Islamic Estate Planning in Malaysia: Addressing the Dilemma and Enhancing the Industry

Journal of Islam in Asia
Special Issue: Islamic Banking and Finance 2020
EDITOR-in-CHIEF
Mohammed Farid Ali al-Fijawi
ASSOCIATE EDITOR
Homam Altabaa
GUEST EDITORS
Rusni Hassan & Habeebullah Zakariyah
(Institute of Islamic Banking and Finance, IIUM)
EDITORIAL ASSISTANT
Kamel Ouinez
EDITORIAL ADVISORY BOARD
LOCAL MEMBERS
Abdel Aziz Berghout (IIUM)
Muhammed Mumtaz Ali (IIUM)
Nadzrah Ahmad (IIUM)
Rahmah Bt. A. H. Osman (IIUM)
Sayed Sikandar Shah (IIUM)
Saidatolakma Mohd Yunus (IIUM)
Thameem Ushama (IIUM)
INTERNATIONAL MEMBERS
Abdullah Khalil Al-Juburi (UAE)
Abu Bakr Rafique (Bangladesh)
Anis Ahmad (Pakistan)
Fikret Karcic (Bosnia)
Muhammad Al-Zuhayli (UAE)
Zafar Ishaque Ansari (Pakistan)
Articles submitted for publication in the Journal of Islam in Asia are subject to a
process of peer review, in accordance with the normal academic practice.
© 2020 by International Islamic University Malaysia
All rights reserved. No part of this publication may be reproduced, translated, stored
in a retrieval system, or transmitted in any form or by any means, electronic,
mechanical, photocopying, recording or otherwise, without prior written permission
of the publisher.

International Islamic University Malaysia (IIUM) Journal of Islam in AsiaSpecial Issue Islamic Banking andFinance, Vol. 17, No. 2. 2020E-ISSN: 2289-8077Islamic Estate Planning in Malaysia: The DilemmaPerancangan Harta Islam di Malaysia: Satu DilemaAzi Haslin Abdul Rahman, and Rusni HassanAbstractIslamic estate planning is very important in the life of any Muslims. Indeed,those Muslims who pass away and do not have proper planning on their estate indirectlybreaching the bequest guidance as stated in the Qur’an which are the main source ofreference for a Muslim life. Regrettably, the noble spirit of Islam is not well accepted,and many are not concerned with arranging their estate thus triggering enormous familydebates and increase the unclaimed property after the deceased’s death. The present-dayaffairs of Islamic estate planning in Malaysia is still not encouraging despite the effortsby relevant institutions and industry players to expand the industry. The initiative wasundertaken by the government to form a national institution known as Amanah RayaBerhad and followed by participation of private Islamic estate planning companies toprovide estates planning related services. However, thus far only 700,000 individualshave declared wasiyyah as compared to the majority of Muslims among the 30 millionMalaysians. The outstanding differences among subscribers of the services and who donot subscribe, open up to a real dilemma within the area of Islamic estate planning. Thisis the subject that motivates the researcher to study the issues in Islamic estate planningin Malaysia. The purpose of this study is to examine the dilemma faced by the industrypractitioners. This research is qualitative in nature relying on the existing literaturesfrom internet website, document analysis and library literature. The scope of this studyis relevant and pertinent to the overall Islamic estate planning industry developmentthus, intended to put forward recommendations for enhancement of Islamic estateplanning in Malaysia including the possibility of establishing Shari’ah advisoryframework for the Islamic estate planning institutions.Keywords: Islamic estate planning, Dilemma, Issues, Inheritance, Malaysia.AbstrakPerancangan harta Islam adalah sangat penting dalam kehidupan orang Islam.Bagi orang Islam yang meninggal dunia dan tidak merancang sebaiknya harta  PhD’s degree candidate, Institute of Islamic Banking and Finance (IIiBF),International Islamic University Malaysia, IIUM, E-mail: [e-mail]. Prof. Dr., Institute of Islamic Banking and Finance (IIiBF), International IslamicUniversity Malaysia, IIUM, E-mail: [e-mail].

