Session 4

Faraid & Family Legal Issues

Dr. Haji Abdul Aziz Hassan, Founder, Aziz Hassan & Co

WEALTH IN ISLAM

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( To Him Allah belongs all that is in the heavens

and all that is in the earth for He is the Most High

and Most Great ) Al Quran - Surah Ash (42:4)

From an Islamic

perspective, everything

belongs to Allah and we

are but mere trustees..

FARAID DOCTRINE

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This is the Islamic Law of Inheritance. By verses 11, 12 and 176 of

the Surah An-Nisaa’, all the rights of the inheritors are specifically

stated. Faraid Distribution cannot be circumvented unless all

inheritors agree and even then the consent must be after death,

not before death of the testator.

FARAID DOCTRINE–

QURANIC SOURCE

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SURAH AN-NISAA :

11, 12 & 176

The Rights Of Children And Parents To Inherit

“Allah (thus) directs you regards your children’s (inheritance): to

the male a portion equal to that of two females: if only daughters;

two or more, their share is two thirds of the inheritance: if only one,

her share is a half: for parents, a sixth share of the inheritance to

each, if the deceased left children, if no children, and the parents

are the (only) heirs, the mother has a third, if the deceased left

brothers (or sisters), the mother has a sixth (the distribution in all

cases is) after the payment of all legacies and debts. Ye know not

whether your parents or your children are nearest to you in benefit.

These are settled portions ordained by Allah and Allah is All-

Knowing, All-Wise”

Surah An-Nisaa’, 4:11

FARAID DOCTRINE

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Surah An-Nisaa’: 11

The Right Of The Husband And Wife, Brothers And Sisters To Inherit

“In what your wives leave, your share is a half, if they leave no

child; if they leave a child, you get a fourth; after payment of

legacies and debts in what ye leave, their share is a fourth if ye

leave no child, but, if ye leave a child they get an eighth: after

payment of legacies and debts if the man or woman whose

inheritance is in question has left neither ascendants nor

descendants, but has left a brother or a sister, each one of the two

gets a sixth; but if more than two, they share in a third: after the

payment of legacies and debts; so that no loss is caused (to

anyone): thus it is ordained by Allah, and Allah is All-Knowing, Most

Forbearing”

Surah An-Nisaa’, 4: 12

FARAID DOCTRINE

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Surah An-Nisaa’: 12

The Rule Of Inheritance To The Estate Of A Deceased Person Who

Has Left As Heir Neither A Descendant Nor An Ascendant

“They ask thee for a legal decision. Say: Allah directs (thus) about

those who leave no descendants or ascendants as heirs. If it is a

man that dies, leaving a sister but no child, she shall have half the

inheritance if (such a deceased was) a woman, who left no child,

her brother takes her inheritance if there are two sisters, they shall

have two thirds of the inheritance (between them): if there are

brothers and sisters, (they share) the male having twice the share of

the female, thus doth Allah makes clear to you (His law), lest ye err.

And Allah hath knowledge of all things.”

Surah An-Nisaa’, 4: 176

FARAID DOCTRINE

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Surah An-Nisaa’: 176

(i) ‘Ashabul-Furud’

Those whose shares are specifically stated in the

Quran;

(ii) ‘Asabah’

Those who are entitled to the balance of the deceased

estate but whose shares are not specifically stated;

and

(iii) ‘Dhawil-Arham’

The residual third group who are blood-relations but

who do not belong to either groups (i) or (ii).

CLASSIFICATION OF

HEIRS

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CLASSIFICATION OF

HEIRS

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ASHABUL FURUD

(Quranic Heirs)

MALE FEMALE 1. Husband

2. Wife

3. Father

4. Mother

5. Grandfather

6. Grandmother

7. Daughter

8. Son’s daughter

9. Full sister

10. Consanguine sister

11. Uterine sister

12. Uterine brother

ASABAH BI AL-

NAFSI

(in his own right)

1. Son

2. Father

3. Brother

4. Uncle

ASABAH BI AL-GHAYRI

(in the right of another)

1. Daughter with son

2. Son’s daughter

with son’s son

3. Full sister with full

brother

4. Consanguine

sister with

consanguine

brother

ASABAH MA’A AL-

GHAYRI

1. Full Sister(s)

together with either

daughter(s) or

son’s daughter(s).

