A recent presentation on avoiding fitna at the Islamic Center of Claremont. Please check it out and share it with your friends and family if you feel it is beneficial.
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Asking Muslims to do Haram, for Money
Some Reflections on Halal Rizq and Islamic Estate Planning
Jabir ibn Abdullah reported: The Messenger of Allah, peace and blessings be upon him, said, “O people, fear Allah and be graceful in seeking provision, for a soul will never die until it finishes its provision. If it is slow coming, fear Allah and be graceful in seeking provision. Take what is lawful and leave what is unlawful.” (source)
Early in my now decades old legal career I remember vividly a case I had of psychological injury. You see, I was a lawyer for a company that slaughtered pigs. They had an employee who did the actual slaughtering. After years of doing this work, this man was haunted, day and night, by all the pigs he killed. The long dead pigs would approach him at all hours, speak to him and confront him about the violence he perpetuated against them.
Now at this point, you may be wondering, what on earth does this have to do with Islamic Estate Planning, and why is a Muslim lawyer representing a pig slaughterer anyway? Well, it does. Lawyers must often think about ethics, and Muslim lawyers often must consider Islam in the work they do and how they earn their pay. But lawyers, as a general matter do not think of themselves as much different than a plumber or an electrician in several important ways. We usually don’t really care what clients do for a living unless it affects our work. A plumber does not usually concern himself with how a customer earns his money, unless he is helping a customer do something illegal.
Please note, as a disclaimer, this is about how I drew my lines. I think everyone else can draw their own lines on the way they earn a living and consult with knowledgeable and learned people they respect. It’s not my intent to lay out principles that would be applicable to everyone, but I think they should be helpful as the perspective of an Islamic Estate Planning Attorney.
Why I turn down clients
Over the course of many years, here are a few reasons I have had to turn down clients (not an exhaustive list by any means, and not all because it’s haram to help):
- Muslim parents want to disinherit their Muslim daughter because she married a black man (who is Muslim).
- Man wants to use asset protection to launder bags of cash to hide it from ex-wife and men he evidently cheated to obtain said bags of cash, who are soon getting out of prison and may come after him.
- The client turns out to be a very public white nationalist media figure.
It’s Haram to Help Someone Do Something Haram
ۘ وَتَعَاوَنُوا۟ عَلَى ٱلْبِرِّ وَٱلتَّقْوَىٰ ۖ وَلَا تَعَاوَنُوا۟ عَلَى ٱلْإِثْمِ وَٱلْعُدْوَٰنِ ۚ وَٱتَّقُوا۟ ٱللَّهَ ۖ إِنَّ ٱللَّهَ شَدِيدُ ٱلْعِقَابِ
“[…]cooperate with one another in goodness and righteousness, and do not cooperate in sin and transgression. And be mindful of Allah. Surely Allah is severe in punishment.”
I do a lot of asset protection work, both for Muslims and non-Muslims. Asset protection is one of those areas of law that can attract people who want to both protect their family and wealth from lawsuits that they don’t know about yet. Alternatively, shady characters may contemplate asset protection, and helping such people can implicate the lawyer in cheating and theft. While clients often rely on Attorney-Client Privilege, so attorneys keep their clients’ secrets even to the point that they cannot testify, there is a “crime-fraud” exception. Lawyers can and do get in trouble for helping their clients cheat and steal. They can go to jail.
For a lawyer, that’s an easy line to draw. Don’t help someone steal. Stealing is haram. Stealing is against the law. Great we are clear.
What about Inheritance?
Where I won’t get in any legal trouble, is when a client asks me to do an estate plan that gives everything to a son and excludes a daughter for an unjust reason or gives equally to a daughter and son (which is pretty banal). People have testamentary freedom and lawyers do these kinds of plans all day.
I will turn away Muslims who want to exclude or diminish the rights of heirs for the exact same reason I would turn down a client who wants my help laundering money: It’s haram to help someone so something haram.
