I was on Blogging Theology with Paul Williams of the United Kingdom. It’s on Islamic charities. Do check it out if this is an interesting subject.
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Private Retirement Plans for Muslims: A California Legal Exemption Strategy
Most people have not heard of the “Private Retirement Plan”- but having one, may just save your retirement. In California, when someone is sued and a judgment is entered against them, not everything they own is up for grabs. The law protects certain categories of property from creditors. These are known as exempt assets, and they serve a legitimate and important function: allowing individuals to maintain basic financial security—even in the face of legal or financial adversity.
Most Californians are familiar with at least one exemption: the homestead exemption, which protects a portion of equity in your home. But there’s another exemption, less known and often overlooked, that is especially valuable for professionals, business owners, and high earners: the Private Retirement Plan (PRP).
This is not an exotic strategy. It’s not a loophole. It is a state-recognized method of setting aside assets for retirement—assets that are legally exempt from most forms of collection.
And for Muslim families, it offers a rare benefit: retirement protection that preserves both ownership and compliance with the Islamic Rules of Inheritance.
Retirement Accounts Are Already Exempt — This Is the Next Step
If you have a 401(k), IRA, or pension, you’re already benefiting from exemption planning. These accounts are protected by California law because they serve a legitimate social purpose: giving people a way to provide for themselves in old age. But what if those accounts aren’t enough? What if your profession or business generates wealth that doesn’t fit neatly into a retirement wrapper?
California allows you to go a step further. Through a Private Retirement Plan, Amina can create a retirement structure tailored to her needs — one that shelters a broader range of assets, so long as it’s properly documented and genuinely designed for retirement.
Dr. Amina’s Retirement Security
Take Dr. Amina, a 51-year-old neurologist in Los Angeles. She’s had a long and successful career. She runs her own practice, contributes to a SEP-IRA, and has invested in a couple of rental properties over the years. She’s financially comfortable — but increasingly aware of the professional risks she faces. Malpractice insurance provides some coverage, but she knows from colleagues how quickly a lawsuit can spiral beyond what’s covered.
When she brings this up with her estate planning attorney, the conversation doesn’t start with fear or evasion. It starts with retirement.
Together, they talk about what it would take to ensure that her retirement is stable, that her practice doesn’t leave her exposed in her later years, and that her legacy can be passed on properly. That’s when the attorney introduces the idea of a Private Retirement Plan — a state-sanctioned structure that allows her to designate specific assets for her retirement, and in doing so, places them under the protection of California’s exemption laws.
Dr. Amina doesn’t need to give anything away. She still owns her investment accounts and real estate. But now, she holds them under a plan that is governed by a retirement-focused framework. Amina directs plan documents be overseen by her attorney and an administrator tracks contributions and account levels. Retirement goals are articulated.
It is, in every sense, a real plan for retirement — not a shell to hide money. That’s why it works.
The Islamic Rules of Inheritance Still Apply
For Dr. Amina, this was more than just a legal or financial decision. She does not want to disrupt the Islamic Estate planning that she believes must apply when she passes.
In Islam, for purposes of inheritance, ownership matters. What Amina gives away no longer belongs to her estate. This does not replace the living trust or will or powers of attorney.
With a PRP, Dr. Amina retains ownership. The assets remain hers. When she eventually passes, they will be included in her estate and distributed according to the Qur’anic shares — the fara’id — owed to her children, spouse, and other qualifying relatives.
In short, the PRP allowed her to protect her retirement without compromising her religious obligations.
Legal Integrity, Long-Term Security
Several years later, a former employee brings a lawsuit against Dr. Amina’s practice. The case is complicated, and although her attorney is confident she will prevail, there’s always uncertainty. What gives Dr. Amina peace of mind is knowing that the retirement plan she funded and maintained for years is protected — not because of secrecy or manipulation, but because California law explicitly recognizes the value of protecting retirement assets.
Amina established her plan before the lawsuit. The contributions were reasonable and in line with her income. The records are clear. And the purpose — retirement — is genuine.
There’s nothing aggressive about the strategy. It’s simply good planning — the kind that allows a professional to focus on her work today while preparing responsibly for tomorrow.
If you’re a physician, business owner, or high-income professional in California, and you’re thinking about how to protect your retirement while respecting the Islamic obligations of inheritance, a Private Retirement Plan may be one of the strongest tools available to you.
It won’t be the right fit for everyone, especially since the fees for administering them can be quite high (I understand that is a relative term). But when designed intentionally — not as an afterthought, not as a shield, but as a retirement strategy — it offers a powerful way to secure your future and preserve your legacy.