238 Islamic Estate Planning in Malaysia: The Dilemmapeninggalan mereka, dalam erti kata lain individu terbabit telah melanggar garispanduan yang telah ditetapkan di dalam Qur’an yang merupakan panduan utama bagikehidupan seseorang yang beragama Islam. Prinsip utama panduan kehidupan sehinggaperingkat kematian yang bersifat menyeluruh yang ditekankan oleh agama Islam nyatagagal diterima sepenuhnya oleh umat Islam yang akhirnya menyebabkan sebahagiandari mereka tidak merancang pengagihan harta setelah kematian. Situasi inimenyebabkan wujudnya perdebatan antara ahli keluarga atau waris yang berhak dan inimenjadi faktor kepada harta tidak dituntut setelah kematian seseorang individu.Perkembangan semasa pengurusan harta pusaka di Malaysia masih tidak menggalakkanwalaupun pelbagai usaha telah dilaksanakan oleh pihak berwajib dan pemain industri.Inisiatif awal telah dibuat oleh pihak Kerajaan Malaysia dengan menubuhkan institusidikenali sebagai Amanah Raya Berhad serta seterusnya kemunculan pelbagai pemainindustri swasta dalam menyediakan khidmat pengurusan harta pusaka serta yangberkaitan. Namun demikian, sehingga kini, sejumlah 700,000 individu sahaja telahmelaksanakan deklarasi wasiat berbanding bilangan umat Islam di Malaysia yangmencecah 30 juta orang. Perbezaan yang amat ketara ini berhubung individu beragamaIslam yang mempunyai wasiat dan yang tidak berwasiat membuka kepada persoalanapakah dilema yang dihadapi dalam pengurusan harta Islam di Malaysia. Objektifkajian adalah untuk mengenalpasti dilema yang dilalui para pengamal industri. Kajianini bersifat kualitatif dan bersumberkan literatur sedia ada yang dirujuk menerusi lamaninternet, analisis dokumen dan carian di perpustakaan. Skop kajian ini adalah sangatrelevan dan bertepatan dengan keperluan dan perkembangan industri pengurusan hartapusaka. Kajian ini juga bertujuan untuk menyediakan cadangan bersesuaian bagikemajuan pengurusan harta pusaka berdasarkan kaedah Islam dengan kemungkinanmewujudkan kerangka khidmat nasihat berlandaskan Shari’ah bagi institusi pengurusanharta pusaka Islam.Kata kunci: Perancangan harta pusaka, dilema, isu, harta warisan,Malaysia. Introduction The life span of Islamic estate planning institution in Malaysiacould be traced from the establishment of Department of Public Trusteeand Official Administrator in 1921, later known as Amanah Raya Berhad(ARB) after corporatization in 1995. Counting the number of years inexistence, the only public trustee in Malaysia being in the market nearlymore than 90 years. In addition, the emergence of private trustee wayback more than 15 years ago and some newest companies indicates thepresent of Islamic estate planning (IEP) service provider in Malaysia.Unfortunately, IEP which is equally important aspect of Islamic financeis neglected, judging by the number of years of their existence and theirdevelopment progress. The current scenario implicates little attentiongiven to the IEP industry. For the purpose of assessment, the nature ofearning and commercial opportunity from estate planning business is notlike that of mainstream Islamic finance. It is likely not comparable to the