Inheritance is ordained in Islam. It is literally a God-given right. In the context of the rules of Inheritance, the Quran is quite clear
وَمَن يَعْصِ ٱللَّهَ وَرَسُولَهُۥ وَيَتَعَدَّ حُدُودَهُۥ يُدْخِلْهُ نَارًا خَـٰلِدًۭا فِيهَا وَلَهُۥ عَذَابٌۭ مُّهِينٌۭ
But whoever disobeys Allah and His Messenger and exceeds their limits will be cast into Hell, to stay there forever. And they will suffer a humiliating punishment.
It’s not a right for non-Muslims who have their own values that I am happy to put into a plan. But if I help a Muslim deny a right Allah gave to a child, I am helping in that theft. I don’t think helping steal future inheritance from a future orphan is any better than helping a criminal launder money. Yes, one is perfectly legal and the other is not, but that is not my sole inquiry when it comes to my comfort about how I earn my rizq.
But Muslims Keep Asking Me to Do Haram things Anyway
I write and speak about Islamic Inheritance frequently. It’s important to me, Still I do get Muslims to call me because they don’t want to do Inheritance Islamically. Some Muslims, even those that you might consider conventionally religious, go to the Masjid, fast in Ramadan and so forth, are offended by what the Quran says about Inheritance.
. As the years have gone on and there is more education about Islamic Estate Planning, I have grown more offended by this over time. It’s like a Muslim demanding another Muslim serve him whiskey. If you want whiskey, have the decency to not demand it be served to you by another Muslim.
Other Muslims may have worked out difficult ethical issues about how they earn their rizq in ways that may not sit well with everyone. Yet to them, it’s still vital to make sure inheritance is distributed the way ordained by Allah. They don’t want their last act in this world, their parting shot, to be one of injustice against the orphans and others they leave behind.
To talk about Islamic Estate Planning in a 15-Minute mini-consultation with Ahmed Shaikh, click here.
Is sharing your wealth with your spouse a good idea?
The Financial Boundaries of Marital Partnership
The Wall Street Journal recently had an article about how spouses share or don’t share their finances. Not everyone does, but the report argues pooling resources helps families achieve “milestones” and is better overall. The couple who pool funds are not just spending their own money, they are spending their spouse’s money too, and there is “accountability” for making spending decisions that are not sensible.
In the United States, about 23% of all couples keep their finances completely separate, while 43% don’t distinguish. The rest have some accounts together and some separately.
Immersive Partnership and other ideas
Your marriage may not be like your best friend’s marriage. Some view marriage as a social and family partnership but not a “partnership” about money. Others don’t view it as a social or family partnership or an economic partnership. A married couple may not live together and maintain separate sets of children, grandchildren, and social circles.
Then there are the married couples, who see their union as an immersive Partnership that covers every social, family, and economic aspect of each partner’s life. Many people love that kind of marriage. Not everyone does, and that’s okay.
Why Keep it Separate?
First, there is the matter of personal autonomy. Maybe a husband does not want to explain to his wife, after a review of the credit card bill, that he splurged on a giant chocolate ice cream sundae on his way back from work two weeks ago. Perhaps the husband wants to share the same account because he wants to be accountable for where he eats and what he does with the money he and his wife earn.
The second reason may be that you earned it. If a wife wants to buy jewelry with money she earned, send it to her family overseas or purchase real estate, she should be able to do it. In Islam, men must spend on their family’s benefit; women have no such obligation. I have seen some Muslim families that regard their earnings as jointly held while taking no ownership interest in money earned by their wives. Not all husbands interpret their obligation to provide for their family as the same as giving everything to their wives.
Life Has Surprises
Third, not everyone gets married in their early 20s stays married to each other until old age, after which they pass in rapid succession. Marriages end, and it’s often in ways the husband and wife did not expect. A spouse may die early, the couple may divorce, and maybe they would have wanted something more nuanced than sawing everything in half.
