DISCLAIMER: I am not an expert in this matter, all info below is what I have found out in the course of dealing with deaths in the family and research for my own financial planning. This info is not to be used in court. Info and procedure can vary by state, my experience was in Selangor. Consult your own financial advisor, legal advisor or local Islamic offices for your own situations. I welcome any corrections from anyone more well versed in these matters.
You are welcome to share this info, but please link back to this post.
The various estate management situations that may happen upon death were explained in Part 1.
The procedure to deal with the estate of a deceased loved one was listed in Part 2.
PART 3: Strategising your own financial estate
I will be honest. Dealing with the death of a parent without a financial plan is a long and emotional process, in an uncomplicated circumstance. For someone in less fortunate circumstances, for example a young widow with small kids who depended on the husband’s income, who may be fighting other waris, whose own portion of the estate is miniscule and whose small kids’ portions of the funds are now in limbo and will later be administered by a company far away, the process would seem insurmountable and be emotionally devastating.
Knowledge is power. Plan the best future for your money and your family. Give your family the gift of a secure financial future.
These are my tips:
1. Keep it simple. Keep your affairs simple, i.e. try to keep money in only a few strategic places. Empty out (and keep the bank book showing 0 balance) or close down any accounts that are never or rarely used. This will relieve a lot of headaches as the person dealing with your estate will have to go to each bank in person to find out the amount in each account, and again later to come back with the Surat Kuasa to withdraw the funds. Some banks even require the executor to go to the home branch (the branch where the account was opened).
Also, if you have a joint account with your spouse, check with you bank on whether the account will be frozen if one of the accountholders passes away. This varies by bank.
2. Documentation and lists. Keep a running list of accounts/properties/investments. Keep this list updated regularly, and also update penama/hibah recipients/wasiat terms immediately if/when necessary.
Get an accordion folder and keep this list, bank books, family documents like death certs, birth certs and surat nikah, property and vehicle grants, insurance documents, S&P agreements, wasiat or hibah info, and any other documents that may be pertinent. Make sure your spouse/adult kids know where this folder is kept and how important it is. I call it my Fire Folder – in case of house fire, this is the only non-living thing I would try to save.
@image had the fantastic suggestion to digitize everything and save it to the cloud. While you WILL need the originals of family documents for filings, digitizing them is a great way to have all the info on hand if needed by any member of the family at any moment, and also is motivation to start compiling and safely organizing everything. Save them in a passwoed protected google document folder.
Also, I know this is a difficult topic, and I know older people do not like to speak of death, but try, very diplomatically, to get your elderly relatives to keep a financial list and gather financial/property/vehicle/family documents. Maybe you could use the excuse of digitization for family history records. You will thank me later.
3. Prepare immediately accessible funds for your spouse. Husbands: please realize that by faraid your wife will only get a TINY fraction of your estate. It may take over a year for the funds to be processed and released. Funds that are allocated for your underaged children will be controlled by a corporation far away. You NEED to plan for the future of your family, especially if you are the sole breadwinner.
THIS IS ESPECIALLY IMPORTANT IF YOU DO NOT HAVE A SON. Your siblings/other relatives will be entitled to big portions of the estate (Faraid calculator: http://faraid.usm.my/msl/faraid.asp). On your death, there may be vultures circling looking for whatever they can grab. Relatives who will righteously claim their “hak” while ignoring their responsibility to look after the grieving widow and small kids. Sounds like a drama melayu, but it is too real. I even recently heard of a man who was severely injured, in a vegetative state but NOT YET DEAD, who had SMALL KIDS INCLUDING A SON, whose brothers ambushed the stressed-out wife and took the family vehicles as their “hak”.
Apart from the below, if you have a joint account, check with your bank whether in case of your death the account will be frozen or not. Make arrangements for property to be kept at least jointly in her name.
Here are several easy options to provide immediately accessible funds:
3a. Insurance. For a young family starting out, life insurance for the breadwinner is a must, so that in the event of sudden untimely death, the future of the family is provided for. You can hibah the insurance to your spouse by Hibah Takaful. Without hibah, even though the wife may be the nominee, the money will have to be distributed by faraid or wasiat. Check with your takaful agent for more info.
Also, consider medical insurance for the entire family. Nothing will wipe out savings faster than a serious illness or accident. On a tangential note, invest in living a healthy lifestyle and also regular medical checkups for all. It is much cheaper to prevent or catch any conditions in the early stage than at a Stage 4 diagnosis.
3b. ASB. Most malay muslims will stash their savings in ASB accounts, as this has high dividends. You can hibah the ASB account. There is a fee to set it up and a percentage administration fee upon payout. https://www.asnb.com.my/hibahamanah.php Without hibah, large amounts will need a surat kuasa to be withdrawn and then distributed by wasiat/faraid.
