Islamic Inheritance Step 2: Wassiyyah And Debts

Wassiyyah for our purposes

The term Wasiyyah is commonly referred to as a “last will and testament.” Indeed, it can be understood as such but will not be for our purposes. I will explain why below. The common understanding is supported by the following ahadith:

It is the duty of a Muslim who has anything of value to not let two nights pass without writing a will about it.

– Prophet Muhammad (PBUH) as reported in Sahih Al-Bukhari

Also:

“A man may perform good deeds for 70 years, but if he acts unjustly when he leaves his will, the wickedness of his deed will be sealed upon him, and he will enter the fire. If a man acts wickedly for seventy years but is just in his will, the goodness of his deed will be sealed upon him and he will enter the Garden.”

– Prophet Muhammad (PBUH) as reported in Musnad Ibn Hanbal and Ibn Majah

For purposes of this series, the wassiyyah constitutes the portion that a Muslim individual has the discretionary ability to distribute, which is no more then 1/3 of the total value of the estate.

Narrarrated by Sa’d bin Abi Waqqas “I was stricken by an ailment that led me to the verge of death. The Prophet came to pay me a visit. I said, “O Allah’s Apolstle! I have much property to give and no heir except my single daughter. Shall I give two thirds of my property in charity?” He said, “No.” I said, “Half of it?” He said “ No.” I said “One-Third of it?” He said, “You may do so, though one-third is also too much, for it is better for you to leave your offspring wealthy then to leave them poor, asking others for help… (Hadith narrated in Sahih Al-Bukhari)

In the Qur’an, the wassiyyah (as well as debt) is distributed before the shares that are specified in the Qur’an (4:12), provided they were not designed to injure the Islamic heirs.

There is a distinction between a person who was entitled to inheritance under the Islamic rules of inheritance and an individual, if any, who is to receive any portion of the 1/3. If a person is already entitled to inheritance under the Islamic rules of inheritance, he cannot receive any additional benefit from the discretionary portion. This is what we refer to as the “wassiyyah.”

The most common use of a wassiyyah is to give a portion of an estate to charity, preferably continuous charity.

Arrangements during lifetime

Islamic Inheritance principles, in general, do not regulate the transactions and gifts that people make during life. Transactions cannot be intended to injure the rights of the Islamic heirs and of course, there are Islamic rules that address things other than inheritance. In general, there is nothing stopping a mother from giving her daughter a substantial amount of property during her life, while she is alive and healthy.

An individual should not distribute property to circumvent the Islamic rules of inheritance during his or her “last illness.”

Tax issues in Gift Giving

Keep in mind that lifetime transfers, particularly larger ones, will have tax consequences and should not be done lightly. For example, many parents give away their homes or portions of their business during their lifetimes. There is a 45% tax on gifts, which could potentially make a gift very expensive for the gift-giver. There are exemptions to the gift tax that prevent most people from paying it. Recently the IRS reported they are starting to crack down on such unreported gifts and may penalize families for doing them.

Practical and other legal considerations

Giving away property during a lifetime will often cause a loss in control. If it is property that the parents actually rely on, like a personal residence, it may be subject to loss during lawsuits, bankruptcy or children’s divorce proceedings.

Debts

In Islam, paying off debts takes great importance.

“All the sins of a martyr are forgiven except debt.”

– Prophet Muhammad (PBUH) as reported Sahih Muslim

The family’s obligation to pay off the debt comes before providing any inheritance to anyone. This is an Islamic obligation. As it happens however, it is also state law, though they do not line up exactly.

Another form of “debt” is not contractual, but comes about because of a lawsuit or other judgment. In many cases, at least when planned correctly, those debts are not personal to the decedent but against an entity owned by the decedent, such as a corporation or an LLC.

Gifts made during a lifetime

Occasionally, families will commit to paying for the wedding and college education of one child while the other child is too young. They may designate a fund, at least informally, to make sure that if they died before the younger child got married, a fund that may be available.

If the younger child predeceased to the parents, the younger child’s heirs would be entitled to inheritance under the Islamic rules of inheritance.

Next: Go to Step 3 Islamic Heirs