Who This Guide is For
Islamic Estate Planning is an act of worship (like marriage, buying gifts for your children, or any number of other useful things). Islamic Inheritance is a mandatory obligation Allah ordains with specificity in the Quran.
If you don’t think Estate Planning should be an act of worship, this article is not for you. This guide is for Muslims in the United States who’ve either done their estate planning previously but want to check on the Islamic aspects of planning or like to learn about Islamic Estate Planning for themselves or their own families.
I intend this article to be a resource for many families. Some of them have needs that are going to be different from yours. If you see a portion of the article that does not pertain to you, skip to what you find beneficial.
About the Author
I am a Board Certified Estate Planning Attorney (by the California Bar Association Board of Legal Specialization). I have been practicing Islamic Estate Planning since 2006, though I have been an Attorney since 2000. I am the former Chair of the Trusts and Estates Section of the Orange County (California) Bar Association. I have co-authored the leading book on Islamic Estate Planning for Attorneys (actually the only such book), published by the American Bar Association.
I also have many articles related to Islamic Estate Planning (which is a massive subject) throughout this website and others, such as on Muslim Matters. My law practice served hundreds of Muslim families who want to organize their affairs based on their values.
What I mean by “Estate Planning.”
Any organizing of your estate, which means your personal and real property, and your affairs in general, such as guardianship of minor children and healthcare decision-making, counts as “Estate Planning.” People are continually engaging in acts of “estate planning” when they do things with their assets. Estate Planning (consciously or unconsciously) includes opening a business, a bank account or filling out a beneficiary designation form for their 401(k), or buying a home with joint tenancy with the right of survivorship.
Of course, not all estate planning is especially good or useful. When you do it poorly, Estate planning can often be quite harmful to families.
About Estate Planning Documents
Many people understand Estate Planning as a series of documents. Say a will, a living trust, a power of attorney. You get these things because it’s the responsible adult thing to do. However, people often think of these documents as if they are interchangeable.
Estate planning documents are pieces of paper with things written on them. The documents are similar in as much as bodies of water (puddles, lakes, oceans) are alike. It does not matter as much that you have “Estate Planning.” It matters that you are acting to protect those you love based on your values.
I have a list of standard Estate Planning Documents here.
What Makes Islamic Estate Planning “Islamic”?
Islamic Estate Planning is a term that we use to designate that the plan conforms with the values that a Muslim may have. How this works may be evident in the documents themselves. However, other aspects of Islamic Estate Planning go to the “why”- why the plan does what it does. Estate Planning in the United States is often an exercise in personal vanity. You want things to be a certain way. Islamic Estate Planning centers on what Allah has prescribed over any person’s vanity.
Estate Planning is about the future. Much estate planning (though not all) is for a world where you are no longer here.
You know nothing about who exactly you will leave behind, the circumstances of those people if they are sick or healthy, rich or poor. Islamic Estate Planning recognizes this reality.
Poor Estate Planning leads to injustice. Bad results can happen not just with inheritance but also with incapacity, guardianship matters, and other areas. Poor estate planning (and no Estate Planning counts) is a way for people to take advantage of each other, to oppress, to break the bonds of kinship.
Good estate planning can engender peace and harmony.
The difference between Islamic Estate Planning and what everyone else does
Islamic Inheritance is about transferring wealth and values. In some ways, the concept is similar to how some people plan their estates consistent with the Jewish faith, other faiths, or secular value systems.
In the United States, there tends to be an immense level of flexibility when it comes to Estate Planning.
Americans tend to view “property” as something the owner controls, including doing what they want to do with it after death. In Islam, we have a system of wealth succession ordained in the Quran.
Everything in the heavens and the earth and all that it contains belongs to Allah, as Allah repeatedly reminds us of the Quran.
There is more to it, however. We look at avoiding fitna, taking care of each other, and endeavoring to do the right thing in everything we do. We want to do everything in the best way that we can.
“Is the Reward for Ehsan anything but Ehsan” Quran 55:60
The Islamic Rules of Inheritance
Islamic Inheritance is the most prominent part of Islamic Estate Planning. It is also not incredibly well understood. Islamic Inheritance regarded as half of all useful knowledge according to a hadith of Muhammad (ﷺ).