3c. Tabung Haji. While last year’s dividends seemed depressing at 1.5%, this actually isn’t too bad considering TH auto pays 2.5% zakat on funds deposited, so indirectly the dividend was 3.5%, comparable to a FD. [You are obligated to pay yearly zakat simpanan of 2.5% on the minimum total within one year of all funds in other accounts yourself.] TH dividends are normally much better, usually in the 5% range. You can nominate a penama, who will be able to withdraw the funds immediately upon death but will have to distribute it by wasiat/faraid, and there is a risk that a wasiat may be contested. Or, you can hibah your TH account to give it solely to your spouse. There is a fee to set up the hibah and a percentage administration fee upon payout. https://www.tabunghaji.gov.my/en/savings/services/hibah-amanah-th
Also, a benefit of TH savings is that the money can easily be transferred online to a maybank account, or withdrawn via several linked ATM networks, compared to FD which is stuck till maturity.
(Additional tip: open TH accounts for your kids as soon as possible and gift them the minimum needed and register them for haji. The haji queue is so long that if you wait for them to do it for themselves, they may only get their turn at age 100. Plus, many parents neglect to pay zakat on their kids’ savings. TH will pay zakat automatically.)
4. Wasiat. Hibah is by far the most secure option, but not all assets can be covered by hibah.
For example, you cannot hibah a EPF/KWSP account, but you can give the content by wasiat, either solely to one person or a distribution of your choosing. Any property still under loan cannot be given by hibah, but can be given by wasiat (subject to the loan being paid off from the liquid assets first). A deceased person’s portion of a jointly owned property cannot be given by hibah, but can be given by wasiat. A vehicle still under loan cannot be given by hibah, but can be given by wasiat (subject to the loan being paid off from the liquid assets first). [You could hibah a fully paid off vehicle, but there is a high chance that you may sell the vehicle and replace it, which would invalidate that hibah.] Any asset to be given by hibah must be specific, but assets to be given by wasiat can be stated in general terms.
HOWEVER – a wasiat requires the agreement of ALL the legal waris, as determined in the Sijil Faraid. If any of the waris contest the wasiat, estate distribution reverts back to faraid.
Thus, if you have an uncomplicated waris situation and are confident that they will not contest the conditions (bearing in mind that the prospect of easy money can turn people), you might consider a wasiat. Here are some tips to optimize your wasiat :
4a. Think about how it is written to cover all eventualities and minimize amendments.
For example, if you intend to give all your properties and vehicles to your spouse, it may not be wise to name specific properties or vehicles, as if you over time sell them and do not update the wasiat, you will later need to prove the property or vehicle is sold and no longer in your possession. And some people do not keep sale documents for very long. Thus, be general, for example you may state “any properties owned” or “any vehicles owned”.
However, if you want to give different properties to different people, then you do have to be specific and also update the wasiat regularly when you make changes. Each time you amend your wasiat you will be charged a fee and have to meet the wasiat body to put your signature to the changes.
Consider how future changes might affect distribution and try to write that in. For example, you might want to state that any assets assigned to a waris who passes away will be distributed equally to the remaining waris. Or if you decide to gift money to grandchildren, use the general statement “all my grandchildren” instead of naming each grandchild by name, or else you will need to update the document each time a grandchild is born, and any grandchildren born after the last amendment will be left out.
Discuss this thoroughly with your wasiat consultant before finalising the document.
4b. Know that money distributed by the wasiat administrator is subject to percentage fees, but money mentioned in the wasiat but claimed and distributed by a penama is not. So, if you keep the bulk of your funds in EPF/KWSP, Tabung Haji and insurance you can state the distribution of money from these accounts and the penama can immediately withdraw and distribute it according to the terms of the wasiat, without being charged wasiat distribution fees. Of course, if the penama has also passed away, the administrator will handle the withdrawal and distribution and charge the percentage administration fees.
4c. Be sure to regularly review and update your wasiat. For example, if your parents pass away you will remove them as beneficiaries. If you sell a property you may need to change the asset distribution to keep things balanced. Or if you wish to gift money to new family members or a friend or a cause close to your heart. You can amend your wasiat, for a charge each time of course.
4d. Use the wasiat to state your wishes regarding your underage children and administration of their portions of funds. If a husband passes away without any wasiat, the default administrator of the minor childrens' portions of the liquid assets is not the wife - it is Amanah Raya. If you have a wasiat, the default administrator of the childrens' portions of liquid inheritances is the wasiat administrator. You can state in the wasiat that you wish your spouse to be the financial administrator of your childrens’ portions of your estate and the funds to be used for their care and needs. You can state that in the event that you and your spouse both pass away, who you would like to have custody of your kids and (if you trust that person implicitly) to make that person the financial administrator of the childrens' money, to be used for their care and needs until 18yo. (The default is husband’s father.) This may have to be approved by the judge, but it at least gets your wishes on record.
