Blog

On Muslim leader “nobility”

October 24, 2016 By ahmed shaikh

I wrote yet another article on Countering Violent Extremism called “the Muslim Lords of CVE“- please do check it out.

As many of you who have been reading stuff I write (thank you!) know, I have been interested in corruption among Muslim leaders for some time, particularly when there is government money available for leaders to influence what Islam is and what it is not. This has made some people angry, but not too many. We have a First Amendment in the US Constitution that provides for religious freedom, and it is worth defending. This is the same freedom that allows us to do Islamic Estate Planning. We don’t have an official Islam in the USA. The government’s excessive entanglement with religion on “national security” grounds and the creation of an industry of Muslim Security contractors who pose as leaders and activists inside the Muslim community is a dangerous development.

Please read it. If you like it, share it. In any event, please feel free to comment and let me know what you think.

ISNA West Zone Appointment

October 24, 2016 By ahmed shaikh

Just a brief announcement for my blog, I have been appointed by the Islamic Society of North America (ISNA) as the “West Zone Representative”- which is a volunteer role that has some major responsibilities for oversight and management of the organization, including attendance at t ISNA Logo heir “executive council” and “Majlis.” It is a role held by some of the most esteemed individuals in the Muslim community, most recently Imam Tahir Anwar, which makes this a tremendous honor.

I do have a history with this ISNA, I have spoken at their National Convention several times on Islamic Inheritance (obviously), though I had not attended these past few year, at least until this past September when I did attend. In addition, I have been a member of their Endowments Committee, though that means a lot less than it sounds. I anticipate though that I will have to show up at ISNA for the next few years (this role has a two year term).

ISNA is a unique organization in the Muslim community. It is fairly general and open to Muslims with a wide range of backgrounds and beliefs, at least as far as Muslim organizations go. It is over half a century old, having been founded as the Muslim Students Association. Its conventions tend to set the standard for events in the Muslim community. It is going through some challenges right now, as is bound to happen with all organizations.

This is a new thing for me. To the extent the organization is important to ISNA as a national organization and to the limited extent it operates on the west coast. Currently, ISNA has a west coast education forum in Anaheim (January next year) and often does a “west zone conference” in the Bay Area.

A Muslim Guide to the 529 Plan

August 2, 2016 By ahmed shaikh

Many parents feel just a little guilty that they may not be saving enough for their children’s education, the 529 plan is one way to do it.

In the United States, post-secondary education is expensive, and most Americans with college educations now start their professional lives in debt. This adds needless stress to their lives, as well as pressure to pursue career paths that may not reflect their (or your) values. Perhaps you are banking on how your child will be a star athlete, get a full ride for being an amazing scholar, or you just plan on sending your child to Germany for free tuition.

The goal is to save and invest money and have plenty of cash by the time your child grows up and is ready to ask for it. If they end up not needing the money, you can use it for other things.

Congress came to the decision to encourage savings for education by offering tax incentives. What I want to discuss in this post is the 529 plan. I will leave other methods of saving for another day.

There are two kinds of 529 plans; one 529 plan is essentially prepaid tuition. This is where you lock in tuition at a particular academic institution. This will have very limited appeal for most parents. The second is a savings plan, where every state has its own sponsored plan. For example, California has the ScholarShare savings plan administered by TIAA-CREF.

This is savings for a specific purpose, a narrow one at that. Not every child goes to college, and indeed, not everyone needs to. Plenty of successful people have never attended a postsecondary institution, or have found their success through alternative educational resources. Some children use a whole lot more of their parent’s savings by being in school longer than other children or attend much more expensive institutions. Some will use less for other reasons, for example, they may have more scholarships and grants available to them.

So when you begin crafting a college savings plan, you want to be able to have the flexibility needed to move assets from the benefit of one child to another. Another option is if the money is no longer needed for your children’s education, you can use it for their wedding, a gift towards your child’s first home, for a vacation, or for whatever you wish.

Furthermore, ideally, if you went through some financial problems, or you went through a lawsuit or even bankruptcy, your children should still be able to go to college without going into debt.

Advantages of 529 Plans

Here are some advantages to the 529 Savings Plans.

Anyone can donate to it (so grandparents).
You can change beneficiaries as many times as you want.
It can be outside your taxable estate for estate and gift tax purposes.
It can be protected from bankruptcy, depending on who the beneficiaries are.
Withdrawals can be free of federal or state taxes if used for qualified educational purposes (this is fairly broad but not unlimited).
You can get the money back, just pay taxes and penalties on the earnings (not on the principle).
There are no income limitations. You can be wealthy and still participate in this program.
You can save as much money as you want in these plans, as long as it can be reasonably used for educational purposes. Some plans do have limits however, but they are quite large.
You can “roll over” a 529 plan into another one you like better without any penalty or taxes.
It has minimal impact on your child’s financial aid application. FAFSA in particular, which only takes into account 5.64% of parent’s assets and counts 529 plans as a parental asset.

There are some caveats to these benefits (this is a mere blog post, I am writing more about it elsewhere) however if you have children you expect to be paying college bills for, and are blessed enough that you can save some money, this likely sounds like a great deal.

Dealbreaker?

The 529 Savings plan does have one gigantic drawback that will make it a deal breaker for many Muslims. You cannot control the investments in the plan. That is to say for those who insist on “Sharia-compliant” investment products will not find them useful.

