Distribution of Wealth in Islam – An Introduction

Introduction

The Importance of Wealth Distribution in Islam

Islam emphasizes that the just distribution of wealth is a cornerstone of social and familial harmony and well-being. Wealth is viewed as an Amanah (trust) from Allah, and its proper distribution is a way to ensure fairness and accountability. Allah commands believers to fulfill their trusts and uphold justice in matters of wealth:

“Indeed, Allah commands you to render trusts to whom they are due and when you judge between people to judge with justice. Excellent is that which Allah instructs you. Indeed, Allah is ever Hearing and Seeing.”
(Surah An-Nisa:58)

The Prophet Muhammad (ﷺ) also highlighted the importance of properly managing and distributing wealth. He said:

“It is better for a man to leave his heirs wealthy than to leave them dependent, begging from others.”
(Sahih al-Bukhari, Hadith 5355)

This guidance reflects the need to plan and execute wealth distribution responsibly, ensuring that the loved ones are provided for within the framework of Islamic principles.

The Role of Justice and Fairness in Wealth Distribution

Justice and fairness are the core values inherent within Islamic teachings, particularly in matters of wealth. Islam forbids any form of oppression or favoritism that could lead to disputes among heirs. The Quran lays out specific shares for family members in inheritance, showing divine wisdom in preventing injustices:

“Allah instructs you concerning your children: for the male, what is equal to the share of two females. But if there are only daughters, two or more, for them is two-thirds of one’s estate. And if there is only one, for her is half (of the estate)…”
(Surah An-Nisa, 4:11)

The Prophet Muhammad (ﷺ) warned against the dangers of injustice, particularly in estate planning and wealth allocation:

“Fear Allah and treat your children equally.”
(Sahih al-Bukhari, Hadith 2587)

By adhering to the principles of Faraid, Wasiyah, and Hibah, Muslims can avoid familial discord and uphold the divine mandate of fairness.

Relevance to Muslims in Singapore

In Singapore’s multicultural and legally structured society, Muslims face unique challenges in aligning secular laws with Islamic principles. Modern financial instruments, such as CPF nominations, joint-tenancy properties, and insurance policies, often seem to complicate the application of Islamic inheritance laws.

For instance:

• CPF Nominations: While legally binding, they may seem to not reflect the Islamic principle of equitable distribution through Faraid.
• Joint-Tenancy Properties: The automatic transfer of ownership upon the death of one owner can be misunderstood as contradicting the Shariah obligation to distribute the deceased’s share among rightful heirs.

Moreover, misunderstandings about Islamic principles, such as the perception that Faraid is rigid or outdated, can lead to disputes or neglect of rightful shares. This makes it crucial for Muslims in Singapore to understand the balance between adhering to civil laws and fulfilling their Islamic obligations.

The guide will serve as a tool to:

1. Educate readers on Islamic wealth distribution principles with Quranic and Sunnah evidence.
2. Provide practical solutions for navigating contemporary issues unique to Singapore.
3. Emphasize the spiritual and societal benefits of justice in estate planning, reflecting the words of Allah:

“And establish weight in justice and do not make deficient the balance.”
(Surah Ar-Rahman, 55:9)

By doing so, the guide aims to empower Muslims in Singapore to approach wealth distribution with clarity, foresight, and a commitment to Islamic teachings.

1. Wealth Left by the Deceased: A Holistic Overview

Definition of Estate (Tirkah) in Islamic Terms

In Islam, the Tirkah (estate) refers to all assets left by the deceased at the time of death, which includes both tangible and intangible items such as property, money, investments, personal belongings, debts owed to the deceased, and other financial entitlements.

The estate is considered a trust from Allah and must be handled with utmost care to ensure it is distributed following Islamic laws. Allah reminds us:

“And give the orphans their properties and do not substitute the defective [of your own] for the good [of theirs]. And do not consume their properties into your own. Indeed, that is ever a great sin.”
(Surah An-Nisa: 2)

This verse highlights the sanctity of the estate and the importance of dealing with it justly.

