ownership with clear and identifiable ownership trails. This means that there is an indisputable copyright status, and royalty protection.
The uniqueness of NFTs lies in the fact that they cannot be replicated. There can only be one owner at any time and the record of ownership cannot be fabricated as it is secured on the blockchain technology. NFTs have their own unique identifying code and this means they create their own digital scarcity.
As NFTs are unique digitally this means that no two NFTs will be the same and their uniqueness provides for a great financial investment opportunity.
Examples Of Nfts
Some examples of NFTs include the following:
- unique digital artwork
- trainers in a limited edition collection
- digital collectibles such as the Lebron James 'dunking against the Houston Rockets' moment
- internet domain names
- Internet GIFS such as the recent Taco Bell series of GIFS
- In-game items
- Ticketing for events
NFTs have exploded onto the mainstream because big brands and celebrities have started to realise how useful and lucrative they can be. High profile company Adidas recently launched a collaborative NFT partnership with Prada, and even McDonalds have added NFT to their marketing and advertising strategy.
These latest collaborations have made the news and brought NFTs firmly into the mainstream spotlight.
HOW DO NFTs WORK?
In its very simple form, NFTs work on the basis that they are not divisible, interchangeable, or assignable. The Ethereum blockchain technology enables the NFT to be fully traceable and trackable. Information about the NFT is stored securely on blockchain technology and this gives investors peace of mind and reassurance.Similar technology that is used for cryptocurrency investments is used for NFTs to guarantee the uniqueness of the NFT. The blockchain technology is the digital ledger that contains the proof of ownership. This means that it is impossible to create duplicates of frauds. This in turn means the price of NFTs can rise based on their features.
NFTs can include anything from digital files, photography, music, art, and videos. Recently, there have even been tweets from web content that have been made into NFTs.
Although NFTs have been around since 2014, 2021 was a bumper year for the NFT economy as NFT financial transactions and sales increased massively with investors building and diversifying their portfolios.
Difference Between Nft And Cryptocurrency
Although NFTs are built using similar technology to cryptocurrency, they are actually very different from cryptocurrency. NFTs are traded and generated using cryptocurrency.
However, unlike cryptocurrency, NFTs can't be exchanged because no two NFTs can ever be identical. What you are purchasing when you buy an NFT is a unique code that will manifest itself as a unique digital item.
For example, if you have multiple £10 notes in your wallet, these are interchangeable. You can use any one of them to make purchases. These notes are fungible - they are interchangeable. In contrast, consider the NFT sale of Jack Dorsey's first tweet that he sold for $2.9 million. This tweet is original and cannot be interchanged or replicated.
HOW TO MAKE MONEY WITH AN NFT
Many investors treat NFTs as they would a stocks and shares investment. They profit from buying and selling NFTs.
For collectors, NFTs are a great investment as they act as digital assets with proof of ownership that cannot be replicated. Each NFT has a digital signature that makes it impossible for it to be exchanged with like for like. Cryptocurrencies, in contrast, are considered to be fungible assets as they can be interchanged with each other.
For creators, they can create and sell their NFTs on various platforms and websites online that act in a similar way to Etsy or Amazon. These websites hold all the data relating to the NFT securely.
For investors, you can sell or trade NFTs. Of course, as with any investment you will need to know when the best time to sell is and factor in any kind of appreciation or depreciation of your NFT.
For many people, NFTs represent a fun but lucrative investment.
INVESTING IN NFTs - THE FUTURE
Although it is difficult to predict the future of NFTs, they are here to stay and experts predict that they will only increase in value and popularity. If wealthy investors continue to invest the NFT market will grow and move beyond gaming and art realms.
Investors looking for long-term investments that are likely to grow in popularity are drawn to NFTs as they have the potential to increase in value, quickly.For investors the main benefits are that NFTs provide the following:
- Proof of ownership
- Exclusive access
- Certifiable authenticity
- Marketplace efficiencies
- Safe blockchain technology
- Facilitate diversification
From a Sharia point of view, scholars understand that NFTs are still very much in their infancy. Any investor needs to ensure that no Sharia principles relating to assets and Islamic finance are breached. For example, investing in NFTs that operate within haram industries such as gambling, alcohol, or porn would be deemed impermissible under Sharia rules.
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