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A Muslim Husband’s Guide To Community Property

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Community property and inheritance in IslamJust a disclaimer, this post may not be useful to people who do not live in community property states like California, Texas, and a few others. Other states follow separate property or “community property”- many are former British Empire colonies and Louisiana, which follows a version of the Napoleonic code.

The “Contradiction”

I hear this from Muslim husbands somewhat regularly:

  • In Islamic Inheritance, the wife gets ⅛ (well, maybe ¼, but ⅛ if there are children).
  • In community property, The wife gets ½.

Clients have often told me this disparity is a contradiction. Islamic Inheritance, relative to other heirs, is both a minimum and a maximum. You cannot give more than what has been ordained by Allah, right?

Community Property is NOT inheritance.

Example:

Ibrahim and Adam are partners in a detergent-making business, and both own 50% of the company. They are both men, and to be clear, they are not married to each other or related in any way. Ibrahim is married to Hafsa (who is female), and Adam is married to Salma (who also happens to be female).

Ibrahim dies. Adam gets 50% of the business. How? Adam did not inherit 50% of the company, he had already owned 50% of the business, and he owned it regardless of if Ibrahim was dead or alive.

Wait, I thought we were talking about community property?

So far, none of this is community property. Also, none of it is inheritance. I provided the above example to describe how community property is similar to other property arraignments you may be familiar with.  Nobody has to do community property, but it’s also not as alien as some may think.

Example:

Ibrahim and Hafsa decide to divide up their home and interest in their business, bank account, and brokerage account as community property. In one respect, this is no different from Ibrahim’s relationship with Adam. She gets 50% regardless of Adam being dead or alive, so 50% is NOT inheritance. People claiming it somehow contradicts the Islamic Rules of Inheritance are making apples to oranges comparisons.

Marriage is a contractual family relationship.

Say Adam agrees with his daughter Kulsum to give her $1,000,000 after he dies in addition to her rightful share of the inheritance? This arrangement is not allowed in Islam. He can give Kulsum a gift of $1,000,000 now if he wants.

It’s a bit different when it comes to marriage. Adam can agree with Salma that he will pay $1,000,000 to Salma upon death or divorce as part of a negotiated Mahar. Adam won’t negotiate anything like a Mahar with his daughter Kulsum. If Adam dies, he will still be Kulsum’s father; she is not getting another one. Salma can potentially go on and marry and divorce or be widowed again, negotiating more Mahar arrangements if she wants. Instead of payment at death, Adam can also give Salma half of all his assets. Maybe it’s a bad idea for him to do that. If he has children, it will probably cause a few problems. However, he can do it if he wants.

However, Adam can also get into a business arrangement with his daughter and co-own assets. Indeed, it is common for parents and children to co-own assets, just like it’s common for married couples to co-own assets. Of course, people co-own assets with unrelated people (the stock market is full of that).

Islamic Inheritance with Community Property

As you might guess, Islamic Inheritance may work differently with community property assets than if you are dealing with a deceased father who had a business partner. Business assets, say in a corporation, are easily divisible. In community property, each spouse owns 50% of everything. So, it’s not just 50% of each bank account (which one can divide easily), but of real estate and personal assets, like the bed the surviving spouse is sleeping on.

Every Islamic Estate Plan will typically need to draft an agreement that includes non pro-rata division of community property. That means other heirs like Kulsum will get their rightful share of the whole, but not necessarily the rightful share of each asset. In the case of Adam, it means his wife Salma can keep her bed, jewelry, and maybe even the house (the house is something I write about separately), but Kulsum will get her inheritance from what constitutes her father’s estate.

Is Community Property Mandatory?

No. Married couples do not need to own their assets as community property. In much of the United States, there is this expectation that marriages are not just a family and social partnership but a financial one. Often, spouses do not distinguish between the husband’s assets and the wife’s, especially if they have been married for several years. While that is fine, it’s not for everyone. Indeed, in some situations, this kind of thinking can be dangerous and unfair and result in injustice.

In many situations, community property is the default way property couples and the courts treat property. So married couples who do not get a prenuptial or postnuptial agreement, anything earned through the skill, labor, and effort of either spouse belongs equally to them.

What is not community property?

In general, property NOT earned through skill, labor, and effort is separate property. By that, I mean inheritance and gifts to an individual will not be community property. This “skill, labor, and effort” terminology is not universal, and there will be some nuance to it. For example, lottery winnings (sidenote: don’t play the lottery) are typically community property even though the winner got rich through no skill, labor, or effort beyond scratching a piece of paper or writing down some random numbers.

Blended Families and Later in Life Marriages

Not everyone who gets married starts young with the hope of building a life together. Many people have pre-built lives, estates, and sprawling families with children, sons, daughters-in-law, and grandchildren. A new spouse will enter a world of family politics and implicit and explicit conflicts over wealth. Don’t ever take this lightly.