Obligations Before Distribution

Before the estate can be distributed among the heirs (following Fara’id Laws), Islam mandates that certain obligations be fulfilled. These include:

1. Settling Funeral Expenses
   The costs of preparing and burying the deceased are the first priority. These expenses must be reasonable and not extravagant, in line with the Sunnah. The Prophet Muhammad (ﷺ) said,

“Do not spend extravagantly in shrouding or burying, for the deceased will not benefit from excess.”
(Sunan Abi Dawood, Hadith 3154)

      2. Paying Off Debts
Islam places a strong emphasis on settling the debts of the deceased, even before dividing the inheritance. The Prophet (ﷺ) said,

“The soul of a believer is held hostage by his debt until it is paid off (on his behalf).”
(Sunan Ibn Majah, Hadith 2413)

This highlights how imperative it is to clear the debts of the deceased. The Quran also reinforces this:

“…after any bequest they [may have] made or debt.”
(Surah An-Nisa:11)

      3. Fulfilling Bequests (Wasiyah)
After debts are paid, any valid Wasiyah – or bequests – (up to one-third of the estate) must be executed. This could include allocations to non-heirs, charitable causes, or individuals specified by the deceased.

The Prophet (ﷺ) said:

“(Allah has given you the right to dispose of) one-third of your wealth (in charity). And one-third is a lot.”
(Sahih al-Bukhari, Hadith 2744)

Sequence of Distribution in Islam

Once the above obligations are met, the remaining estate is distributed among the rightful heirs according to Faraid (Islamic inheritance laws). The sequence is as follows:

1. Fixed Shareholders
   Heirs with predefined shares (e.g., spouse, parents, children) receive their portion as per the Quran:

“Allah instructs you concerning your children: for the male, what is equal to the share of two females…”
(Surah An-Nisa:11)

      2. Residual Distribution (Asabah)
After the fixed shares are distributed, any remaining wealth is allocated to residual heirs (e.g., sons or other male relatives) based on their relationship with the deceased.

      3. Distant Relatives or Other Entitlements
If no immediate heirs exist, the estate may go to distant relatives or be handled as per Islamic rulings on inheritance without heirs – In Singapore, if a person passes away without leaving any heirs, all his assets from his estate (except what have been expressed validly in his will) will go to the Baitul Mal. 

      a) Baitulmal is the institution that acts as a trustee for the Muslims. It looks after assets from which members of the Muslim public could benefit. In Singapore, the Islamic Religious Council of Singapore (Muis) administers the Baitulmal.

Why This Process Matters

The meticulous process of handling the estate is not just a legal duty but also a spiritual responsibility. Proper distribution ensures the deceased’s obligations are fulfilled, family members are cared for, and disputes are minimised.

“…so that it will not be a perpetual distribution among the rich from among you.”
(Surah Al-Hashr:7)

This verse reminds us of the broader wisdom behind Islamic inheritance: to prevent wealth from accumulating unfairly and to promote societal balance.

By adhering to this structured approach, Muslims can uphold justice, fulfill the rights of the deceased, and align their actions with the teachings of the Quran and Sunnah.

2. Faraid: Islamic Inheritance Laws

Explanation of Faraid and Its Quranic Basis

Faraid refers to the Islamic system of inheritance, where shares of the estate are allocated to heirs based on divine instructions found in the Quran and Sunnah. This system reflects Allah’s perfect wisdom and ensures justice in wealth distribution. Allah states:

“Allah instructs you concerning your children: for the male, what is equal to the share of two females… This is an obligation from Allah. Indeed, Allah is Knowing and Wise.”
(Surah An-Nisa:11–12)

These verses detail the proportions for heirs, establishing a framework that balances familial needs with fairness.

Categories of Heirs and Their Entitlement

Faraid divides heirs into fixed shareholders and residual heirs (Asabah):

1. Fixed Shareholders
   These heirs have specific portions allocated by the Quran (in order of priority):

• Spouse: A husband receives one-fourth if there are children, or one-half if there are none. A wife receives one-eighth if there are children, or one-fourth otherwise.
• Parents: Each parent receives one-sixth if the deceased has children. If there are no children, the mother gets one-third, and the father takes the remainder.
• Children: Sons receive double the share of daughters to account for their financial responsibilities in Islamic households.

1. Residual Distribution (Asabah)
   After fixed shares are distributed, any remaining wealth is allocated to Asabah (e.g., sons, brothers). Sons typically inherit the residual estate, ensuring wealth remains within the family lineage.