📞 To discuss whether a Private Retirement Plan belongs in your retirement and inheritance strategy, schedule a 15-minute no-obligation confidential consultation.
Free Loans for Muslim Family Members Have Secret Interest, Not Riba
Riba is Haram, but is Interest?
One of the more confusing aspects to Muslims is “riba” which is often (maybe imprecisely) translated as “interest.” It is a grave issue. In the Quran, Surah Baqarah, it says the following:
O believers! Fear Allah, and give up outstanding interest if you are ˹true˺ believers.
If you do not, then beware of a war with Allah and His Messenger! But if you repent, you may retain your principal—neither inflicting nor suffering harm.
Here you will notice “riba” is translated as “Interest.” The translator is Dr. Mustafa Khattab. Other translators, such as Mufti Taqi Usmani, do not translate “riba” at all, but leave the transliterated Arabic word in the translation. Abdullah Yusuf Ali uses the term “usury.” From my understanding of how finance works in the real world, the word “interest” is imprecise. A fulsome discussion of riba is outside the scope of this article, since I want to keep to the Muslim gift and estate tax planning context.
Muslims want to make sure we avoid riba. We should also want to do our Islamic Estate Planning. However, “interest” is often an unavoidable feature in estate planning, and in particular Gift and Estate Tax Planning. That does not need to mean riba.
A Story of Interest When There is No Riba
Haroon, 65, has an import-export business worth $2,000,000 based on an appraised value. He wants his son Elyas to have the business and supplement his retirement while being fair to his children by not just giving away something to one son that he will not give away to his other children. Haroon gets a fair price for his business and in his Islamic Estate Plan, he would distribute his estate based on the Islamic inheritance rules after he passes away. The business will not be in his estate anymore since he sold it.
Haroon sells the business to his son Elyas for $2,000,000, payable over 20 years with zero interest. Simple right?
Imputed Interest
The IRS, because of Section 7872 of the Internal Revenue Code is going to apply “imputed interest,”- which is to say the law understands the economic consequences of a free loan. We get to what the loan looks like by calculating something called an “original issue discount.” In addition, this is going to be a “gift,” which may have its own tax consequences. In federal tax, the estate and gift tax system is somewhat distinct from the income tax system, though there is crossover.
So, in this example, with Haroon and Elyas, the “interest free loan” will not be regarded this way. It would be a “partial gift” and “partial sale.” That means he is not really selling his business for $2,000,000. He is selling it for $796,648.61. This is the original issue discount (at the time of writing since this will vary).
You get this by applying the “Applicable Federal Rate” (AFR), which changes every month. The rest of it, $1,203,351.39, is a gift. In the open market, if we had an “arms-length transaction” with an unrelated party- Haroon would never actually sell his business for two million unless it was cash up front. He would be assuming the risk of default and losing out on having the ability to deploy the cash for other purposes. Also, the value of $2,000,000 for the business assumes cash right now, not a 20-year loan.
Original Issue Discounts or Even “Interest” is Permissible Here
Now in Islam, it is considered permissible for Haroon to sell the $2 million business for $3.2 million or even $4 million. This would be a cost-plus contract, effectively getting an interest rate that would be reported as interest income on Haroon’s tax forms. That is not riba, but rather a “murabaha” contract since it is not money for money, but a thing being sold on a payment plan. It has long been understood that trade is permissible, but riba is not. Selling something for more money over time than the cash price is often a fair deal.
Gifts and “Fairness” within the family
Intra-family loans are common in families. In my example, it was the sale of a family business. The older generation may also use loans to sell properties to their children. They may not give it away because if they have three or five children, they may not have three or five homes of the same value to give away. There is frequently a misunderstanding between children and parents about what is a “gift” and what is a “loan.” Both have tax implications, but more importantly, they have family harmony consequences as well.
De Minimis Exception: No Interest, No Riba
We do not worry about loans of a small value. Under the Internal Revenue Code, this is a loan of $10,000 or less. This can be safely given interest free. However, the parties should still write these loans down. So, a father loaning his son, who was recently laid off, $10,000 interest-free to help pay some expenses is usually not going to cause problems.
Loans Used in Estate Planning
Notes with interest are a common way to conduct estate planning, especially for those with higher net worths or complex assets. All of what an Islamic Estate Planning Attorney does when doing Estate and Gift Tax Planning can effectively be described as using the exemptions that exist in the tax code, combined with the time value of money. As a result, gifts and sales with interest are common. In Islamic Estate Planning it is vital that when these arrangements are created, they are done in a way that will match your values and not result in injustice or oppression.