I hope this information was beneficial. If I have made any mistakes, please let me know and I will make corrections. If you have any further suggestions or strategies, please share.
You are welcome to share this info, but please link back to this post.
The various estate management situations that may happen upon death were explained in Part 1.
The procedure to deal with the estate of a deceased loved one was listed in Part 2.
PART 3: Strategising your own financial estate
I will be honest. Dealing with the death of a parent without a financial plan is a long and emotional process, in an uncomplicated circumstance. For someone in less fortunate circumstances, for example a young widow with small kids who depended on the husband’s income, who may be fighting other waris, whose own portion of the estate is miniscule and whose small kids’ portions of the funds are now in limbo and will later be administered by a company far away, the process would seem insurmountable and be emotionally devastating.
Knowledge is power. Plan the best future for your money and your family. Give your family the gift of a secure financial future.
These are my tips:
1. Keep it simple. Keep your affairs simple, i.e. try to keep money in only a few strategic places. Empty out (and keep the bank book showing 0 balance) or close down any accounts that are never or rarely used. This will relieve a lot of headaches as the person dealing with your estate will have to go to each bank in person to find out the amount in each account, and again later to come back with the Surat Kuasa to withdraw the funds. Some banks even require the executor to go to the home branch (the branch where the account was opened).
Also, if you have a joint account with your spouse, check with you bank on whether the account will be frozen if one of the accountholders passes away. This varies by bank.
2. Documentation and lists. Keep a running list of accounts/properties/investments. Keep this list updated regularly, and also update penama/hibah recipients/wasiat terms immediately if/when necessary.
Get an accordion folder and keep this list, bank books, family documents like death certs, birth certs and surat nikah, property and vehicle grants, insurance documents, S&P agreements, wasiat or hibah info, and any other documents that may be pertinent. Make sure your spouse/adult kids know where this folder is kept and how important it is. I call it my Fire Folder – in case of house fire, this is the only non-living thing I would try to save.
@image had the fantastic suggestion to digitize everything and save it to the cloud. While you WILL need the originals of family documents for filings, digitizing them is a great way to have all the info on hand if needed by any member of the family at any moment, and also is motivation to start compiling and safely organizing everything. Save them in a passwoed protected google document folder.
Also, I know this is a difficult topic, and I know older people do not like to speak of death, but try, very diplomatically, to get your elderly relatives to keep a financial list and gather financial/property/vehicle/family documents. Maybe you could use the excuse of digitization for family history records. You will thank me later.
3. Prepare immediately accessible funds for your spouse. Husbands: please realize that by faraid your wife will only get a TINY fraction of your estate. It may take over a year for the funds to be processed and released. Funds that are allocated for your underaged children will be controlled by a corporation far away. You NEED to plan for the future of your family, especially if you are the sole breadwinner.
THIS IS ESPECIALLY IMPORTANT IF YOU DO NOT HAVE A SON. Your siblings/other relatives will be entitled to big portions of the estate (Faraid calculator: http://faraid.usm.my/msl/faraid.asp). On your death, there may be vultures circling looking for whatever they can grab. Relatives who will righteously claim their “hak” while ignoring their responsibility to look after the grieving widow and small kids. Sounds like a drama melayu, but it is too real. I even recently heard of a man who was severely injured, in a vegetative state but NOT YET DEAD, who had SMALL KIDS INCLUDING A SON, whose brothers ambushed the stressed-out wife and took the family vehicles as their “hak”.
Apart from the below, if you have a joint account, check with your bank whether in case of your death the account will be frozen or not. Make arrangements for property to be kept at least jointly in her name.
Here are several easy options to provide immediately accessible funds:
3a. Insurance. For a young family starting out, life insurance for the breadwinner is a must, so that in the event of sudden untimely death, the future of the family is provided for. You can hibah the insurance to your spouse by Hibah Takaful. Without hibah, even though the wife may be the nominee, the money will have to be distributed by faraid or wasiat. Check with your takaful agent for more info.
Also, consider medical insurance for the entire family. Nothing will wipe out savings faster than a serious illness or accident. On a tangential note, invest in living a healthy lifestyle and also regular medical checkups for all. It is much cheaper to prevent or catch any conditions in the early stage than at a Stage 4 diagnosis.
3b. ASB. Most malay muslims will stash their savings in ASB accounts, as this has high dividends. You can hibah the ASB account. There is a fee to set it up and a percentage administration fee upon payout. https://www.asnb.com.my/hibahamanah.php Without hibah, large amounts will need a surat kuasa to be withdrawn and then distributed by wasiat/faraid.