Importance of Adhering to Faraid

Following Faraid is an act of submission to Allah’s decree, ensuring justice and preventing disputes. Going against it risks accountability in the Hereafter. Allah warns:

“…and whoever disobeys Allah and His Messenger and transgresses His limits – He will put him into the Fire to abide eternally therein, and he will have a humiliating punishment.”
(Surah An-Nisa:14)

By observing Faraid, Muslims uphold the rights of heirs, strengthen family bonds, and contribute to a fairer society.

3. Wasiyah (Islamic Will)

Definition and Purpose of Wasiyah

A Wasiyah is an Islamic will that allows a Muslim to allocate up to one-third of their estate to individuals or causes outside the circle of Quranic heirs. Its purpose is to:

• Fulfill personal wishes within Shariah boundaries.
• Address obligations or commitments not covered by Faraid, such as debts or unpaid Zakat.
• Provide for non-heirs (or non-Muslim relatives) or support charitable initiatives.

This provision reflects Allah’s mercy in allowing flexibility for specific intentions while preserving the primary rights of heirs.

Rules and Limitations

Islam sets clear guidelines for Wasiyah to ensure justice and prevent disputes:

1. Maximum Allocation: One-Third of the Estate
   The Prophet Muhammad (ﷺ) restricted the Wasiyah to one-third of the estate, stating:

“One-third, and one-third is too much. It is better for you to leave your heirs wealthy than to leave them dependent and begging from others.”
(Sahih al-Bukhari, Hadith 2744, 5354)

      2. Not for Quranic Heirs
Heirs entitled under Faraid cannot benefit from a Wasiyah. This ensures their shares remain protected. The Prophet (ﷺ) said:

“Allah has given everyone who has a right their due, so there is no bequest for an heir.”
(Sunan Abi Dawood, Hadith 2870)

These two are in place to preserve the rights of the Quranic Heirs and fairness among them. However, these limitations on the Wasiyah can be overruled only if there is full consensus among the Quranic Heirs to execute it as it is. This is to signify their willingness to relinquish their rightful portion for the dedicated cause. Otherwise, these limitations must be respected.

      3. Must Be Shariah-Compliant
A Wasiyah cannot include instructions that contravene Islamic principles, such as bequeathing wealth to impermissible causes.

Role of Wasiyah in Safeguarding Non-Heirs or Charitable Intentions

The Wasiyah can be a vital tool for addressing the needs of those not covered by Faraid. For example:

1. Providing for Non-Muslim Family Members
   Since Faraid applies only to Muslim heirs, converts to Islam can use a Wasiyah to provide for their non-Muslim parents or siblings.
2. Supporting Charitable Causes
   Muslims may allocate part of their wealth to support mosques, education, or humanitarian efforts. This aligns with Allah’s encouragement of charity:

“The example of those who spend their wealth in the way of Allah is like a seed [of grain]…”
(Surah Al-Baqarah:261)

      3. Acknowledging Non-Heir Contributions
A Wasiyah can benefit individuals who contributed to the deceased’s well-being but are not heirs (e.g., stepchildren, caretakers).

By balancing the rights of heirs and broader social responsibilities, the Wasiyah embodies Islam’s principles of justice, mercy, and foresight.

4. Hibah (Islamic Gift)

Definition and Comparison with Wasiyah

Hibah refers to a gift given voluntarily during a person’s lifetime without expecting anything in return. Unlike a Wasiyah, which takes effect after death and is limited to one-third of the estate, a Hibah is executed immediately and has no such restrictions.

Permissible Conditions for Hibah

For a Hibah to be valid in Islam:

1. Immediate Ownership Transfer: The recipient must take full possession of the gifted asset.
2. Equality Among Heirs: When gifting to children, fairness is emphasized. The Prophet Muhammad (ﷺ) said:
   “Fear Allah and treat your children equally.”
   (Sahih al-Bukhari, Hadith 2587)
3. Voluntary Intent: The gift must be given willingly, without coercion.

How Hibah Is Used in Modern Contexts

Hibah has become an essential tool in estate planning to address modern challenges, such as:

• Property Transfer: Ensuring a specific beneficiary (e.g., a spouse or child) retains ownership of a jointly held property, especially under joint-tenancy arrangements.
• Avoiding Disputes: Reducing potential conflicts by distributing assets in advance according to personal preferences.
• Charitable Gifts: Allocating wealth to charitable organizations or waqf (Islamic endowments) during one’s lifetime.