For a no-obligation 15-minute discussion on zoom about doing your Islamic Estate Planning, you can click here.
Muslim Burial Challenges
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Abu Hurairah (May Allah be pleased with him) reported: I heard the Prophet ﷺ saying, “Hurry up with the dead body (for its burial), for if it is pious, you are speeding it to goodness and if it is otherwise, you are laying an evil off your necks.”
Cremation Nation and Muslim Burial
Say you are in a crowd of people: Look to your left. Then look to your right. Chances are high that one or both of those people is going to be cremated. If you are Muslim and you are in a crowd of Muslims, then that statement is not true (I hope).
Cremation has started to dominate how the human remains are dealt with in the past few years. It may be surprising to learn how dominant cremation has become in American society. In 1976, about 7.3% of Americans were cremated (about one hundred years after cremations became a thing in the United States). Now it exceeds 60% and is expected to plateau at 80% of all funerals. Cremation, to the uninitiated, is a process of placing human remains into a chamber that burns the body until it is ash. There is a related procedure called a “water cremation” which does not involve fire but water and various chemicals that also results in a kind of powdery residue. Ashes can be placed in an urn at home, or scattered in various places, like the ocean, or a favorite activity in Southern California and Central Florida, in the Haunted Mansion at Disneyland or the Magic Kingdom (which have HEPA cleanup teams to deal with this).
What do you care? Well, burial is rapidly becoming extinct. Religious groups that once viewed cremation as disrespect of the dead, which was historically a crime, have now adopted means other than burial. This trend most vividly affects converts to Islam whose families either do not respect or are not especially curious about Muslim tradition. Practicing Muslims with a “secular” family who do not care about Islamic traditions may have a similar problem. There are other ways to dispose of human remains other than Islamic burial.
Donation to Science
Do you want to donate your body for the purpose of having scientists, medical students and potentially others dissect it? Do you want to have your body chemically treated to be placed in museum displays? How about displayed in private collections? The Islamic Medical Association of North America has taken the position this is fine, so long as it is fine with you.
Without question, generations of medical students have been educated by dissecting human cadavers. Millions of people have seen the “Body Worlds” exhibits that have been touring the globe for decades. Though, some of those bodies have allegedly been stolen and trafficked without the decedent’s permission. Even when there was permission, it may not have been for the purpose of putting the body on display.
Now, one thing you have probably figured out is that human remains has value and can be trafficked, mishandled, and abused. I am not sure it makes it better that a doctor, a scientist, a medical student or Harvard is doing this. Famous deceased geniuses have had their brains stolen to be studied, only to have nobody find anything in the brain tissue that tells us what made them special.
Because there is an opinion that donation of the body is okay to do, this is one of those non-burial thing Muslims are more likely to do.
Medical schools often have memorials or a process to honor the “silent teachers” and, if requested, would eventually return the remains to the family, so they could conduct a burial or cremation or whatever else they want to do.
From speaking with various clients who have experience with the way medical schools treat human remains, I have found most Muslims I have spoken to, “in the know” would be uncomfortable having their own body go through that process. Though without question, there will be Muslim physicians who would be completely fine with this. Outside the medical field, I don’t see Muslims being interested.
Casket Burial
There was a time when funeral homes insisted on caskets, built relationships with manufacturers of caskets, and made caskets a necessary part of a “package.” The funeral and burial industry got itself a bit of a reputation for being an exploitative racket. Four decades ago the Federal Trade Commission aimed to address a variety of poor practices of the industry. In recent years, this has included lying to families and other sleazy sales practices, making threats about remains, or all manner of abusive conduct against families going through enormous stress.
The funeral rule does not prevent a cemetery from requiring a casket. The funeral rule itself governs funeral providers, not cemeteries.
“Green Burial” is not Exactly Muslim Burial
Muslims traditionally do not use caskets. The practice of Muslims is like a trending practice known as “green burial.” This is where the body is not treated with chemicals and there is no casket or coffin, or if there is one (for non-Muslims) it is biodegradable. This is maybe a bit different from the practice of “human composting” with is the use of a container that is filled with various microorganisms to turn the human body into soil more rapidly. The soil in that case is used outside a cemetery setting, like to plant things in a back yard.
Islamic Burial is quick, uncomplicated, efficient, and dignified. The problem though is that societal trends (except maybe green burial, which is far less common than cremation) work against it.
How to get people to care about your burial being done right?
