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An announcement and some a brief reflection

After more than a decade and half at my law practice dedicated in large part to the Islamic Rules of Inheritance and Estate Planning for the Muslim community, I have decided to shut down.  I have joined the law firm of Bohm, Wildish, and Matsen LLP in Costa Mesa.  I head up the firm’s Asset Protection and Estate Planning Department.  

It started with a conversation in court

The first several years of my 22-year career in Law has been focused on litigation at a couple of law firms.  In 2006, I met a former co-worker in court who told me he opened his own law practice.  One of the things he was doing was estate planning. I had taken courses on Wills and Trusts and taxation in law school, but estate planning, let alone Islamic Estate Planning was not something I had previously given much thought to.   I had not done any estate planning of my own, like most Muslims perhaps.  That conversation took me on the path of learning that I would not have anticipated. 

Islamic Inheritance Education Was Almost Non-existent 

I discovered there was an area of law that was fard (obligatory) for Muslims, but no lawyers had ever given serious attention to it that I had seen. Education on Islam and inheritance in my community was scant.  Sophisticated knowledge of how this system fits in California or other states was almost nonexistent.  It t was like this vital area of Islam was shrouded in darkness.   I had remarked that Muslims can be born in the US, go to Friday prayers and weekend schools and halaqas throughout childhood and adulthood, die, and never know that Islamic inheritance is an actual thing and an obligation they need to do something about.  

Since then, I have been grateful to work with and learned from over a thousand Muslim clients, spoken at many Muslim conferences, Masajid, community gatherings, and small halaqas with friends, to discuss how the process of Islamic Estate Planning works. I have also helped several lawyers around the country learn more about Islamic Estate Planning, learning from them along the way.  Over the years I have also had the experience of seeing many of my clients pass away, including my parents.  I have seen plenty of extreme family drama, elder abuse, scams but also plenty of humanity, kindness and love through generations of Muslim families.  

Where I am now

My new position takes over an established Asset Protection and Estate Planning practice with mostly non-Muslim clients, though I am still an Islamic Estate Planning Attorney.  I came to the firm I am at now because it offers history, a strong client base, and resources I need to provide better service.  

The firm I am joining is especially strong in international and domestic asset protection.  I am also in a much better position to help clients with Trust administration (when someone with a trust passes away), business planning, charitable tax planning, conservatorships, probates, and a wide range of other challenges. Resources matter in law practice, and I hope and pray the move is something that will help me continue to grow and learn and also provide my clients with better service going forward. 

I have closed my old law firm’s website, but islamicinheritance.com will remain as a place where I will write articles specifically about Islamic Estate Planning issues.  I will also write more about asset protection and other areas that you may find useful.  

Thank you for reading this all the way through. If you want to discuss Islamic Estate Planning, Asset Protection Planning, Charitable Planning, Disability and Incapacity Planning, Business Planning, you can reach out for a 15-minute mini-consultation.  Your referrals are also greatly appreciated.  

 

It Starts with a Post by an Academic Islamic Law Expert

When someone sent me a screenshot of a Facebook post by a noted Muslim academic and expert in Islamic Law. I was perplexed by what the author was trying to do, and felt compelled to address it. I left out his name since it is not necessary.  

According to a hadith, Islamic Inheritance is half of all useful knowledge. My goal is that Islamic Inheritance (known as the “fara’id”) and the wasiyyah should be essential information for Muslim adults.  

This noted Muslim academic highlighted an unnamed “feature” of Islamic law. Where “revealed law both created default entitlements AND endowed individuals with powers to alienate those entitlements in a way that could undermine social expectations created by the default rule.” The academic then says the “testator is using his will-making powers with this twist; equal division between grandsons and grandchildren.” This scholar marveled that “there was no concern that this would somehow challenge the authority of the Quranic law of inheritance specifying that a son receives twice the share of a daughter.”  

It is hard to tell if this academic was blowing smoke or if it demonstrated confusion about what the wasiyyah was. At the very least, readers could be forgiven for reading his prose and becoming more ignorant of Islamic Inheritance and the wasiyyah. So, let’s break this down. 

If another person can alienate (sell, give away, destroy) something you think is an entitlement, it is not an entitlement. 