Fourth, it may keep people sharp when it comes to financial affairs. I have seen several situations where a widow or widower is completely lost regarding money and finances because the husband or wife handled that. Yes, both spouses can have kitchen table financial discussions, pay bills and make major financial decisions, but in an immersive partnership, one spouse tends to take the lead. The other may not have a clue as to what’s going on.
Guard Against Elder Abuse
Lastly, an immersive marriage partnership can harm family relationships and even be abusive. Marriage is sometimes a vehicle for elder abuse, especially financial elder abuse. A typical scenario is when a widower re-marries. Adult children often suspect the new spouse of coming in for the money, which is sometimes wrong and unfair, but the suspicion is occasionally spot-on. Abusive late marriages are perhaps the biggest fitna I have had to deal with in the world of Estate Planning.
Why Keep it together?
There are also compelling reasons to keep finances together. Many couples start with nothing and build a family and life together. It’s expensive to purchase a home and pay for expenses. One partner may go through a financial setback, a layoff, or a failed business startup; the other can help through tough times.
The married couple can view themselves and their efforts as a 50/50 partnership and organize their economic affairs virtually the same way unmarried business owners may do if they were a partnership.
Islam does not regulate how spouses organize their finances. If the husband wants to buy his wife a Ferrari as a gift, nothing in Islam stops him. If he wants to hand over half his paycheck to his wife, and his wife wants to hand over half her paycheck to her husband, there is nothing wrong with that.
You are separate economic units
For purposes of Islamic Inheritance, you need to be separate economic units. If spouses share, it’s no different from unmarried partners owning a business together.
So say, for example, Aslam and Adil are 50/50 partners in a hardware store; Aslam’s heirs are entitled to shares of inheritance per the Islamic Rules of Inheritance for 50% of the value of the hardware store. If Aslam is married to Bilquis, Aslam’s heirs, including Bilquis, are entitled to inheritance per the Islamic Rules of Inheritance.
Unless either Adil or Bilquis is Aslam’s only heir, under no circumstances should they get everything.
Unfortunately, this happens.
Understand the difference between “partnership” and “everything.”
Unfortunately, one cultural marital expectation in the United States is that the surviving spouse gets everything. Getting everything is not a partnership. If like in the above example, Aslam dies, he has heirs who have rights in Islam. He may have parents, children, and a spouse, who all get their shares as ordained in the Islamic Rules of Inheritance.
While Islam does not regulate how your Partnership works during life, so long as it is halal, Islam most definitely regulates how property is supposed to be distributed after death.
Click here for a 15-minute mini-consultation over zoom with Ahmed Shaikh on the Islamic Estate Planning process.
Six End of the Year Charity Tips
Despite the poor stock market, some readers have had a good enough year where they are looking at year-end giving to charity. While this is a blog post, you should investigate more before deciding if a strategy will work for you. Here are some ideas you may consider:
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Income from an IRA you don’t need and don’t want to be taxed on can go to charity
This helpful reminder comes from the IRS. You can make tax-free distributions of up to $100,000 per person from your IRA if you are more than 70 ½ years old. This kind of distribution is not an option for reducing people’s tax burden now for income already received, but it is a great planning tool for future years. For example:
Bilal is 73 years old and retired with a high income from his pension, rental income, and IRA. His IRA income comes from a “mandatory minimum distribution” he does not need, but the government forces him to withdraw some of it yearly because that’s how IRAs work.
Bilal can give up to $100,000 of this IRA income to charity. He cannot deduct the donations from his taxes, but it does count against the mandatory minimum distributions, so he has that much less income. The government does not force Bilal to take the distribution, pay taxes, and give it to charity. I am describing a Qualified Charitable Distribution (QCD), and you can read about it here.
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Cash gifts tend to be inefficient.
The value of your deduction is your donation times your highest marginal tax rate. So, if Bilal donates $100 to charity and has a marginal tax rate of 35%, he saves $35. However, suppose Bilal donated $100 in appreciated stock purchased for $10. In that case, that is a savings of having to pay income tax on the $90 appreciation, plus he gets the deduction for the complete donation. That is just the start. It would help if you generally planned charitable gifting, the who, why, and how.