One thing I tell Muslims who come from established Muslim families is that you should not worry about it, and you are remarkably fortunate because of your background. This is especially true if you are in a metropolitan area with an established Muslim community where there is a system for burial. One of the more remarkable things about burial is that this is something Muslims do well, far better than other faith traditions in my opinion (why cremation has become so popular in the first place).
Muslim burial providers are silent heroes in the community and are frankly underappreciated for the good they do. Doing the Ghusl, the Janaza and everything else that goes along with it and doing it quickly and with dignity is a vital service for families.
There is a special problem however for Muslims with no or little Muslim family. It is even worse when that family has not accepted that person’s Islam and will not respect the traditions of the faith community the individual belongs to. No matter the age, it is important to make sure there are proper arrangements.
Where instructions go
Muslim funeral providers do not need to be told how to do a Janaza or where the body is supposed to face in the grave. They already know the answers to these kinds of questions. The main instruction is that your body needs to be buried based on Islamic tradition by a funeral provider that has experience and employees or volunteers that will act quickly.
Advance Healthcare Directive or Separate Writing
In California (where I am based) Health and Safety Code Section 7100 and 7100.1 give the power over who can control your remains. The highest priority goes to the person who is your agent under the Power of Attorney for Healthcare. If you want a Muslim burial, do not make the agent someone who has not accepted your Islam, even if that person is your parent, sibling, or spouse. That will likely result in a non-Muslim burial. There is a copy of an advance healthcare directive for California here.
If there is no advance healthcare directive, then under the law it is the spouse, parents then siblings and so forth. Muslim friends would have no legal authority in this area and would not be able to do anything other than try to persuade family members, which is to say if they even heard about the death before the funeral.
An alternative is a separate written instruction on burial under Health and Safety Code Section 7000.1. This will take precedence over family priority in deciding the issue. If you put these instructions in an Islamic Will, they are to be conducted immediately even if the will ended up not being valid for whatever reason.
A writing that is separate from a will is often best. But what is more important, is that it be accessible to the people who need it, when they need it.
I have three recommendations and sample instructions.
- Get to know who does Islamic burials in your area. By that I mean maybe meet them in person, at a Janaza and burial you are attending. If you have not attended a janaza and burial, be sure to do that. It should not matter that you do not know who the person is.
- Consider the cost of the service. Burial services, especially cemetery plots can be a profitable business, and Muslims have entered this space for a profit motive. If they offer value to families for the money this is not a problem. However, this can pose a potential problem for Muslims who are indigent, unless the organization has a policy on taking all comers regardless of ability to pay, which is typical for nonprofit services operating in the Muslim community.
- Some Muslim mortuary organizations offer cards with instructions, including that you want a Muslim burial and their contact information, with a place for you to sign and print your name. Consider using this or making your own. Instructions can be as follows:
Instructions Regarding my Remains
I ___________ am a Muslim and wish to be buried in accordance with Islamic traditions. In the event of my death, I direct my executor to contact ________________ (name of Muslim organization) at ________________ (phone number) immediately to make funeral and burial arrangements. If I die far from my residence, I direct my executor arrange that I be buried in accordance with Islamic tradition closest to where I passed, and this be managed by a qualified Islamic burial service.
Note: If you do not have an estate plan with a named executor, then you can name the person who should be responsible for your burial, a Muslim in the community who is most likely to step up and take responsibility should you pass away. You may consider naming multiple people.
I ___________ am a Muslim and wish to be buried in accordance with Islamic traditions. In the event of my death, I direct ____________ (name of person), and if not available ______________ (name of second person) facilitate my burial to contact ________________ (name of Muslim organization) at ________________ (phone number) immediately to make arrangements. If I die far from my residence, I direct my executor arrange that I be buried in accordance with Islamic tradition closest to where I passed, and this be managed by a qualified Islamic burial service. I direct payment for such services be reimbursed through my ________________ (bank name) account located at _______________ (address of bank).
(Insert Contact information for both individuals who are to be contacted)
Both instructions are designed to be brief so you can place it in a wallet card. Keep in mind I am providing this for educational purposes and not offering legal advice to readers of the article by writing this suggested language.
How to Pay for it
As my second suggested instructions says, you may need to deal with the issue of payment. The law requires instructions be unambiguous and that there should be a way to pay for it. As a practical matter, if you are Muslim, the burial provider will not charge if you did not have means to pay.