You need to understand the Islamic Rules of Inheritance. I have a long-form article that does precisely this, which you can find here.
I also have a Frequently Asked Questions on Islamic inheritance among girls and boys, which is the part of Islamic Estate Planning perhaps best known and yet least understood.
Who raises your children in the event you cannot do so yourself? There are a massive number of issues when it comes to Guardianship for Muslims. For some, it’s obvious, like an aunt or uncle that lives nearby. For other Muslims, especially for those with family overseas or no close family at all, it isn’t easy.
Non-Citizens and Non-Residents
Many Muslims in the United States have property in this country, are raising their children here, and need to do some planning. They have some special issues. You can read about it here.
Living Trusts in Islamic Estate Planning
Living Trusts are often at the very heart of an Islamic Estate Plan. A “will-based plan” has judicial supervision (also known as probate), and aside from the cost and length of probate, which varies by state, the plan may not end up being Islamic at all. Judges are incompetent to rule on Sharia, and this is all about Sharia.
We have a resource here on Islamic Living Trusts you should check out.
A Last will and testament is an essential aspect of Estate Planning. I always use them but in conjunction with other documents. There may not be such a thing as an “Islamic Will,” even if the shares are correct. Too many things can go wrong.
For more on Islamic Wills, and especially how they are different from a Living Trust, you should click here. I have another article on the reasons why an Islamic will may not be Islamic or even useful.
Incapacity in Islamic Estate Planning
Incapacity involves not just being in a hospital bed. Many people who appear healthy have lost their executive decision-making ability. Unscrupulous people can take advantage of them. We also want to ensure that we, our parents and loved ones maintain privacy and dignity.
I address incapacity planning here.
Does your ex-wife get your stuff after you die? Not usually, but I have seen this happen. There is also a whole slew of things to worry about here, from guardianship, remarriage, and more complicated families. I write about post-divorce planning for Muslims here.
Because of changes in the law in recent years, Estate Tax planning is far less critical than it used to be. Its status is always subject to change based on the political winds of the moment. It continues to be a concern for families with great wealth, who may be concerned about the 40% tax rate on their estates after an extremely generous exemption.
There are various techniques used in Estate Planning to address the burden of taxation, both the federal estate tax and the income tax (which matters to more people). One of them is charitable tax planning.
Not all estate planning is charitable. Often, people use their ability to give a Wasiyyah to those outside their family (or distant relatives. A lot of charitable planning involves creating trusts and obtaining tax benefits while giving more charity than a person might otherwise.
I have a guide on Islamic Charitable Planning. If the idea is interesting to you, read it.
How do you handle assets overseas when doing your Islamic Estate Planning? Do you want your overseas wealth to stay with your family? If you were born in another country and own property there, and your children grew up in the United States, chances are good people overseas will find stealing from your children relatively easy to do. People do it all the time. I have seen it.
I have some ideas on international assets you may want to check out.
Your Parents and Estate Planning
You may not want to consider estate planning for yourself but think about it for your parents.
For many families, this is a fraught issue. You should see my article on advising parents on Islamic Estate Planning.
Special Needs and Islamic Estate Planning
Giving inheritance outright to people who have the right to it can be harmful to some. Some people are receiving “needs-based” public benefits and don’t want that ruined. Unscrupulous people can take advantage of some people with greater ease than others. The good news is there is a solution for that in Special Needs Planning. You should see my article on this aspect of Islamic Estate Planning here.
Health Care Directives
Who makes healthcare decisions for you if you cannot make them yourself? What about donating your organs? I address the “pulling the plug” issue in this article. I have a separate article on organ donations.
Married couples need to have agreements with each other. That should be obvious; the marital relationship is, by its nature, contractual.
However, many couples are not sure who owns what after one or another person dies. In places like California and Texas, which are community property states, many Muslims don’t know what that means to them. I discuss the surviving spouse’s share here.
Retirement Plans and Islamic Estate Planning
Part of what you own for your retirement. There are many rules associated with your 401(k) and IRA. I walk through a scenario for Islamic Estate Planning and these assets in this article.
Check out our free resource guide on Islamic Estate Planning here and sign up for our email list.
Get This Done
You can schedule a 15-minute mini-consultation to learn about the process of getting your Islamic Estate Planning done.