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Huge income years may have a charitable solution.
Many people have years where they receive a significant income they usually don’t expect yearly. For example, on the sale of a business, or a building, certain kinds of lawsuit judgments and a big bonus can result in a rather extreme uptick in income for a specific year and, thus, a more significant than the ordinary income tax bill. It’s possible to get a tax deduction for giving to a charity that year for an amount substantially more significant than the charitable gift for that year; this is through a charitable lead trust.
Example: Bilquis owns restricted stock in a startup she works at. Someone purchased the company, and her HR tells her she will receive a taxable income of 2.3 million dollars. Bilquis knows payments like this are unusual, and she would like to keep as much money as possible for her family, retirement, and other priorities.
She creates a “charitable lead trust” (CLT) that allows her to give a percentage of the $2.3 million while investing it every year for the next 20 years. She can spread her deduction for the next five years.
Bilquis could get a deduction with a CLT trust, like an outright donation. With a CLT, Bilquis gets to keep nearly all the money. Twenty years later, she may have much more if she invests wisely while donating.
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Some charitable-tax planning increases income.
One of the more common charitable planning techniques, a “charitable remainder trust,” is a kind of “split-interest trust” where the person who creates a trust gets several tax benefits. The result may still be more taxation overall, but because there is more to tax.
For example:
Hamza sells an office building owned by his charitable remainder trust for a profit of $4 million.
He is not immediately taxed on the capital gain of nearly $4,000,000 and can reinvest whatever he wants, supercharging his returns.
Hamza also gets an immediate tax deduction. It’s for the value of the future interest in charity.
Income from the trust that goes to Hamza is taxed but on more favorable terms than other investments. When setting up the trust, Hamza has various options regarding when he starts to take distributions and under what terms (there are a detailed set of rules, however). He can decide to take a “unitrust” – say 6% of the account value, an annuity trust, which is fixed income (but it’s not interest), net income, or a variety of other options.
The entire trust ends up going to charity eventually. That’s the bargain with this kind of trust. An illustration can show people who invest through charitable remainder trusts can do substantially better financially than those not having such plans.
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A Charitable Gift Annuity is a horrible idea.
Many nonprofits will try to sell donors, especially the elderly, something called a “Charitable Gift Annuity.” It works like this:
Khadija is 80 years old. A local nonprofit offers her a charitable gift annuity. It’s a way to earn a fixed income, guaranteed by an organization’s assets for the rest of her life. She decides to donate $3 million, which will generate a guaranteed $120,000 per year for the rest of her life. Khadija figures she can retire and not worry about the stock market. She will get a tax deduction for the value of the charitable contribution.
Annuities are often a bad deal and are often exploitative to the elderly. They are not as safe as you might think. This device likely violates rules on Islamic Inheritance as well as interest. As we are dealing with nonprofits, consumer protections in the law often melt away, but they are the same product.
Please stay away from them and discourage Muslim organizations from marketing them.
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Always Research Charities
The charitable sector has many organizations that do good work. The industry is lightly (if at all) regulated by state and federal governments and has tended to attract more than its fair share of corrupt operators. Religious nonprofits are the least regulated by design and tend to have almost no accountability.
Having social ties to an organization, hearing a good speech at a fundraiser, or being subjected to brand advertising is not a substitute for due diligence. Organizations often figure you would be less careful about the money you give than what you invest for your family. They may be correct, but why should that be?
You should care about the money you spend for the benefit of your brother just as much as you care about the money you keep for yourself. As Muhammad (sws) is reported to have said, “none of you will believe until you love for your brother what you love for yourself.”
Charity is more than just a tax benefit. It’s an act of love.
You can read my Muslim guide to charitable planning here. To discuss the process for charitable trust planning or Islamic Estate Planning, you can schedule a 15-minute zoom consultation here.
Islamic Inheritance for all the pronouns
Pronouns, Gender and Estate Planning
Pronouns came up recently when I was listening to a continuing legal education program on estate planning. I need to do regularly to keep my license to practice law. A presenter advised estate planning lawyers should stop identifying children as “sons” and “daughters” in estate planning documents.