932, and Rusni HassanAzi Haslin Abdul Rahman other mainstream segment of Islamic finance; however, the desires andthe importance of appropriate estate planning may ensure the smoothnessof estate distribution after one’s passing away. Very little discussion onIEP and again, IEP is always associated with wealth management thatgoes back to Islamic banking and takaful, leaving behind estate planningwhich is appeared under the wealth distribution phase. Clearunderstanding may be derived from the proper definition of the process;thus, the IEP is where the individual charting their assets and possessionsto their loved ones, designated heirs in accordance to Islamic inheritancelaw or bestow it for charitable purposes. Corresponding to the IslamicWealth Management Report 20161, Islamic wealth managementrelatively under-developed as compared with other sub-sectors in Islamicfinance, however Islamic wealth management has countless ability foradvancement. The similar report affirming few concerns such as thelimited supply of Islamic wealth management products driven, expansionof markets and investor base, strengthening of the supportinginfrastructure, and generating greater level of confidence.The Islamic wealth management comprises of few componentsincluding wealth creation, wealth accumulation, followed by wealthprotection, then wealth cleansing/purification and lastly wealthdistribution. Thus, the scenario testified in the previous report extendedto the wealth distribution stage or estate planning industry that believedto be left behind. Due to insignificant concentration on IEP, substantialissues raised concerning the practices particularly as regard to Shari’ahcompliance aspects of IEP. The essence of the concern connected to thepractices of the Islamic law itself and not to the existing law precisely.Therefore, there are needs for a check and balance in the practicesapplies in IEP institutions. In another standpoint, as scripted in theEconomic Transformation Programme (ETP), “Shari’ah wealthmanagement is a largely underserved market today that represents aunique opportunity for Malaysia, requiring specialized knowledge suchas Shari’ah compliant wills and estate planning.”2 ETP also realizes thatbuilding Shari’ah financial planning capability is a prerequisite for thewell-developed personal wealth management industry. Visibly, the 1 Edbiz Consulting, “Islamic Wealth Management Report 2016” (Kuala Lumpur, 2016).Islamic Wealth Management Report (2016) published by Edbiz Consulting, aninternational Islamic financial advisory firm. This report publication is sponsored byLabuan International Business and Financial Centre, Malaysia. 2 PEMANDU Jabatan Perdana Menteri, “Economic Transformation ProgrammeReport,” Economic Planning Unit Malaysia, 2010. P. 229.

240 Islamic Estate Planning in Malaysia: The Dilemmastated assertion in ETP reaffirm substance of Shari’ah compliant willsand estate planning. In relation, establishing the intended products andservices that are fully compliant apparently needs the participation ofShari’ah expertise. In some situation, the process of dispersal of estatesgrow more complicated in the event of multiple layers of heirs and in theoccurrence of swindle and disagreements among beneficiaries. This iswhat referred as a family drama. On top of that, this kind of family dramaturn out to become headline in mass media and worsening the reputationof IEP.Further understanding on the inheritance system applied in Islamwhich is faraid that define as one of the instruments stated in Qur’an forestate distribution. In Islam, the jurisprudence that deals with inheritanceis called al-faraid or the science of the ordained shares whose principlesare drawn from the Qur’an.3 In another circumstances, the Muslimsshould understand that besides the faraid system which being mandatoryfor them, they have a duty to also be attentive of various otherconsiderations that their rightful beneficiaries should go through prior tothe estates be able to be disseminated among themselves after theirpassing away. According to the worth of the estates, these involveprocesses and bureaucracies that be existent with several governmentagencies, such as the Department of Director General of Lands & Mines,both the Civil and Syariah courts, banking and financial institutions,ARB, Employee Provident Fund (EPF), and Tabung Haji (TH) as well asRetirement Fund Incorporated (KWAP). Taking into consideration,certain complexity of processes required an extended time of period.Thus, the beneficiaries had to endure a tiresome procedure.The major concern in this study is the barrier in the advancementof IEP industry in Malaysia. The reality of the industry practicescurrently quiet upsetting due to improper regulation, and it starts fromnon-appearance of the standard practices. This condition caused by theabsence of requirement by the respective authority. Hence, the study isimportant and significant to the general IEP industry development. Theresearch objective is to shed light and address legal and Shari’ahregulatory issues within IEP in Malaysia. Ultimately, this study envisionssome proposition for enhancement of IEP in Malaysia including theprobability of forming Shari’ah advisory framework for the IEPinstitutions. The modus operandi of the study utilizing qualitative 3 Azman Ismail, Islamic Inheritance Planning 101, 1st ed. (Kuala Lumpur: IBFIM,2013).