Of course, what the spouses want to do with their wealth matters. But there are the opinions of others that matter as well because the goal for all concerned should be long-term peace and harmony in the family. A spouse, particularly a wife, is interested in some financial security. That will create conflicts with other family members and color how they perceive the relationship. Unless the couples handles this well, the family can be an unpleasant place for some time.

How Islamic Estate Planning Helps

Islamic Estate planning is far more than the Islamic Rules of Inheritance. It’s about creating a rule book with many different kinds of legal documents that aid the cause of peace and harmony in the family over the long term. Relationships are more about people than documents, but good planning can be valuable.

Click here for a no-obligation 15-minute mini-consultation with Islamic Estate Planning Attorney Ahmed Shaikh.

 

 

Contemplating Nursing Homes for Elders?  The Rules are Changing

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Note:  This post is about Medi-Cal rules for nursing home care in California (it’s called Medicaid in other states, but it’s different in those places) as of May 2022.  If you are in a jurisdiction outside of California or reading this much later, you may not be getting the most updated information.  

I come to you with an unpleasant thought.  The more we know about nursing homes, the worse they seem.  There may well be “good” nursing homes, but we need to expand our conception of “good” out of necessity.  Some families cannot take care of their elders.  With a nursing home, you are talking about a place where people don’t want to work, where overmedicating elders is often the first option, and where lawsuits for neglect and abuse are commonplace.

Muslim Nursing HomeStill, nursing homes are necessary.

The reasons are varied but can include:

  • In some cases, having people with severe memory care issues can be dangerous for small children.
  • Adult children have economic or space limitations that prevent them from caring for their elders, even if home-based care options are available from government sources.
  • Some elders don’t have children or close family; the nearest family member may be a niece or nephew if they are lucky.
  • In many middle-class and upper-middle-class families, it is common for children to go far away from home for college, get jobs in other cities, marry and start families far away, and lose connection with their parents and siblings.  In American culture, there is no fundamental obligation to elder parents.
  • Families can be complicated, with lots of love, pain, and trauma mixed with some incendiary family politics.

Paying for Nursing Homes

So, we have exhausted alternatives, and it is necessary to get an elder into a nursing home.  What happens next?

Insurance does not pay for long-term care at all.  There are insurance products that pay for long-term care, but most people do not purchase it, or by the time people are interested, it’s too expensive anyway.

You can also just pay for it in cash.  If the elder is wealthy, it’s not a problem.  But otherwise, you are looking at costs that range from $10,000  a month (if you are lucky) to $20,000 per month.  Relatively few people have this kind of cash lying around.

The last option is, of course, going to government programs.  Elderly Americans are eligible for Medicare, which for the most part, does not pay for nursing home care.  The next option is Medi-Cal, which is healthcare for the poor.

Medi-Cal for the Poor, and You are not Poor 

People want to pass on their assets and not have their hard-earned wealth go down some nursing home sinkhole.  So historically, people got rid of assets putting themselves into a virtual state of destitution.  They have done this even when they are not sure they will ever be going to a nursing home.  Relatively healthy elders have done this even when they have years or even decades ahead of them, just to deal with this fear.

Unfortunately, working with this fear is the way things have been for some time:  To get Medi-Cal, you need to go through “Medi-Cal qualification.”  That means people purposefully impoverishing themselves.  They can have no more than $2,000 in liquid assets; while certain things, like homes, don’t count towards qualifications, they are subject to “Medi-Cal estate recovery.”  Essentially it means Medi-Cal is loaning the cost of care to the family, and they will get it back after death.

The family member in a nursing home figures they will pay for it one way or another, so they just start giving things away in anticipation of Medi-Cal.  What makes this even more complicated is that if you start giving things away too soon before needing Medi-Cal to pay for a nursing home, the government will count this against you. Medi-Cal rules exclude people- why people had done Medi-Cal planning long before they needed it (and ultimately may never need it).  In some cases, adult children may prod this kind of activity to take possession of the assets earlier.   A typical strategy is to use the technical rules of Medi-Cal to purchase exempt assets and dispose of others creatively.

Purposefully impoverishing yourself is a horrible idea.  Every person is entitled to autonomy, liberty, independence, and personal dignity.  Do not voluntarily give away such things unless there are no other options.  I would never recommend anyone start gifting away everything they have.

How Medi-Cal Planning Has Worked

For example, Abdullah, 81 years old, and his children expect him to go to a nursing home in the next few months because he believes he may be going through the early stages of dementia.  Abdullah has a paid-off home worth 1.6 million, a car, investments worth 210,000, and his only income is social security.  Medi-Cal has an income limitation (138% of poverty).   Under Medi-Cal rules, he cannot have more than $2,000.