  Say Abdullah says to his only son and heir Bilal, “son, I have a million dollars. According to the Quran, you get all of it when I die: “A year later, Abdullah spends a million dollars on a mahar and the gift of a new home for his lovely young bride Bilquis, who ends up divorcing him six months later, but keeps the gifts. When a distraught Abdullah dies soon after, Bilal gets nothing from his now ex-millionaire father.  

Was Bilal ever entitled to a million dollars?  

Of course not. A lovestruck Abdullah had the right to give it all away during his lifetime, never mind if doing so was a good idea. Abdullah alienated his property by gifting it to Bilquis; he did not alienate Bilal’s entitlement. Bilal’s only entitlement is an inheritance from Abdullah if he survives his father. Inheritance means the wealth Abdullah cannot take with him, less his debts and the wasiyyah. 

Debt and Wasiyyah

According to the Quran, specifically 4:12, debt and the wasiyyah are deducted from inheritance. 

So, say, Abdullah never got to meet Bilquis and kept his million dollars until he died. He decides to do an Islamic Estate Plan to follow the mandatory Islamic Rules of Inheritance. Abdullah includes a wasiyyah, giving 20% of his wealth to orphan programs in his native Bangladesh. As I discussed elsewhere, his wasiyyah, should he wish to do one, is limited to ⅓ of his estate.    

Some of Abdullah’s wealth is structured, so the government taxes it after his death. Those taxes are $20,000 (a debt). Abdullah’s burial costs are $10,000.

When Abdullah dies with $1,000,000, his son and only heir, Bilal, receives $770,000.00. Bilal was never entitled to more than that. If Abdullah had a larger wasiyyah, more debt, or spent the money during his lifetime marrying women, Bilal may be entitled to less or nothing. 

Why is there no concern about challenging the Quran?

The academic here goes on to say there was a “twist”- in that the testator gave a wasiyyah to his grandchildren equally among boys and girls. This “twist” goes to “alienate those entitlements” (which, again, is not an actual thing) “in a way that could undermine social expectations created by the default rule.”

The academic explains, “there was no concern this somehow challenged the Quranic law of inheritance specifying that a son receives twice the share of the daughter.”  

Why would a wasiyyah to grandchildren “challenge” the Quran on inheritance to sons and daughters? This proclamation seems incoherent but has confused some. Children have a right to inheritance in Islam. Grandchildren generally do not (obviously, there are situations where they might). Children and grandchildren are different family relationships. Muslims who want to give part of their estate to their grandchildren do it through the wasiyyah or lifetime gifts.  

In our example, Abdullah can give up to ⅓  of his estate as a wasiyyah. So long as he is not violating any rules of the wasiyyah, it is his to bequest as he likes. Say, Abdullah had another son, Hashim, who died five years ago. Six children survived Hashim. Abdullah decided that instead of leaving his wasiyyah to orphan programs in Bangladesh, he would leave 20% of his estate equally to his male and female grandchildren from Hashim, but not his six grandchildren from Bilal, who still have both parents.

Of course, Abdullah can do this. 

Social Expectations. Where?  

Wasiyyah does not come with “social expectations” created by unrelated commands in the Quran.   This claim seems to have no function other than to confuse people. 

The wasiyyah is a simple concept. Muslims have broad but not unlimited latitude in what they can do. The Islamic Rules of Inheritance do not govern this except that the rightful heir cannot be beneficiaries.

To discuss completing an Islamic Estate Plan, you can set up a 15-minute mini-consultation with no obligation by clicking on this link.  

Why FBAR Matters

Hypothetical: Saqib is a physician in the United States. At age 50, he decides to move back home to his native Pakistan, where he maintains financial accounts of $2,000,000.

At 61, Saqib decides to move back to the United States.

Because Saqib did not report his overseas bank accounts, the government can fine him for half of his money in Pakistan.

It’s common for Muslim families in the United States to have ties overseas and move back and forth. Many also maintain bank accounts overseas to collect rents or profits from business or real estate holdings, slowly disburse charity or zakat once in a while, or just as a place to hold inheritance or gifts.

FBAR Penalties can be steep

If you have financial interests overseas, you need to know about FBAR, or “foreign bank account reporting.” Under US Law (the Bank Secrecy Act), Americans must report their foreign bank accounts. The IRS gets to enforce this with an unforgiving penalty regime. There are two penalties, “willful” and “non-willful.” For non-willful, there is a maximum fine of $10,000. For “willful,” it’s a maximum fine of either $100,000 or half of all the money, whatever is more.

