Personal finance FIN533

WHAT IS ESTATE PALNNING?
Definite plan for the administration and
disposition of one's property during one's
lifetime and at one's death
Essential part of retirement planning and
has 2 components
i) build your estate through savings,
investments & insurance
ii) transfer your estate as you wish
at death

WHY ESTATE PLANNING?
If married, include spouse and children in
estate planning process
If unmarried, make sure beneficiaries have
information about your estate that they will
need
Newer lifestyles means different
challenges, which means plan early and
get expert help

OPPORTUNITY COST OF RATIONALIZING
Many people give little or no thought to
putting their personal and financial affairs
in order for their families that survive them
Demands of daily living can keep people
from thinking about death
Plan while you are in good health
Especially important for non-traditional
households

DEFINITION OF WILL
A document where a person
states his intentions as to
how his estate is to be
administered and distributed
after his death and who is
to administer it
 Neither a contract nor
an agreement
 Only take effect upon
the demise of the
testator

CHARACTERISTICS OF WILLS
 Include information on the appointment or an executor who
will execute the will beneficiary to the will and allocation of
assets to the named beneficiaries
 Also include the appointment of guardian for minor
beneficiaries and revocation of earlier wills

REQUIREMENT OF VALID WILL
In writing Sign
Not be under
the age of
majority
Sound mind
At least 2 or
more
witnesses

VALIDITY OF WILL
A person who has attained the age of 18
(Peninsular Malaysia & Sarawak) or 21 in Sabah
Only a person who has attained the age of 18
can make a will. So the minor is below 18 cannot
make a will
Of sound mind
Acting on his own free will and without coercion
A person who wants to make a will should make
on his own free will and without any forcing from
another party

WHY DO WE NEED A WILL?
Important tool of
estate planning
Helps in expedite the legal process involved in estate administration as
no sureties or security deposits are required prior to the issuance of the
grant of representations
Enables a person to choose and appoint his/her own executor and
trustee to carry out his/her wishes
Provide an opportunity for the testator to give and make allocations for
any special needs of their loved ones
Will also enables a person to bestow gifts to non-family members
or non heirs as well as various charities and religious
organizations that the testator may choose

STEP NEEDS TO TAKE UPON MAKING THEIR
DECISION TO WRITE A WILL
 Establish one’s wealth distribution objectives prior to nominating
beneficiaries and the estate allocation
 Analyze and evaluate one’s state of assets by compiling all the
related documentations such as insurance policies, certificates of
unit trusts and others
 Nominate beneficiaries and allocate assets for them as per one’s
wealth distribution objectives
 Appoint a trustworthy executor with the capability to execute the will
in a reliable manner
 Get assistance from a trustworthy will writer to assist in writing the
will
 Ensure that the will is kept in a safe place and inform the executor
on his/her appointment as executor as well as the location where
the will is to be kept

DUTIES OF TRUSTEE
To manage the assets to which they said beneficiary
is entitled to, for the benefit of the beneficiary
Be responsible in managing a trust created by the
testator in his will
The executor and trustee can be the same person

HOW TO UPDATE A WILL?
 The family changes as a result of a birth, adoption,
marriage, divorce or death
 Substantial changes occur in the amount/kind of property
owned; for example testator want to add his other
property
 Tax laws change ; whether tax is increase/decrease so a
will need to be updated
 Residence changes from one state to another, for
example the testator move from Malaysia to Singapore
 The designated executor, guardian/trustee can no longer
serve for example they don’t want to be a
trustee/guardian anymore

LEGAL WILLS IN ISLAM
According to verse
180, Al-Baqarah
wills is the
obligation in Islam.
After mewarith
verse legal of wills
will be
For Jumhur
Fuqaha’ , the
law will change
according to
circumstances
(3) Daud Al-
Zahiri : wills is
obligate to
parents relatives
who had not
received an
inheritance
(2) Fuqaha’
Tabi’in : wills
is the
obligation to
Islam
(1) Jumhur
Fuqaha’ : wills is
be
recommended

ABSENCE OF WRITTEN WILLS STATISTIC IN 2010 &
2011

ELDERLY WOMAN’S WILL RULED INVALID
 The High Court has ruled as invalid a will left by an elderly
woman who was said to be of unsound mind
 The plaintiffs, Foo Siew Ngo and her 3 siblings, filed an action
to challenge the will left by their mother, Chin Fong, 93, who
passed away in 2005
 They named their sister, Foo Fook Ngo, who is living in
Germany, and the public trustee, Amanah Raya Berhad, as
the defendants
 Siew Ngo, who collected rental amounting to RM 29,600 on a
property, to hand over the money to Amanah Raya which
would distribute it to the beneficiaries. Siew Ngo also has
provide a statement of account to the public trustee within a
month from yesterday

