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KEY DIFFERENCES BETWEEN ISLAMIC

AND CONVENTIONAL ESTATE


PLANNING
THE CONCEPT OF WEALTH
OWNERSHIP IN ISLAM
Wealth referred to having property/asset or income that
exceeds a persons immediate needs.
Selangor Enactment 1999 define wealth : any movable or
immovable property, any right, interest, title, claim, chose
in action, whether present or future or which is otherwise
in value in accordance with Hukum Syarie.
Accumulating wealth and managing wealth requires a set
of mental skills, discipline and understanding of the
dynamics of wealth creation and the cycle of wealth.
A person action in managing his wealth falls back to his
belief (aqidah) system about the ownership of wealth.
THE CONCEPT OF WEALTH
OWNERSHIP IN ISLAM
. The Perspective of Ownership (al-Shura,42:4)
2. Trust ( wealth is a trust and muslim as trustee)
3. Guidelines of Managing Wealth wealth generation,
accumulation and distribution.
- the assets must be from a halal source and not from doubtful source.
- Wealth accumulation : once it meets minimum threshold (nisab) and
hawl (ownership period), zakat must be paid.
- Wealth distribution : any properties legally belong to the deceased will
be distributed according to faraid system.
THE CONCEPT OF WEALTH OWNERSHIP IN
ISLAM
4. Wealth as a Form of Trial tool to make a person spend in line with
Shariah (al-Anfal,8:28)- trial on a persons faith.
5. Spending for Charity wealth is a tool to help others and more
important it is the blessing of Allah on our wealth.
- Hadith when the son of adam dies, all his good deeds comes to an end
except for three : recurring charity, knowledge that benefits others and
the supplication of a pious son
- Wealth is a tool to help others especially the less fortunate and more
importantly it is the blessing of Allah on our wealth.
KEY DIFFERENCES OF ISLAMIC FINANCIAL PLANNING TO
CONVENTIONAL PLANNING
1. TIME HORIZON
ISLAMIC FINANCIAL PLANNING CONVENTIONAL
Islamic World View : Dual It only covers wordly life-
Polar secularism.
Covers wordly life and the Create strategies to help
hereafter. The lifespan of clients achieve their financial
Muslim do not end upon goals.
death, it continues in the
hereafter.
KEY DIFFERENCES OF ISLAMIC FINANCIAL PLANNING TO
CONVENTIONAL PLANNING
OBJECTIVE

ISLAMIC FINANCIAL PLANNING


CONVENTIONAL
To achieve state of al-Falah
Planners concentrate on
(prosperity that leads a good
winning and servicing the
life in this world i.e hayatan
client in orderly manner
tayyibah) and the al-Jannah
according to ethical and
(paradise) in the hereafter.
professional standards.
Goal is for personal
satisfaction (need and wants)
KEY DIFFERENCES OF ISLAMIC FINANCIAL PLANNING TO
CONVENTIONAL PLANNING
METHOD

ISLAMIC FINANCIAL PLANNING CONVENTIONAL


Provide impartial advisory and Provide impartial advisory- to
at the same time must conform act in the best interest of the
to Shariah. In his pursuit of client instead of being a mere
wealth, a Muslim must abide by product pusher.
Shariah at all times. Balance between personal and
Holistic approach towards social obligations.
Shariah compliant wealth
management.
The planners function deemed
as part of ibadah. Balance
between personal, social
obligation and the hereafter.
KEY DIFFERENCES OF ISLAMIC FINANCIAL PLANNING TO
CONVENTIONAL PLANNING
ACHIEVING AL-FALAH

ISLAMIC FINANCIAL PLANNING CONVENTIONAL


Bounties of Allah swt and Scarcity of resources
thus resources are not scarce. Ownership is on an
Man as a trustee is not the individual basis.
ultimate owner of goods and Plan during ones lifetime
properties. only.
Plan during life and hereafter.
FARAID VS. DISTRIBUTION ACT
Faraid is the distribution /inheritance law
specified in the Quran in detail such as who will
inherit and their entitlements.
The distribution Act is a law passed by Parliament
of Malaysia and is applicable to non-Muslims only.
It is applicable when a person does not have a will
or when the will made is silent on the quantum of
distribution of the assets.
COMPARISON BETWEEN FARAID AND
DISTRIBUTION ACT

FARAID DISTRIBUTION ACT


Sources of Law
Quantum of distribution
Application
Divinity
Lineage
Provisions for uterine
sister/brother
The system of
inheritance
COMPARISON
1. SOURCES OF LAW
Faraid is the law of inheritance deduced from the
Quran. The distribution under faraid is based on the
quantum that clearly mentioned in the Quran.

The Distribution Act is man made law legislated by the


Parliament of Malaysia which is initially based on the
English Law. Ex : a wife will inherit 1/3 of the deceased
husband estate if he has children, of the estate has
parents only, -has children and parents and whole
estate if the wife is only the legal heirs.
COMPARISON
2. QUANTUM OF DISTRIBUTION
Faraid : quantum of distribution is fixed as to either 2 or
3 portions only. For ex : a husbands share is or of
the deceased wifes estate the right to the entitlement
of the estate would depend on the family structure at the
time of deceaseds death.
Distribution Act : more complex compared to faraid
because there is no permutations. Ex : a husbands share
can be the whole estate of the deceaseds wife if he is the
sole legal heir, of the wifes estate if he inherits with
her parents, 1/3 of the estate if he inherits with the
children or of the estate if he inherits with parents
and children.
COMPARISON
3. APPLICATION
Faraid : the distribution is based on the Quranic laws.
Universal for all Muslims. Ex: if a person have assets in 3
countries, and all these countries recognize faraid
system, the distribution to all the heirs would be
standardized and uniform in all countries.
Distribution Act : varies from one country to another.
It is only applicable in Malaysia.
COMPARISON
4. DIVINITY
Faraid : it is a divine law revealed by Allah swt through
the Quran. to question faraid means to question the
sanctity of the Quran./ question the divine order can
effect to ones faith and iman.
Distribution Act : human made law- question it means
challenge the laws of Malaysia/ questions the wisdom of
the lawmakers.
COMPARISON
5. LINEAGE
Faraid : the distribution system is based on lineage-
take into account the inheritors must be from the same
lineage of the deceased- step, adopted and illegitimate
children do not inherit under faraid. Inheritance is
structly either by blood, marriage, kinship, slavery or
baitul mal.
Distribution Act : adopted child/parents will be
enabled to inherit- legal requirements are fulfilled.
COMPARISON
6. PROVISIONS FOR UTERINE SISTER/ BROTHER

Faraid : uterine brother and sister may inherit under


certain circumstances (between 1/6 and 1/3)

Distribution Act : no provision available for uterine


brother and sister.
COMPARISON
7. THE SYSTEM OF INHERITANCE
Faraid : It is male agnatic based on the paternal system
and the concept of wilayah (authority). It lays down the
chain of responsibilityand who can become the guardian
(wali) for the person. Ex: The priorities of responsibility
for a woman are ;
i. husband
ii. Father
iii. Germane brother.(brothers from same parents)
iv. Consanguine brother (brothers from same father)
v. Paternal Uncles (uterine @ siblings from same mother
Distribution Act : based on what is deemed logical and fair.
COMPARISON
The male agnatic system is based on the concept of
responsibility and wilayah (authority).
Distribution Act
The division is based on what is deemed logical and fair.
However on the chain of responsibility, the distribution act
does not lay down on the prority of responsibilty of a person.
Faraid is not applicable to non_muslims and the
distribution act is not applicable to Muslims.