Wealth is a part of sustenance granted by Allah to all mankind, and Islam permits its accumulation, as stated in the Holy Qur’an, Surah Al Israa, Q17vs12 says:
“We have made night and day as two signs. We made the sign of the night devoid of light, and made the sign of the day radiant that you may seek the bounty of your Lord and know the computation of years and numbers. Thus, We have expounded everything in detail to keep everything distinct from the other”
and also from Surah Al-Furqan, Q25vs47
“And it is Allah Who has ordained the night as a garment for you, and the sleep as a repose of death, and the day as the time of return to life.”
However, the acquired wealth must be spent in the right way, as emphasized by Allah in Surah Al-Baqarah, Q2vs261
“The charity of those who expend their wealth in the way of Allah may be likened to a grain of corn, which produces seven ears and each ear yields a hundred grains. Likewise, Allah develops manifold the charity of anyone He pleases, for He is All-Embracing, All-Wise.”
Verse 274 of the same Surah explains further that
“The parable of those who spend their substance in the way of Allah is that of a grain of corn…’ and ‘Those who (in charity) spend of their goods by night and by day, in secret and in public, have their reward with their Lord: on them shall be no fear, nor shall they grieve.”
Islam prohibits harmful practices related to wealth, such as wastefulness or excessive use, as mentioned in Surah Al-Israa Q 17vs26;
“Give to the near of kin his due, and also to the needy and the wayfarer. Do not squander your wealth wastefully”.
Furthermore, Surah Al-Furqan, Q25vs67 cautioned that:
“those who, when they spend, are neither extravagant nor miserly but keep the golden mean (balance) between the two (extremes)”
Wealth protection and preservation are crucial in Islamic wealth planning, aligning with Sharia principles to ensure financial well-being, justice, fairness, and risk-sharing. Accordingly, intentional Islamic estate planning emerges as a fundamental component, contributing to the protection and preservation of wealth.
In addition, strategic diversification of assets (within the framework of Islamic principles) is encouraged for protecting and preserving wealth.
We will discuss Islamic Estate Planning tools below as well as Asset Diversification / Risk management.
Islamic Estate Planning
Islamic Estate Planning is the process of anticipating and planning for the management and disposal of a Muslim’s estate during his lifetime and after his death. It is the act(s) carried out or put in place by a person of Islamic faith to ensure the continuous management of their assets and provide for their loved ones in the event of their inevitable death. Flowing from this definition, it can be construed that Islamic Estate planning does not necessarily mean making provisions for after death alone as there are mechanisms for Estate planning during the lifetime of the Testator or Settlor including Gifting (Hibah) an asset to a beneficiary or creating a Trust (Waqf) amongst others.
There are several reasons for individuals of the Islamic faith to undertake the estate planning process. These are :
- It is a divine Injunction.
- It facilitates and institutionalizes wealth and asset preservation across generations.
- It is a means to ensure continual provision for loved ones.
- It is a means to stifle the possibility of a rift among the family members
- Islamic Estate planning allows for Philanthropic dispositions.
- It facilitates the ability to gift an asset to an individual who is not contemplated within the Faraid provisions.
We would continue examining Islamic wealth planning for Islamic faithfuls in subsequent editions of this Newsletter.
Remember you can secure your legacy according to Islamic principles with our expert estate planning services.
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