WASIAT
 Basically a trust document which appoints a Wasi
(Trustee) almost akin to the Executor appointed under
the English Will
 Appoint an executor and/possible alternative executors
for the estate
 Nominate guardian’s for minor children or other
dependents
 Instruct distribution of personal effects
 Make specific bequests (wasiat)
 Give the executor the power to administer the estate
 Guide the executor on funeral arrangements

WAQF
Waqf means forbidding movement, transport or
exchange of something
Special kind of charity given for the purposes of
benevolence
Have permanence and continuity, so that people
can benefit from them for years, generations or even
centuries
Made of entitles from residual income people can
benefit, while the capital asset of the entity lasts and
stays for a short or long period of time, such as
construction, a well and a tree

MATRIMONIAL PROPERTY
RIGHT

The right of the parties (husband or wife)
in a legal and valid Islamic marriage, in
respect of properties which were jointly
acquired during subsistence of the
marriage

DEFINITION OF FARAID
Faraid or the law of inheritance
in Islam, is also known as Ilmu
Faraid is a science dealing with
the law pertaining to the
devotional acts based on the
syariah in respect of the wealth
of a person after the certainty
of his/her death or on the
assumption of his/her death
(Personal Finance)
Section of the Islamic law that
deals with the distribution of
the estate of a deceased
person among his heirs in
accordance with Allah (God)
decree in the Holy Quran and
according to the hadith or
tradition of the Messenger of
Allah (peace be upon him)

BASIS OF FARAID
The Quran
Hadith
Ijmak and Ijtihad of the companions of the
Messenger of Allah, imams of mazhab &
mujtahid of proven knowledge

EPF MONEY, SOCSO & ALIKE FOR DEAD
MUSLIM MEMBERS

THE PRINCIPLES & LIABILITIES IN
INHERITANCE DISTRIBUTION
 Making payment for the funeral rites and
expenses
Settling the debts of the deceased whether
debts to Allah SWT or debt to human being
 Distribution of the inheritance to the rightful
beneficiaries
 Carrying out the will made by deceased
 Resolving matrimonial property claim by the
still-living spouse

DISTRIBUTION OF SMALL ESTATE
Provided in the
Small Estates
Distribution Act
1955 (Act 98) – “the
act”
The Act provides
the administration
& procedure of
distribution
The maximum
value of a small
estate is fixed at
RM 600, 000
Previously it used
to be only RM 25,
000
It is observed that a
majority of Muslim
estates in this country
fall under the category of
“small estate”

DISTRIBUTION OF NON-SMALL ESTATES
Procedurally/the first
instance the applicant
shall apply for the grant
of a letter of
administration &
following that, he/she
shall also apply for a
vesting order
The distribution
order made by High
Court is made in
accordance with the
sijil faraid
Then he/she should
submit the sijil faraid
to get a vesting
order
Before making the
vesting order, the High
Court will normally
require the Muslim’s
applicant to obtain a
sijil faraid from the
Syariah Court
The applicant shall
apply to the Syariah
Court for the sijil
faraid & make
payment at certain
amount

FARAID LAW – MUSLIM ESTATE
DISTRIBUTION
SHARE WHO IS ELIGIBLE CONDITION
1 / 2 Daughter
Husband
Only child
No child his
1 / 4 Husband
Wife
Existence of child
No child his
1 / 8 Wife Existence of child
1 / 3 Mother No child
2 / 3 Daughter only 2 or more
1 / 6 Mother
Father
Existence of child

STANDARD CASE
• Father 1 / 6
• Mother 1 / 6
• Husband 1 / 4
• 1S & 2D get balance
2 / 12
2 / 12
3 / 12
5 / 12 split into 4 parts
 1 son gets 2 parts = 5 / 12 x 2 / 4 = 5 / 24
 Each daughter gets 1 part = 5 / 8

AGNATE CASE
• Father 1 / 6
• Mother 1 / 6
• Wife 1 / 8
• Daughter 1 / 2
 4 / 24
4 / 24
3 / 24
12 / 24
Balance 1 / 24 goes to Father
(Agnatic heir)

AUL CASE
• Father 1 / 6
• Mother 1 / 6
• Wife 1 / 8
• 2 Daughter 2 / 3
4 / 24
4 / 24
3 / 24
16 / 24
TOTAL
27 / 24
4 / 27
4 / 27
3 / 27
16 / 27
 Change the denominator

KUMPULAN WARIS
WARIS UTAMA
 SUAMI
ISTERI
IBU
BAPA
ANAK LELAKI
ANAK PEREMPUAN
WARIS GANTIAN
Datuk (sebelah Bapa)
Nenek
Cucu lelaki daripada anak
lelaki
Cucu perempuan daripada
anak lelaki
WARIS SISIAN PERTAMA
 Saudara lelaki & perempuan
Seibu bapa
Saudara lelaki & perempuan
sebapa
Saudara lelaki & perempuan
seibu
WARIS UTAMA
Bapa saudara
sebelah bapa

Personal finance FIN533

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