ISLAMIC TRUST: WHY YOU NEED ONE
(Protect your Family, Assets and avoid probate )
What is an Islamic Trust?
Islamic trust planning can ensure that no house or land has to be sold first after death to avoid paying more inheritance tax than you need. In addition to these traditional uses, an Islamic will also ensure that the distribution of assets is in accordance with Islamic laws and principles. This includes the fair distribution of assets among heirs, as well as the prohibition of certain types of gifts and bequests, such as those that could lead to financial hardship for the beneficiary.
An Islamic trust, also known as a waqf, is a legal agreement where a person (the settlor) transfers ownership of assets to a trustee for the benefit of specified beneficiaries. The assets in the trust are managed and controlled by the trustee, and the income generated from those assets is used to support the beneficiaries.
One of the key benefits of an Islamic trust is that it allows for the transfer of assets during the lifetime of the settlor, which can help to avoid paying unnecessary taxes and ensure that the assets are distributed according to the settlor’s wishes. Additionally, Islamic trusts are often used for charitable purposes, such as supporting schools, hospitals, and other charitable organizations.
Overall, Islamic wills and trusts are important tools for Muslims to ensure that their assets are distributed according to Islamic laws and principles and to minimize the financial burden on their loved ones after their passing. It is important to seek proper legal advice and guidance when creating an Islamic will or trust, to ensure that it meets all necessary requirements and complies with the laws of the country in which the assets are located.
The Islamic will has the same purposes as a conventional will. It may be used to:
• name a guardian for minor children,
• name an executor to manage your estate,
• name a trustee to hold a property for someone who cannot manage it for himself or herself, (for
example, an incapacitated person),
• provide for a spouse,
• set up a living trust, and
• name beneficiaries for specific items of property.
Estate Planning for dependents according to Quran Surah An-Nisa (5-6)
وَلَا تُؤْتُوا۟ ٱلسُّفَهَآءَ أَمْوَٰلَكُمُ ٱلَّتِى جَعَلَ ٱللَّهُ لَكُمْ قِيَـٰمًۭا وَٱرْزُقُوهُمْ فِيهَا وَٱكْسُوهُمْ وَقُولُوا۟ لَهُمْ قَوْلًۭا مَّعْرُوفًۭا ٥
Do not entrust the incapable ˹among your dependents˺ with your wealth which Allah has made a means of support for you—but feed and clothe them from it, and speak to them kindly. (An-nisa5)
وَٱبْتَلُوا۟ ٱلْيَتَـٰمَىٰ حَتَّىٰٓ إِذَا بَلَغُوا۟ ٱلنِّكَاحَ فَإِنْ ءَانَسْتُم مِّنْهُمْ رُشْدًۭا فَٱدْفَعُوٓا۟ إِلَيْهِمْ أَمْوَٰلَهُمْ ۖ وَلَا تَأْكُلُوهَآ إِسْرَافًۭا وَبِدَارًا أَن يَكْبَرُوا۟ ۚ وَمَن كَانَ غَنِيًّۭا فَلْيَسْتَعْفِفْ ۖ وَمَن كَانَ فَقِيرًۭا فَلْيَأْكُلْ بِٱلْمَعْرُوفِ ۚ فَإِذَا دَفَعْتُمْ إِلَيْهِمْ أَمْوَٰلَهُمْ فَأَشْهِدُوا۟ عَلَيْهِمْ ۚ وَكَفَىٰ بِٱللَّهِ حَسِيبًۭا ٦
Test ˹the competence of˺ the orphans until they reach marriageable age. Then if you feel they are capable of sound judgment, return their wealth to them. And do not consume it wastefully and hastily before they grow up ˹to demand it˺. If the guardian is well-off, they should not take compensation; but if the guardian is poor, let them take a reasonable provision. When you give orphans back their property, call in witnesses. And sufficient is Allah as a ˹vigilant˺ Reckoner. (An-Nisa 6)
Holding the Property of the Unwise in Trust.
Allah specifically prohibits granting those who are unwise the right to possess wealth, which Allah created as a source of sustenance for mankind. Due to the fact that young people are unable to make wise decisions, this rule occasionally applies. It also applies to people who exhibit erratic behavior, is insane, have poor intelligence, or have religious practices.
What are the tax benefits of Islamic Living Revocable Trust?