Hibah provides flexibility while upholding Islamic values of fairness and generosity.

5. Contemporary Issues in Singapore

A. Joint-Tenancy

• Joint-tenancy is a concept of property ownership whereby all co-owners have equal shares to the property and the right of survivorship. This means that in the case of any one of the co-owner passing away, their share is automatically given to the surviving co-owner(s). Couples buying a home together will usually opt for joint-tenancy.  
• Tenancy-in-common is property ownership whereby each co-owner of the property has a distinct share in the property which can be unequal. The right of survivorship does not apply to this form of ownership, hence, co-owners can transfer their shares as they wish. Tenancy-in-common is often used when family members or business partners want to maintain separate shares. In the case of the death of a co-owner, his share will then be distributed according to his will, or the Muslim Inheritance Law (Faraid) as it becomes a part of his inheritance.
• The Islamic Religious Council of Singapore (MUIS) has issued a fatwa regarding joint tenancy, recognising it as a valid contract under Islamic law. This fatwa acknowledges the “right of survivorship” inherent in joint tenancy agreements, where upon the death of one co-owner, their share automatically transfers to the surviving co-owner(s). Consequently, the deceased’s share does not become part of their estate and is not subject to Faraid (Islamic inheritance laws).
• Recommendations for Muslim families:
  • Clarify Intentions: Co-owners should explicitly state their intentions regarding property distribution to prevent future disputes. This can be achieved through legal documentation or mutual agreements.
  • Seek Professional Advice: Consult both legal experts and religious scholars to ensure that property arrangements comply with both civil laws and Islamic principles.
  • Consider Family Welfare: When choosing between joint tenancy and tenancy-in-common, consider the financial stability and housing needs of surviving family members. Joint tenancy may provide immediate security for the surviving co-owner(s), typically the spouse.
  • Stay Informed: Regularly review and update property ownership documents to reflect current intentions and family circumstances.

Difference Between Joint-Tenancy and Tenancy-in-Common

Feature	Joint-Tenancy	Tenancy-in-Common
Ownership Interest	Equal ownership shares for all parties.	Owners can hold unequal shares.
Right of Survivorship	Yes, the deceased’s share passes to surviving owners automatically.	No, the deceased’s share is part of their estate (to be distributed).
Will Consideration	Property does not pass through a will.	Property is distributed according to a will or inheritance law.
Flexibility	Less flexible for estate planning.	More flexible for individual distribution.

B. Nominations for CPF and Insurance

• CPF nomination guidelines under Singaporean law. CPF nominations allow us to decide what happens to our CPF monies upon death. CPF nominations let us choose the person(s) who will receive the CPF savings, the percentage that each one of the nominees will receive from our CPF savings, and the manner in which the CPF savings will be distributed to our nominees. 
• Nominations for CPF monies covers our savings in the Ordinary, Special, MediSave and Retirement accounts. CPF savings are not considered as part of the estate, hence it could not be included in the will, and nominations must be made if we want to ensure that the CPF savings will be distributed according to our wishes.
• How to align CPF and insurance nominations with Faraid principles.
  • Intentional nominations: When making CPF or insurance nominations, ensure that the distribution aligns with Islamic principles of fairness and justice. While nominations are considered Hibah and not subject to Faraid, it’s essential to avoid causing injustice to rightful heirs.
  • Consultations: Engage with religious scholars and legal professionals to understand the implications of your nominations and ensure they comply with both civil and Islamic laws.
  • Transparent communication: Discuss your nomination decisions with family members to prevent future disputes and ensure clarity regarding the distribution of assets.

6. Common Misunderstandings and FAQs

• Misconception: Faraid as a rigid system that disregards modern contexts.

• • • Faraid is a divinely inspired system of inheritance in Islam, designed to ensure the equitable distribution of wealth among heirs. While its principles are fixed, Islamic scholars and jurists acknowledge the complexities of the modern contexts allowing for flexibility within Shariah Laws. For example:
    • Wasiyah (Islamic will) allows for up to one-third of the estate to be distributed to non-heirs or for specific purposes, offering flexibility.
    • Tools like Hibah (gifts during one’s lifetime) and family trusts can address specific financial needs while honoring the essence of Faraid.
    • Modern financial instruments, like CPF and insurance nominations, are recognised in some jurisdictions (e.g., Singapore) as distinct from Faraid assets, provided they comply with Islamic guidelines.

