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.