3c. Tabung Haji. While last year’s dividends seemed depressing at 1.5%, this actually isn’t too bad considering TH auto pays 2.5% zakat on funds deposited, so indirectly the dividend was 3.5%, comparable to a FD. [You are obligated to pay yearly zakat simpanan of 2.5% on the minimum total within one year of all funds in other accounts yourself.] TH dividends are normally much better, usually in the 5% range. You can nominate a penama, who will be able to withdraw the funds immediately upon death but will have to distribute it by wasiat/faraid, and there is a risk that a wasiat may be contested. Or, you can hibah your TH account to give it solely to your spouse. There is a fee to set up the hibah and a percentage administration fee upon payout. https://www.tabunghaji.gov.my/en/savings/services/hibah-amanah-th
Also, a benefit of TH savings is that the money can easily be transferred online to a maybank account, or withdrawn via several linked ATM networks, compared to FD which is stuck till maturity.
(Additional tip: open TH accounts for your kids as soon as possible and gift them the minimum needed and register them for haji. The haji queue is so long that if you wait for them to do it for themselves, they may only get their turn at age 100. Plus, many parents neglect to pay zakat on their kids’ savings. TH will pay zakat automatically.)
4. Wasiat. Hibah is by far the most secure option, but not all assets can be covered by hibah.
For example, you cannot hibah a EPF/KWSP account, but you can give the content by wasiat, either solely to one person or a distribution of your choosing. Any property still under loan cannot be given by hibah, but can be given by wasiat (subject to the loan being paid off from the liquid assets first). A deceased person’s portion of a jointly owned property cannot be given by hibah, but can be given by wasiat. A vehicle still under loan cannot be given by hibah, but can be given by wasiat (subject to the loan being paid off from the liquid assets first). [You could hibah a fully paid off vehicle, but there is a high chance that you may sell the vehicle and replace it, which would invalidate that hibah.] Any asset to be given by hibah must be specific, but assets to be given by wasiat can be stated in general terms.
HOWEVER – a wasiat requires the agreement of ALL the legal waris, as determined in the Sijil Faraid. If any of the waris contest the wasiat, estate distribution reverts back to faraid.
Thus, if you have an uncomplicated waris situation and are confident that they will not contest the conditions (bearing in mind that the prospect of easy money can turn people), you might consider a wasiat. Here are some tips to optimize your wasiat :
4a. Think about how it is written to cover all eventualities and minimize amendments.
For example, if you intend to give all your properties and vehicles to your spouse, it may not be wise to name specific properties or vehicles, as if you over time sell them and do not update the wasiat, you will later need to prove the property or vehicle is sold and no longer in your possession. And some people do not keep sale documents for very long. Thus, be general, for example you may state “any properties owned” or “any vehicles owned”.
However, if you want to give different properties to different people, then you do have to be specific and also update the wasiat regularly when you make changes. Each time you amend your wasiat you will be charged a fee and have to meet the wasiat body to put your signature to the changes.
Consider how future changes might affect distribution and try to write that in. For example, you might want to state that any assets assigned to a waris who passes away will be distributed equally to the remaining waris. Or if you decide to gift money to grandchildren, use the general statement “all my grandchildren” instead of naming each grandchild by name, or else you will need to update the document each time a grandchild is born, and any grandchildren born after the last amendment will be left out.
Discuss this thoroughly with your wasiat consultant before finalising the document.
4b. Know that money distributed by the wasiat administrator is subject to percentage fees, but money mentioned in the wasiat but claimed and distributed by a penama is not. So, if you keep the bulk of your funds in EPF/KWSP, Tabung Haji and insurance you can state the distribution of money from these accounts and the penama can immediately withdraw and distribute it according to the terms of the wasiat, without being charged wasiat distribution fees. Of course, if the penama has also passed away, the administrator will handle the withdrawal and distribution and charge the percentage administration fees.
4c. Be sure to regularly review and update your wasiat. For example, if your parents pass away you will remove them as beneficiaries. If you sell a property you may need to change the asset distribution to keep things balanced. Or if you wish to gift money to new family members or a friend or a cause close to your heart. You can amend your wasiat, for a charge each time of course.
4d. Use the wasiat to state your wishes regarding your underage children and administration of their portions of funds. If a husband passes away without any wasiat, the default administrator of the minor childrens' portions of the liquid assets is not the wife - it is Amanah Raya. If you have a wasiat, the default administrator of the childrens' portions of liquid inheritances is the wasiat administrator. You can state in the wasiat that you wish your spouse to be the financial administrator of your childrens’ portions of your estate and the funds to be used for their care and needs. You can state that in the event that you and your spouse both pass away, who you would like to have custody of your kids and (if you trust that person implicitly) to make that person the financial administrator of the childrens' money, to be used for their care and needs until 18yo. (The default is husband’s father.) This may have to be approved by the judge, but it at least gets your wishes on record.
I hope this information was beneficial. If I have made any mistakes, please let me know and I will make corrections. If you have any further suggestions or strategies, please share.