• Wasiyah, Hibah, and their interplay with Faraid.

• What is Wasiyah, and how does it relate to Faraid?

• • • • Wasiyah refers to an Islamic will, allowing a Muslim to allocate up to one-third of their estate to non-heirs or charitable causes. The remaining two-thirds are subject to Faraid.
      • Wasiyah cannot override Faraid shares, ensuring the rights of heirs are preserved.

• How does Hibah differ from Wasiyah?

• • • • Hibah is a lifetime gift, effective immediately upon transfer, and is not subject to Faraid.
      • It allows asset allocation during the donor’s lifetime, bypassing the deceased’s estate.

• Can a Wasiyah or Hibah favor specific heirs?

• • • Yes, provided it does not exceed the one-third limit for Wasiyah and is agreed upon by all heirs. Hibah has more leeway but should aim to avoid creating family disputes or injustice.
• Clarifications on the Permissibility of Alternative Arrangements
  • Are CPF and insurance nominations allowed under Islamic law?
    • In Singapore, CPF and revocable insurance nominations are considered as a form of Hibah (lifetime gifts). They are permissible if the intention is clear and they do not undermine Faraid principles.
  • Can I allocate all my assets outside of Faraid?
    • No, Faraid must be upheld for the portion of the estate not covered by Wasiyah (two-thirds). Alternative arrangements like Hibah must be carefully planned to ensure they do not deprive rightful heirs.

7. Practical Guidance for Muslims in Singapore

• Guide to writing up a Wasiyyah: https://www.muis.gov.sg/Islamic-Legacy-Planning/Wasiat/wasiat 
• Importance of consulting Asatizah and legal professionals:
  • Holistic Guidance: Asatizah offers insights into Islamic inheritance laws (Faraid), while legal professionals ensure compliance with Singapore’s legal framework. This dual consultation ensures that estate planning honors religious obligations and adheres to national laws.
  • Conflict Resolution: Potential conflicts between Faraid and civil laws can arise. Engaging both experts helps navigate these complexities, ensuring that estate distribution is both Shariah-compliant and legally sound.
  • Customised Planning: Each family’s circumstances are unique. Collaborating with Asatizah and legal professionals allows for tailored estate plans that address specific needs while upholding Islamic values and legal requirements.
• Recommended resources for legal and Shariah-compliant advice:
  • MUIS Islamic Legacy Planning: https://www.muis.gov.sg/Islamic-Legacy-Planning
  • Syariah Court Faraid Calculator: https://syariahcourt.gov.sg/Inheritance/Online-Trial-inheritance-Calculator
  • Educational articles: https://singaporelegaladvice.com/law-articles/hibah-muslim-estate-planning-singapore/
  • Legal firm with Shariah expertise: https://irblaw.com.sg/practice-areas/wasiat-hibbah/

8. Conclusion

• Gentle reminder for Muslims:
  • Death of a loved one is a deeply emotional and sensitive time for the family involved. During these moments of grief, do not rush to settle the disbursement of wealth and give time to involved parties to mourn their loss.
  • Adhering to Islamic principles to the etiquettes of grieving a loss and subsequently to disbursement of wealth is essential in maintaining harmony and justice within the family.
• Encouragement to approach wealth distribution with care and foresight.
  • Estate planning is not merely about financial arrangements but a reflection of our values, fairness, and love for our family. Taking the time to plan thoughtfully ensures that wealth is distributed justly and reduces the potential for disputes or misunderstandings among heirs.
• Reminder about accountability in the Hereafter.
  • Allah s.w.t. has provided clear guidelines on inheritance in the Qur’an to uphold justice. As Muslims, it is our duty to honor these divine commandments, as we will be held accountable for our actions, including how we manage and distribute wealth entrusted to us in this life.
• Invitation to seek further guidance from the mosque or qualified experts.
  • For those seeking clarity or assistance, mosques and qualified experts, including Asatizah and legal professionals, are valuable resources. They provide the necessary guidance to navigate both Islamic inheritance laws and contemporary legal frameworks effectively.

By planning wealth distribution with care, foresight, and adherence to Islamic principles, we fulfill our obligations to Allah s.w.t., support our families, and leave a legacy of justice and goodwill.