Estate planning can generally be defined as the process of planning one’s own needs through the creation, accumulation, preservation or protection, distribution and purification of property from economic aspects and rules outlined by law. It is the process of planning the well-being of the family by managing the assets or the properties of the settlor during his lifetime and after his death based on his wishes and objectives. This is well aligned with the one of the Maqasid Syariah, namely hifz mal (protection of wealth/property).
Estate planning is also a plan to determine and administer the management of the assets properties of the settlor by understanding about the relevant Shariah principles or concept to be utilised which is fit, suitable and customized to the intended wishes and objectives of the settlors. of planning for the use, care, ownership and transfer of an individual’s property throughout his life and planning after his death. Among suitable Shariah contracts or concepts for estate planning is hibah (gifts out of love and affection), hadiah (gifts out of respect and regard), wasiat (bequest/will), waqf (endowment), faraid and sadaqah (alm giving).
The very purpose of having estate planning to provide peace to the mind of the settlor. Peace in the sense that the settlor is clear that the objectives of his wealth are well accorded as he or she wishes it to be. Let us understand first the 5 basic principles of estate planning, namely;
1.Wealth creation
Wealth creation is a wealth acquisition phase which must be done via permissible or halal efforts (amal) or sources in the eyes of Syariah. (maliyah) in accordance with the rules of Allah SWT. Many verses of the Quran and hadiths of the Prophet encourage or encourage people to work via halal or permissible means. For instance, in Surah Al-Mulk verse 15, Allah asks us acquire wealth from what whatever bounties He provided in the earth.
“It is He who made the earth for you: easy to use, so walk in its wide recesses, and eat of the provision that Allah has provided; and (remember), to Allah is (your return after) being resurrected; (so appreciate His favor and fear His wrath).”
This effort is the best effort, namely acquiring wealth with your own hands and energy by complying with the Syariah principles.
2.Wealth accumulation
Islam does not prohibit humans from accumulating and acquiring wealth, in fact it is required in Islam to live their lives in this world and enjoy the rewards for the good deeds done through their wealth in the hereafter. This could be materialized via wealth accumulation. Wealth obtained in a halal way should be spent and developed in a halal and Sharia-permitted way. One of the important concepts in wealth accumulation is ‘Al -Nama’ (growth). The assets and properties may grow via many mechanisms such as investments, trading and commercial activities which must be in line with the Syariah principles. Otherwise such increase or growth could not be used for the benefits of the settlor.
3.Wealth preservation or protection
Wealth preservation or protection may be achieved through several dimensions such as through continuous investment and wealth development, justice to contracting parties, validity in transfer of ownership, circulation of wealth through zakat and sadaqah, and transparency and clarity in muamalat activities. It can be done through takaful or Islamic insurance and taking pre-cautionary or mitigating actions like protection in tems of contractual rights and liabilities. Wealth preservation through Takaful will protect wealth from financial risks and threats, protect assets and physical property from unpredictable events and potential losses, and protect health and personal energy from hardships from illness, prolonged illness, injury or disability, or death.
4.Wealth Distribution
In this regard, Islam encourages us to spend and mobilize our wealth not only for ourselves but also to help those in need. The mechanism of circulation and distribution of wealth in Islam aims at benefiting the people while protecting the rights of the people in society, especially the weak and vulnerable. Such mechanisms would be by way of sadaqah (alm giving/charity),waqf (endowments)and etc. This cycle of distribution would definitely complete the eco-system of Islamic economics which recognises profit maximisation and wealth distribution that allows private individual to accumulate their wealth while extending benefits to needy persons.
5.Wealth purification
Islam requires every individual to purify their wealth via selected instruments. Humans as trustees of wealth lent by Allah in this worldly life have duties to ensure the distribution of their assets to the needy. Among the wealth purification processes in Islam refers to the implementation of the obligation of zakat, hibah, waqaf, and kafarah. In maintaining the sustainability of Shariah compliant status of our assets, we should alwys abstain ourselves from engaging and involving the Syariah non-compliant elements namely, riba (ususry), maysir (gambling), gharar (uncertainty) and any prohibited items such as pork, wine etc.