 

It does not matter if Saqib brought the money to Pakistan with him from the United States, that he inherited it from Pakistan, or if it’s not even his money, only his signing authority. It also does not matter that the account was in an account that earned no interest or income. Not reporting can cause some severe problems.

What “Willful” Means

In law, words often don’t mean what your common sense tells you. If Saqib did not know about the existence of FBAR (because he is an ordinary person), the government might consider his reporting “willful.” The definition of “willful” is evolving and can include people who have no idea they need to report such things. Saqib can be “reckless” about how he conducted his affairs.

Late Reporting

If Saqib has failed to report his bank account for ten years, should he be quiet about it? Should he fess up to the government and plead for mercy? Someone like Saqib should get some professional help. According to the IRS website, they won’t impose a penalty if Saqib is current on his taxes, and the IRS did not previously contact him about his non-compliance.

After Death Reporting

If Saqib dies, he may leave his heirs with a mess and increased exposure to penalties. I have previously written about international assets and how they are often inherently problematic. American heirs of foreign property are often victims of inheritance theft. Extreme FBAR penalty liability only adds to this. For Saqib’s beneficiaries, the penalty can be as much as 35% of the inheritance in some cases.

Affairs in Order

Making sure you have your affairs in order includes Islamic Estate Planning, but you should also consider organizing your finances so that surprises like hefty avoidable fines don’t happen. To discuss planning with Islamic Estate Planning Attorney Ahmed Shaikh, you should schedule a 15-minute mini-consultation over zoom.

Note: The following facts are fictional. Any resemblance to actual people is coincidental.

Sahar is a 33-year-old mother with two young children, a boy, Hamza (5), and a daughter Layla (3). She comes from a Muslim family and is blessed with two aging (aren’t we all) parents and three siblings, 45-year-old brother Ibrahim, 38-year-old sister Salma and 28-year-old sister Maryam. Maryam, an Attorney, is not married just yet. Older sister Salma is a homemaker, her husband owns a successful packaging company, and her eldest brother Ibrahim is a married surgeon with a wife and five children. All her parents and siblings live within a 15-mile radius, and her older sister lives just a mile away.  

All her siblings share her values, and she has a great relationship with them, their spouses, and their children. There are moments of awkwardness like any family, but it’s pretty good.  

Sahar wants to name her brother and sisters as guardians for her minor children in her last will, and her husband Tariq (a rare only child who immigrated from Palestine) wants to do the same. However, Sahar would like to ask their permission first.   

How should Sahar handle this? 

Answer: Sahar should NOT ask for permission. Sahar should name her siblings in the order she and her husband feel are most capable of acting as a Guardian for minor children when she and her husband do their Islamic Estate Plan. She then tells those siblings they need to step up if anything happens to her and her husband. It is their responsibility to take care of their children. Of course, all those nominated guardians with children similarly need to have a plan in case they pass away first.  

Sahar’s siblings already have a hand in raising Hamza and Layla. Siblings are responsible for stepping up if the time ever comes and their nephews and nieces become orphans. They must take care of their kin. If they can do the job, it’s not a choice; it’s an obligation.

Predicting the Future

Does that mean Sahar’s siblings will act as guardians should the time come? Of course not. Sahart does not know the future. Even if Sahar went to the trouble of asking her siblings to act as guardians for her children, and they said yes, and also, gee, that’s a silly question, that “permission” is meaningless when everyone concerned is alive in good health.  

Any planning Sahar does is for some indeterminate time in the future does not know. Sahar does not know which of her siblings will survive, and if they do, will they be in a place where they can competently take the duties of a guardian? 

Sahar should have a close enough relationship with her siblings that she would know if they are willing to and capable of taking care of her children if it came to that without asking. That knowledge does not extend to the future. Sahar will need to update her estate planning as things change. In two years, the younger sister Maryam marries a man Sahar has values incompatible with how she wants her children raised; she would need to remove Maryam as a guardian.  

Take Action

For more, I have a Guide to Guardianship, and a FAQ.  

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To schedule a 15-minute mini-consultation, you can click here.