This plan is also one of many devices that is treated as your money for some purposes, and not treated as your money for other purposes. So 720 days after funds are deposited into your account and the beneficiary is a child or grandchild (step children and step grandchildren count as well), the asset is treated as essentially not being yours if you go through a bankruptcy. It is also not your own for estate and gift tax purposes if it is structured properly.

However, the money is your own (assuming you are the account owner) for other purposes. You can decide who gets the money; you can even give it back to yourself. Also, after death, the successor account holder needs to be named. The 529 account does not just disappear or get distributed to the beneficiaries. If you do not name a successor account holder, the 529 plan becomes a probate asset. This means a judicial process will determine how it will be distributed.

So if you have this kind of account, for purposes of the Islamic Rules of Inheritance, it is your money. You should pay zakat on it every year unless you have actually distributed it to a beneficiary. If you die before your children are educated it needs to be distributed based on the Islamic Rules of Inheritance, and not based on the educational needs of the children. So in that sense, it is treated exactly like any of your other accounts. The Trustee can provide educational benefits to those who need it without regard to inheritance rights so long as other beneficiaries are compensated with other assets.

My suggestion is that you name the Trustee of a Revocable Living Trust as the successor account holder. Then instruct the Trustee on how to handle the asset, assuming the 529 plan administrator allows this. This is based on contract and not state or federal law.

Check out my document on mistakes Muslims make in their Living Trust.

Counseling Sharia at the Wealthcounsel Quarterly

July 11, 2016 By ahmed shaikh

Please check out my article on “Counseling Sharia” published this month at the Wealthcounsel Quarterly in print. This is an organization I joined a decade ago and it has been tremendously helpful to me in learning the legal-technical as well as practice development aspects of what I do, both with regard to Islamic Inheritance as well as Estate Planning in general.

My practice has been about helping people live and organize their affairs based on their values. This allows for the sacred to be included in Estate Planning. Many Attorneys are unfamiliar with the notion of an Islamic Estate Planning Attorney or Islamic Inheritance. Familiarizing the Estate Planning bar is an important service since so many Muslims do not have the opportunity to go to a Muslim Attorney, or even if it is a Muslim community, the attorney may not be familiar with Islamic rules.

In general, we want to point to the following:

They should have a level of respect and understanding for Islam, and for their client that practices Islam. Unfortunately, many non-Muslim lawyers, like teachers and politicians and others in society, have internalized Islamophobia. Education about Islamic Inheritance will help.
Islamic Inheritance is not optional for Muslims. Of course, non-Muslim lawyers are not bound by the Sharia to help a Muslim client who wants to “fudge” on the rules. Muslim lawyers cannot help anyone do something prohibited in the Sharia.
Estate Planning Attorneys are used to doing things a certain way. They need to understand that they need to change their own conception of what they are doing and change their planning substantially. Some lawyers are just not equipped for doing that. This may include some Muslim lawyers, who may be uncomfortable with the rules and advising clients on them. Eventually, this will change in the United States.

Check out the article and let me know what you think.

The “Final Sickness” in Islam

March 30, 2016 By ahmed shaikh

The concept of a “Final Sickness” is part of the Islamic Rules of Inheritance and unlike what you might find anywhere in American law.

Let me take you back a little bit to describe what I am talking about, to a time in Europe when the Church was increasing its power and wealth in Europe. A man with an estate and children is dying. Clergy visits him. They tell him that if he were to grant all is property to the church, he will be granted absolution. The man agrees to this. When you are about to die, absolution is a very good deal. If that means impoverishing your family, so be it.

You see, at the deathbed, there is a long history of people doing wacky things. They seem to be more easily manipulated and subject to elder abuse. Things outsiders suggest to them start to “make sense” when they would not have beforehand.

The Islamic Rules of Inheritance recognizes this tendency among human beings. So in a “final sickness”, the rules that govern the alienation of property change. Normally, you can part with your money in the manner you see fit. There are a number of Companions of Muhammad (SAW) who gave away all of their assets during their lifetime. This is normally not a problem. Giving all your wealth to a religious institution, a hospital or to whomever you want is typically fine.

Yes, if you are healthy, you are unlikely to give away all your money, especially if the wealth is substantial. In general, people are more afraid of running out of money before death then they are death itself. But some people give these large gifts and it is not a concern is Islam, most of the time. Deathbed gifts are regulated. Of course, a Muslim can never really change an Estate Plan based on the Islamic Rules of Inheritance. A new rule that comes up is they cannot give things greater than what they may give in a wasiyyah, which is 1/3 of the Estate.

The rights of the family as specified in the Quran (4:11-14) take precedence over anything else, including a desire to give to charity. Remember: Inheritance in Islam is not about you or what you want. It is not even about you family. It is about a peaceful and cohesive society with a consistent set of rights. Allah ordained these rights. Muslims don’t second-guess them.

What is a final sickness though? An illness that would reasonably lead to death within one year is a typical answer. So having an illness doctors say is ultimately fatal with a longer life expectancy than one year does not result in the final sickness restrictions in Islam. This has important implications. For example, Alzheimer’s in its early stages is not typically a “final sickness.” People with this particular illness may live several more years and have the ability to competently do their estate planning and gifts for several of those years.

Muslims who are in a “final sickness” can and should do their estate planning and make sure their assets are distributed consistent with Islam. It is just as mandatory for them to do this as it is for anyone else. Indeed it is more imperative for family members to push them to do this. This is when they are subject to some great pressures and they can more easily be subjected to manipulation by the unscrupulous. Even if this were not the case, Islamic Inheritance would be vital in order to maintain peace and harmony in your family, and because it is fard. Just like it is for everybody else.