2. Consanguine

sister(s) together

with either

daughter(s) or son’s

daughter(s)

ASABAH

(Residuary Heirs)

RIGHTS OF SUCCESSION

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Blood

Relationship

i.e. father,

mother, son

& daughter

Marriage

Valid

marriage i.e.

husband &

wife

Islam

Because in default of other

heirs, the general body of

Muslims represented by

Baitul-Mal, becomes entitled

to the estate of the

deceased Muslim

FARAID HEIRS

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GENERALLY

NOT EXCLUDED

FATHER

MOTHER

HUSBAND

WIFE

SON

DAUGHTER

FARAID HEIRS AND

SHARE RATIOS

12

Faraid

Wife

1/4 1/8

Husband

1/2 1/4

Father 1/6

1/6 +

Residue

The deceased has children

Deceased has daughters

only or is childless

In the presence

of son only

In the presence of

Daughter, the son

will get double portion Son

Residue

2:1

Daughter

2/3

1:2

1/2

Daughter will get half in the

presence of son

Daughters only in the absence of son Only daughter and in the absence of son

Mother

1/3

1/6

The deceased is childless

The deceased has children

The deceased is childless The deceased has children The deceased has children

The deceased is childless

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SIMPLE CALCULATION OF FARAID

FARAID CALCULATION

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Case : A man died and leave behind : a) Father

b) Mother

c) Wife

d) 1 Son

e) 1 Daughter What is the Faraid ratio for each heir?

FARAID CALCULATION

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APPLICANT’S NAME NRIC A 1234

DATE: 03.09.2005 GENDER MALE FEMALE /

PLEASE FILL IN THE NUMBER OF HEIRS

WIFE

SON

DAUGHTER

MOTHER

FATHER

PATERNAL GRANDFATHER

PATERNAL GRANDMOTHER

MATERNAL GRANDMOTHER

SON’S SON

SON’S DAUGHTER

SON’S SON’S DAUGHTER

SON’S SON’S SON

FULL BROTHER

CONSANGUINE BROTHER

UTERINE BROTHER

FULL SISTER

CONSANGUINE SISTER

UTERINE SISTER

1

1

1

1

1

FARAID CALCULATION

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ZAR PERUNDING PUSAKA SDN BHD

49-1, Wisma Aziz Hassan, Jalan 2/27F, Seksyen 5

Pusat Bandar Wangsa Maju (KLSC), 53300 Kuala Lumpur

Tel : 03-4149 1115, 4149 1880 Faks : 03-4142 4962

Date : 3.9.05

APPLICANT’S DETAILS

Name : A (Man) NRIC No : 1234

INFORMATION OF HEIRS

Heirs Faraid Ratio Common Denominator

1 Father 1/6 12/72

1 Mother 1/6 12/72

1 Wife 1/8 9/72

1 Son 13/36 26/72

1 Daughter 13/72 13/72

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RESPONSIBILITIES AGAINST THE

ESTATE BEFORE DISTRIBUTION

Rights and claims against the estate of a deceased

Muslim are as follows (ranking in priority) :-

a) Settlement of the deceased’s burial (in moderation).

b) Payment of debts which shall include zakat,

uncompleted hajj, nazar (solemn pledge) and debts

to other people and financial institutions.

ESTATE DISTRIBUTION

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c) Claims against the estate (to be settled by the

administrator or heirs of the estate) e.g. the Hibah

(uncompleted) and the Wasiyyah (Note: Some local

jurists have also included the matrimonial property

rights (Harta Sepencarian) in this category).

d) The balance if any, according to the Faraid.

ESTATE DISTRIBUTION

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FAMILY INHERITANCE

DISPUTES

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FAMILY PROBLEMS IN

ESTATE ADMINISTRATION

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ISLAMIC WEALTH

DISTRIBUTION &

PRESERVATION

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ESTATE PLANNING(DISTRIBUTION OF ASSET TO ONE

GENERATION)

LIFE TIME DISTRIBUTION

DISTRIBUTION UPON DEATH(AFTER SETTLEMENT OF DEBTS)

HIBAH GIFT

DIRECT TRUST/FOUNDATION

HARTA SEPENCARIAN

WASIYYAHBALANCE OF ESTATE

ACCORDING TO FARAID LAW BY WAY OF DEED

OF FAMILY ARRANGEMENT (DFA) SUBJECT

TO CONSENT OF FARAID HEIRS

FAMILY PATRIACH

(ASSET OWNER)

LEGACY PLANNING(PRESERVATION OF ASSET AND

DISTRIBUTION TO MULTIPLE GENERATION)