A living revocable trust can provide many benefits when it comes to taxes. Because the Islamic trust is considered a separate legal entity, it can own assets and property that would normally be subject to estate taxes. The trust can also distribute income and assets to the beneficiaries without having to pay any taxes on them. This can save your family a lot of money in the long run! Talk to an attorney about creating a living revocable trust for yourself or your loved ones. It could make a big difference when it comes time to file your taxes.
There are many tax benefits to setting up an Islamic trust. First, any assets you place in the trust are not considered part of your taxable estate when you die. This can save your loved ones thousands of dollars in estate taxes. Second, trusts can help reduce or even eliminate income taxes on your assets. Finally, Islamic trusts can provide privacy and asset protection for you and your family. If you’re considering setting up a trust, speak with an attorney about the best way to take advantage of these tax benefits.
The requirements for a valid will in Islamic law are the same as for conventional wills. One of the most important ways of taking care of your loved ones after you have died is through the use of a will. In the event that you were to go through the probate process, it can be very costly, and it also requires the use of a lawyer.
Muslims believe that all suffering, life, death, joy, and happiness are derived from God and that God is the one who gives us the strength to survive. One of the foundations of the Islamic faith is that Allah is able to do all these things for us. He provides for those who fear him in ways they could never have imagined, and always provides a way out. Allah, says God, is in charge of all affairs for you and for you, the source of all that you fear in Him.
It is important that people know and use all methods of Islamic wealth planning, not only for their own benefit but also for the benefit of their family and friends.
Look out for who could benefit from your wealth, how you live in harmony with others, and how your wealth in this world benefits you. Islam teaches us to seek the help of Allah and the life that ALLAH gives us, but we do not neglect our rightful share in the world. Do not seek to spread corruption in the land, because Allah does not love those who do so, nor seek their wealth without Allah. Wealth is omnipresent, so a person is responsible for how he acquires and disposes of his wealth in this world. Do not feel incapacitated, seek help from Allah for your health and well-being – both for the good of your family and friends.
An Islamic Trust can be structured to be Shariah-compliant, with revenue from trust management being Shariah-compliant. Regular Shariah and Sharia checks can provide comfort to beneficiaries and settlers that the income of the trusts and their administration is compatible with the Shar law and the law of Islam.
From the point of view of Shariah, however, some consideration is needed as to whether it requires a certain degree of compliance with land law and the laws of Islam, as well as the rules of Sharia law.
You must weigh the consequences based on the way your assets are owned and used, and you must be able to draw up a suitable estate plan (also known as Wasiyya if you are Muslim) for legal and religious reasons, as you can be sure that there is a plan to distribute the inheritance to the heirs and even to remedy the inability.
The Islamic part is to ensure that you respect the rights that people have in the family and that there are rights that you cannot take away from them. If you live in a place where Sharia law is not the guiding principle (Islamic succession), you will be responsible for everything. So, you have to plan by making sure you have people you trust, who will be able to execute your instructions, and the people you appoint have the right to do what you want.
Therefore, also it is very important that you have a power of attorney so that if you are ever incapacitated in the future, someone you trust will have the power to regulate your financial affairs. After all, you need a will, so you appoint someone living abroad as your guardian. Appointing a guardian is one way to ensure that your health is guaranteed by the person of your choice, rather than leaving the decision to the state.
Therefore, it is important to consult with an expert who is familiar with Islamic law and the United State federal and state laws. I advise my clients to use a trust to ensure that the Islamic Distribution Trust avoids conflicts of interest between the financial interests of the Trust.
We usually work intensively with our clients to carefully incorporate their Islamic inheritance requirements into their wills. To this end, a living trust is a succession plan that Muslims draw up to breathe life into their values in the event of death or incapacity.
There is no guarantee that a will-based plan will be overseen by a court, and generally, it will not be. Will, the submission solves the ownership issues in the will but there is no guarantee that the family will avoid a lengthy and expensive probate process. For this reason, a trust fund is an important step to ensure that the estate is distributed within the will in the manner you have specified. If trust is based on trust, it can include provisions to ensure that your shares are accurate, even if the unexpected happens.
After all, an Islamic trust can be a great way to avoid the time and expense of opening an estate. If your estate is worth more than $250,000, you need to look closely at a Revocable Living Trust because all the other reasons listed above apply to it. If you start a revised trust and avoid the probate process, this can save you and your loved one’s time, money, and, above all, your love.
If you would like to discuss making an Islamic will or Islamic Trust, please complete our free online inquiry form or call us to consult whether an Islamic will or Islamic Trust is suitable for you, you can fill out our free online inquiry form or call us at 1855-559-4557.