The person you appoint may not know if you have resources or not. If you do have resources, it is vital that you have an appropriate Islamic Estate Plan. Consider the Islamic Rules of Inheritance, and burial. If you have resources to contribute to a burial and not more, then you need to have instructions that direct the person helping you where to find the resources to pay for it. Your providing knowledge of where to get reimbursed will be helpful to the person helping you get your burial done correctly.
In an Islamic burial, often there is a premium on speed. Getting the death certificate quickly and arranging the prayer and burial as expeditiously as possible. Muslim organizations will often worry about payment later. However, as Muslim it is vital that you do not pass away in debt. Don’tassets to family who can access bank accounts but not to those who paid for your funeral. This would be an injustice you would want to avoid.
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For a 15-minute initial zoom call with Islamic Estate Planning Attorney Ahmed Shaikh, if you are looking at getting your estate planning done, you can click here.
Can You Inherit A Masjid? (Why It May be Reasonable to Think So)
According to the case reporter, Imam Pasha Shaluddin was a pillar of his community and Masjid in Newark. Imam Pasha founded a nonprofit religious corporation in 1988, the Islamic Center of Passaic. He started the organization with no constitution or bylaws. Imam Pasha had complete control. Consolidated control, by the way, is typical of how some people have formed Masajid in the United States. Someone starts it, runs it, and controls the whole thing. Completely normal.
Imam Pasha’s community purchased a building in Patterson, New Jersey. It was partially rented commercial space, the revenue from which would fund most of the Masjid on the same property.
Imam Pasha’s wife served as the Finance Director of the Islamic Center. When Imam Pasha passed away in 2013, his wife, according to the appellate panel, “was under the mistaken impression she inherited Islamic Center and its property from her husband.” The wife “also appears to have believed she was vested with sole control of Islamic Center.”
Why would she believe this? She may not have been unreasonable in thinking she controlled the organization. The Masjid started as a personal fiefdom. It was under the control of a husband and wife, where the husband controlled everything but the money, which was under the control of the wife. For most people, absolute control is not anything different from ownership.
Just like a country can be passed on from father to child, as is the case in many countries around the world, so can a farm, a house, or, it would seem, a Mosque.
In that case, another Imam and board created new bylaws, which were followed to remove the widow from her position. A trial court and appellate court agreed that the wife did not get the Masjid.
The Fiefdom Masjid Model
Masajid with consolidated control is not uncommon in the Muslim community in the United States. It works for a while. Suppose someone has the support of other Muslims in the community or the resources themselves. In that case, they can start a Masjid, raise money, draw a salary, and not worry about “accountability” or people asking “questions” about how he runs the organization, his decision-making process.
This model is also relatively standard in the United States for other faith traditions.
Muslim organizations do not have political protection and are subject to tax laws that are perhaps not as enforced in some communities but could have some harsh results if they were. The fiefdom model can be a horrible idea.
The Private Inurement and Private Benefit Doctrines
A religious organization must operate exclusively for religious and charitable purposes. Any private benefit can jeopardize the organization’s tax status. Control by a person or family would be a massive red flag. Occasionally, masjid property may be owned directly by the person controlling the Masjid, but donations would flow to a nonprofit organization.
This issue concerns private inurement and private benefit, which are related but somewhat distinct concepts. Private inurement is an absolute bar that prohibits people from taking undue advantage of a nonprofit in a way that is not identical to ordinary business practices. So, for example, if giving the Masjid property to the person who runs the Masjid is just a deal for the guy who runs the Masjid, it would be pretty suspect. There are taxes on what are known as “excess benefit transactions” in IRC 4958.
The Private Benefit Doctrine differs slightly, but courts have blended it with private inurement. The concept can go beyond monetary gain, and suspect benefits can go to more people than insiders but benefit a limited number of people.
Both private benefit and inurement can also harm the organization and the person who runs it.
Muslims Have Been Fortunate
There is a strong tendency by mostly smaller Muslim organizations to be run as private for-profit businesses. That we are dealing with a “business” has implications for expected Islamic inheritance. Family members may naturally expect to inherit from a nonprofit organization, which is technically supposed to be for charitable purposes and has no owners. So, family members may end up disappointed because while they may naturally expect it because of the specific nonprofit culture, that is not how nonprofits work. Beyond this, though, there is the potential for more significant losses if the IRS becomes interested in what is happening. So far, they have not been.
As we transition to a new federal administration, it may be time to look at whether Muslim organizations and the people running them are vulnerable to enforcement of tax laws.
For a consultation with Ahmed Shaikh regarding your Islamic Estate Planning, you can schedule a 15-minute meeting on zoom by clicking here.