ASSETS ENDOWED BY OWNER DURING LIFETIME/UPON DEATH THROUGH DFA

FAMILY TRUST/FAMILY FOUNDATION

FAMILY CONSTITUTION

FAMILYOFFICE

DIRECT HOLDING

ASSETS

FAMILY HOLDING COMPANY

NON-BUSINESS

ASSET

BUSINESS ASSETS

MANAGE-MENT

CONTROL

PASSIVE MANEGE

-MENT

INCOME PRODUCI-

NG ASSETS

NON INCOME

PRODUCI-NG

ASSETS

ISLAMIC WEALTH

DISTRIBUTION & PRESERVATION

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ESTATE PLANNING

(DISTRIBUTION OF

ASSET TO NEXT

GENERATION)

LEGACY PLANNING

(PRESERVATION OF

ASSETS AND DISTRIBUTION

OF BENEFITS TO FUTURE

GENERATIONS)

FAMILY PATRIACH (ASSET OWNER)

ESTATE PLANNING

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ESTATE PLANNING

(Distribution of Asset to

the Next Generation

LIFE TIME

DISTRIBUTION OF

ASSETS

DISTRIBUTION OF

ASSETS UPON DEATH

(AFTER SETTLEMENT

OF DEBTS)

LIFE TIME DISTRIBUTION

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LIFE TIME

DISTRIBUTION

GIFT

DIRECT TO

DONEE

ENDOWED TO

TRUST/

FOUNDATION

HIBAH

IMMEDIATE

TRANSFER

TO

RECIPIENT

DELAYED

TRANSFER

( AFTER

DEATH)

LIFETIME DISTRIBUTION

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HIBAH (LIFETIME GIFT)

• TRANSFERRED

• NOT TRANSFERRED

CHALLENGES

• FEAR OF LOSS OF CONTROL

• HIGH STAMP DUTY PAYABLE (1% OF FIRST

RM100,000, 2% UP TO RM500,000, 3%

THEREAFTER)

• PROPERTY ENCUMBERED

DISTRIBUTION UPON

DEATH

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AFTER DEATH DISTRIBUTION

OF ASSETS

(AFTER SETTLEMENT OF DEBTS)

FIRST, HARTA

SEPENCARIAN

(MARRIAGE

COMMUNITY

PROPERTY)

THEN,

WASSIYAH (GIFTING OF ASSET

TO NON FARAID

HEIRS LIMITED TO

1/3 OF ESTATE)

FINALLY,

BALANCE OF

ESTATE

DISTRIBUTION

ACCORDING TO

FARAID LAW

DISTRIBUTION

ACCORDING TO

DEED OF FAMILY

ARRANGEMENT

DEED OF FAMILY

ARRANGEMENT

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Needs-based Justice Distribution

• memorandum of wishes (wasiat pesanan)

Family Wealth Distribution Master Plan (before and

after death)

• may include wealth preservation assets for transfer to

family wealth holdings companies

• must be consented by all beneficiaries

• before and after death

•rights under the faraid waived

• if endorsed through a court order under a testamentary

document, NO STAMP DUTY IS PAYABLE

LEGACY PLANNING

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ASSETS ENDOWED

BY OWNER DURING

LIFETIME/UPON

DEATH THROUGH

DEED OF FAMILY

ARRANGMENT

FAMILY

FOUNDATION

/

FAMILY

TRUST

LEGACY

PLANNING

(PRESERVATION

OF ASSETS AND

DISTRIBUTION OF

BENEFITS TO

FUTURE

GENERATIONS)

FAMILY ASSET HOLDING

STRUCTURE

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FAMILY

TRUST/FAMILY

FOUNDATION

DIRECT

HOLDING

ASSETS FAMILY

HOLDING

COMPANY

NON-

BUSINESS

ASSETS

BUSINESS ASSETS

INCOME

PRODUCING

ASSETS

NON

INCOME

PRODUCIN

G ASSETS

MANAGEMENT

CONTROL

PASSIVE

MANAGEMENT

FAMILY OFFICE

FAMILY

CONSTITUTION

govern

manage

manage

This presentation should not be regarded as offering a complete explanation of the matters

referred to and is subject to changes in law. It is not intended to be a substitute for detailed

research or the exercise of professional judgment. Labuan IBFC and MFPC cannot accept

any responsibility for loss occasional to any person acting or refraining from action as a

result of any material in this presentation. The republication, reproduction or commercial

use of any part of this presentation in any manner whatsoever, including electronically,

without the prior written permission from Labuan IBFC Inc. and MFPC is strictly prohibited.

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