However, if he were married between himself and his wife (not going on Medi-Cal), both are allowed $139,400.  For Medi-Cal purposes, his house is exempt from consideration.  There is the prospect of Medi-Cal recovery, but the rules have relaxed in recent years; the government only goes after assets subject to probate.  Assets in a living trust, including one done through an Islamic Estate Plan, would be exempt from the estate recovery process.  So Abdullah should not give his house away just yet.

How Things Are Changing

Under a new California law (AB 133), starting July of 2022, Abdullah would be able to keep $130,000, which is up from $2,000.   Combined with his wife, the number is $267,400.  But more importantly, for purposes of planning over the long term, the asset limitations will be eliminated starting January 1, 2024.  So, Abdullah can have millions of dollars and still qualify for Medi-Cal, so long as his income is low enough.

Medi-Cal asset recovery will still exist (a federal requirement California cannot get rid of entirely). Still, all you need to do to avoid this is do what you should be doing anyway, get an Islamic Estate Plan.

Don’t get rid of your wealth out of fear of losing your wealth.  The government in California seemed to encourage this before, but no more.

To discuss getting your Islamic Inheritance planning done, schedule a mini consultation with Islamic Estate Planning Attorney Ahmed Shaikh by clicking here.

 

 

Islamic Inheritance for Fake Royalty

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India has a fascinating and complicated history.  There is no way I can do justice to the nuances of that history in this post.   Like the history of most places, it involves powerful people exploiting their power to become rich, usually at the expense of others. Before the British Empire took over most the subcontinent, most of it was part of the Mughal Empire – a collection of “princely states.” Long after the Mughal Empire ended, these “rulers” continue to be important.  Some even came to power after the British came to rule.

This history is important, not necessarily because they ruled anything, but because a legacy of accumulated wealth can also be a legacy of accumulated pain.

Primogeniture as a Muslim tradition

Say for example, you have acquired vast lands, collectors of art and other trappings of wealth because you are the head of the feudal system were you ruled as “Lord” over people less important than you. A sort of Scotland in South Asia.. The wealth that you have is not merely the money and land that can be subdivided, but all the combined is what gives your title worth. If you were to follow the Islamic rules of inheritance, which is a uniform system dividing up shares of inheritance, distribution will be fair and just. However, your title and the importance that you have in your society cannot be passed down to anybody because everything has been diluted.

Primogeniture is the historic European system for inheritance. The system is easy to understand. The eldest son gets everything.

This is also the system in India for feudal lords, including the Muslim ones. Is this is permissible in Islam? Of course not. Leave aside that the wealth of such families was not built through industry and hard work. It was taken by force from people who were being lorded over, not for the benefit of society, but for the benefit of a particular family, or a man, followed by the eldest son of that person.  Of course that does not matter.  The same rule would apply to a business owner who favors one child as heir of his business empire.  Islamic inheritance is mandatory for Muslims.

The Fight in Rampur

Recently, we saw the end of the 49-year court battle between the various other beneficiaries of what was a contest between an inherently unjust to the point of absurdity inheritance tradition known as “primogeniture” and  the Islamic rules of inheritance.  Fortunately, for the various ancestors of the Nawab, the result was a win for the Islamic rules.

India is of course a majority non-Muslim country and for historical reasons, the Islamic system of inheritance tends to prevail over there for Muslims. There have been exceptions though. Luckily, this is not one of them.

Tendency for Injustice

Our tendency to do an injustice when it comes to inheritance often has to do with how we see our own legacy. It is true that rulers tend to have a more obvious path to injustice, in part because that is probably what they have been doing their entire lives and in part because this legacy of injustice would simply end if they follow the commands of Allah and distribute inheritance based on the rules of Islam.

There are other situations where such injustices can take place within families. The most likely place these days is in family businesses.  I’ve seen it in other situations as well, including with real estate and brokerage accounts. Sometimes, one particular beneficiary figures he (it is pretty much always a he) is more deserving and more privilege than anyone else, so much so that there is no cause even feel badly if the other siblings get absolutely nothing.

Your Legacy Is Peace, or Power?

The larger your wealth becomes; it takes on greater meaning then merely sustenance for yourself and your family members. Your wealth may become political power, it may mean that you will have many wives and many children from those wives (which is what happened in Rampur).  Those people have rights in Islam.

Your legacy of wealth must dissipate through the generations, not consolidate. This is a necessary part of our own devotion to the command of Allah. Surah Nisah (which contains the verses of inheritance, opens with the following:

 

Oh humanity! Be mindful of your Lord Who created you from a single soul, and from it He created its mate, and through both He spread countless men and women.  And be mindful of Allah- in Whose Name you appeal to one another- and honor family ties. Surely Allah is ever Watchful over you.

Do your own Inheritance Planning

To discuss the process of Islamic Estate Planning, you can schedule a 15-minute mini-consultation over zoom by clicking here.