We should make all estate planning gender neutral.
The reason estate planning lawyers should move away from this terminology, we were told, is that these things are always in flux. A daughter may end up becoming a son, then switch to “non-binary” after the estate planning is done. Family members may switch back and forth or in a variety of other directions. Our documents should not put people in outmoded and arbitrary boxes like “man” or “woman.”
Where Society is on Gender and Pronouns
Conventional wisdom throughout much of the United States, enforced now through the medical, public education, mental health, government, and legal worlds, is that we as a society should encourage people to change their genders and encourage everyone to “live their truth.” Changing genders, or reimagining what that means, is proposed as a solution of a wide range of problems, the most common we are told, is that it somehow prevents suicide.
One of my clients told me about the Islamic School his child was in, where two Muslim middle school girls decided they were no longer girls. One Muslim elected official in Oklahoma identifies as “nonbinary,” identifying as she/they. This means she claims to be neither a man, nor a woman.
There has been much written on if this kind of thing is good or bad, and it’s not my purpose to do either. Rather, I want to address the Islamic Estate Planning implications for families who identify as genderqueer, trans, non-binary or who have adopted or created a new gender from a list, or just made up a gender.
Some people reading this, especially Muslims, who have an Islamically-informed worldview, there are some clear rules, and a bunch of what is happening in our society is impermissible in Islam. People in Muslim families are changing their gender identity and expression. We need to deal with that in a variety of ways, as families and as a society.
Islamic Inheritance Consequences with Pronouns
Daughters and sons get different shares of inheritance in Islam, something I have written about extensively. A daughter deciding, she is a son, and her family’s affirmation of this, payments for hormones and surgeries and flying the trans flag outside the house won’t change this, biological sex at birth will be the correct share of inheritance.
Muslims do things that are impermissible in Islam all the time, it does not change the shares of inheritance. Changing your “gender” is not the same thing as leaving Islam. Disinheritance on this basis is out of the question.
Islamic Estate Planning and Islamic Inheritance are not the same thing
As I often tell my clients, “Inheritance”- as in the shares of Islamic inheritance – is different from “Islamic Estate Planning”- which is about organizing your assets during your life for the purpose of fulfilling a variety of goals (charitable planning, asset protection, special needs and more). You should do your Islamic Estate Plan with sensitivity, compassion and understanding. You also don’t want to do anything haram.
Cutting off family ties and other horrors
Much of gender identity issues are tied with mental health, whatever social circles the child has fallen into, internet influencer culture, autism, or other factors. Many of the influential voices in the transgender world actively advocate disassociating themselves from their parents or other family. For parents with minor children, the coercive power of the state can also be scary.
If you are in this situation as a parent, you cannot ignore the social, political and media environment you are in around gender and pronouns. You obviously want to be on the side of truth and against falsehood. But how do you do it if the stakes become so high that your family ties?
Acting with Wisdom
For those of us who have not gone through the experience of having a child announce a change in genders, it’s perhaps too easy for us to wag our fingers and be dogmatic about it. If a Muslim parent reacts to a child’s announcement about a new gender it can be easy to overreact.
I am not going to pretend to know what the right reaction is. The forces causing the child to do what he or she is doing and the menu of horrible things that can happen before or from that point could vary.
Parents should not want to lose their child because of the government, because of the culture the child is in, because of suicide or mental illness, or the rashness of their own actions, well-intended they may be.
In the Islamic estate plan itself, you cannot change the shares of inheritance. However, the advice of the attorney that provided me with continuing education was not completely off base (well he in general, but not always). If identifying a child with their sex at birth or a name they don’t use anymore (called “deadnaming”) lead to harm, not saying those things in the plan won’t be the worst thing in the world. I am not advocating anyone lie. You can be accurate when developing your plan and follow Islamic Inheritance without causing harm.
To schedule a 15-minute no-obligation zoom call on the Islamic Estate Planning Process, click here.