942, and Rusni HassanAzi Haslin Abdul Rahman approach. The main resources that contribute to the research journeyretrieved from secondary data where the researcher getting theinformation from the published data. The sources derived from thehardcopy or softcopy books, several journals and other publications.Besides that, published printed resources, published electronic resources,government documentations and private sector documentations thatavailable and searchable also become part of the resources. Structure ofthe paper will be reviewing the concept of IEP, the current situation andpractices of IEP in Malaysia followed by the predicament highlighted inIEP and finally some constructive suggestions. The Conception of Islamic Estate Planning The origin of the concept of IEP descended from the Qur’an,which is the holy book of Muslims, and its further interpretationspresented in the hadith. The Qur’an is a 1400-year-old religious text thathas been comprehended over time to be applied to the modern age. Priorto the arrival of Islam, the estate commonly could not be inherited by awoman, even from their spouses, and occasionally these women wereconsidered as a portion of a man’s estate. At those eras, the person whoare blood relatives and adopted sons had the right to inherit. Some uniquefeatures in those days also allowed a situation such as two unrelated mencould bequest inheritance to each other via a “contract of alliance.” In thebeginning period of Islam, it transformed the scenario intensely. Inaddition, conception of understanding that property ultimately belongedto God, and that people only possessed a certain level of control of theproperty at the time of their deaths4. The wealth and physical propertythat we own in this planet is a custody from Allah. For the duration ofour lifespan, we are demanded to use it in the way that is most delightfulto our Lord. As reported by Ibn Masud and Abu Burazah, ProphetMuhammad (peace be upon him) said,ِِهُوُرَوِسٍ عَن ِ عَلَ عَن ِ خُسِأَِّى يِِّوِ حَتَبَاهَتِ هِن ِ عِنِدِ رَمَ يَوِمَ الْقِيَدَمُ ابِنِ آدُولُ قلَا تَزَاِلَ فِيوَوَا عَقَوُ وَهَاذَنِفَفِينَ أَوُ وَسَبِنِ أَيِنَ اكْتَالِوِ هَبِلَاهُ وَهَنِ شَبَابِوِ فِينَ أَفِينَ أَفْنَاهُ وَعِنعَل “The son of Adam will not be dismissed from his Lord onthe Day of Resurrection until he is questioned about five 4 Imani Jaafar, “Practical Islamic Estate Planning : A Short Primer,” Hamline, MitchellReview, Law 42, no. 3 (2016).

242 Islamic Estate Planning in Malaysia: The Dilemmaissues: his life and how he lived it, his youth and how heused it, his wealth and how he earned it and he spent it, andhow he acted on his knowledge.”5Therefore, on the Day of Judgement, as the servant of Allah, wewill be being questioned about our wealth, in what manner did we get it,and in what way did we use it6. Thus, the IEP is the structuredadministration of Muslim’s property after passing away. As a matter ofcourse, the Islamic inheritance law known as faraid is the existing lawthat carrying out as method of estate planning. The common scenarioinvolving faraid execution was a family whom not bearing a deepunderstanding of the said law but execute it just for the sake of estatedistribution.The faraid can be best defined as the study of the calculation andallocation procedure of inheritance for each of the beneficiariesaccording to Islamic law7. The stated Islamic inheritance system isclearly the guidance by Allah (S.W.T) specifically based on verses 11, 12and 176 from Surah an-Nisa. The division of the entitlement for thebeneficiaries also elaborated in these verses. In the verse 176 of Surahan-Nisa, Allah decrees that, “When there are brothers and sisters, bothmen and women, the male’s share is equal to that of two females...”.Apart from that, faraid is categorized as one of the assets redistributionsinstruments in Islamic law8. The profound knowledge about the basis ofthe estate distribution is essential to determine individuals who will gothrough the procedure of distribution of the estate either sooner or later.In addition, the Prophet Muhammad (peace be upon him) had orderedMuslims to learn about the knowledge on faraid. As reported by IbnMajah, Prophet Muhammad (peace be upon him) said,ََّوُوَ أُنِسَى، وَىُوَ يَّوُ نِصِفُ الْعِلْنِ وَىَإِنُوىَا، فِّوِضَ وَعَلَائُوا الْفَرَّوَةَ تَعَليَا أَبَا ىُرَيِرِيَّتِنِ أُهشَيِءٍ يُنِزَعُ ه 5 Narrated by at-Tirmidhi. 6 Muhammad Al-Jibali, The Final Bequest: The Islamic Will & Testament (Al-Kitaab &As-Sunnah Publishing, 1999).7 Siti Fatimah Abdul Rahman et al., “Asset Distribution among the Qualified HeirsBased on Islamic Inheritance,” 2017.8 Zakiah Samori et al., “Towards Managing the Beneficiaries Rights via Writing aWill,” Global Journal of Management and Business Research 16, no. No.3-G (2016),https://doi.org/10.17406/GJMBR.