One thing that differentiates Islamic Inheritance from what we are normally used to seeing is that rights of heirs other than the surviving spouse are considered. Indeed, many heirs actually take more then the surviving spouse. Planning requires a property agreement between the husband and wife so that it is known who owns what, and distribution follows from that point. This is distinguished from simply waiting to see who dies first.
Since so much of the property is distributed to the heirs, either in trust or outright, this may cause an intolerable situation for the surviving spouse, since more then half the entire estate is often the family home. Plainly, under the Islamic Rules of Inheritance, you cannot simply give it all to the surviving spouse. However the home carries with it emotional and personal ties. Its a source of stability during a time when there may not be much.
In the Fall 2008 Trusts and Estates Quarterly, much discussion is given to how the asset is handled when there is a bypass trust, that is to say a trust, historically used as a way to preserve an estate tax credit but now used for other reasons as well, and how placing the home in this arrangement will often be a poor choice. The reasons include the possible loss of the mortgage interest deduction, rational business reasons and the loss of a capital gains tax exclusion for homes.
A solution comes with planning for a sale by note. However this causes its own problems, including fiduciary issues and income tax on non-existent income. These issues must be addressed in the planning stage, if at all. In any planning, set out the rights of the parties in writing early on and deal with potential pitfalls.
Islamic Inheritance does not mean you have to sell the family home after a husband dies. It does mean maintaining stability requires thought and planning.
