Four Benefits of a Trust-Based Islamic Will

There are several options when it comes to Islamic Wills and for some a trust-based Will is more advantageous than others. This blog post considers why a trust-based Islamic Will may be just the fit for you.

One of the biggest reasons to prepare a trust-based Islamic Will is flexibility.

The distribution of a deceased Muslim estate upon death, is determined by their surviving heirs and beneficiaries. When preparing an Islamic will, the testator, i.e. the person making the will, is usually unable to say with any certainty who they’ll leave behind. They can make an educated guess, but no person can ever be completely sure.

A trust-based Islamic Will provides the trustees the flexibility to divide the estate according to the surviving beneficiaries at the time. It does this by giving them what is called an “ absolute discretion“. Conversely a standard fixed Islamic Will, fixes the beneficiaries shares.

In the UK, there is a great tendency for non-Muslims to leave their estate to their surviving spouse. There is also a similar tendency for Muslims to mimic non-Muslims in this way. This is not in what the Qur’an and Sunnah commands. As a consequence, it is not necessarily recommended for Muslims.

The main motivating factor for leaving everything to your surviving spouse is to take advantage of “spouse exemption”. This is an exemption which allows for any assets passing to a surviving legal spouse, to pass tax-free. There is no upper limit but is subject to some limitations.

By leaving your estate in a trust as part of your Islamic Will, the trustees are allowing the beneficiaries the option to redirect their entitlement to the surviving spouse. Under Islamic law, if a beneficiary wishes to take their entitlement, then they must be allowed to do so. Otherwise, it is permitted for them to redirect their entitlement to another beneficiary thus creating the tax-efficiency element.

Issues can arise where a beneficiary subsequently divorces a spouse, having earlier received a share of a deceased person’s estate.

If the beneficiary’s entitlement was contained within a trust, that entitlement could be ring-fenced from a third-party claim. The beneficiary may legitimately be able to say that share of the estate does not belong to them and therefore does not form part of any financial settlement.

The example of a divorcing beneficiary is a common one however, there are others:

• A creditor could make a claim.
• The beneficiaries own beneficiaries, could make a claim. For example, if the beneficiary died before a final distribution.
• A local authority for care fees.

A trust-based Islamic Will can initially be more costly than a standard fixed Islamic Will. However, a standard will, is recommended to be reviewed after the death or birth of each potential beneficiary. This is because the share-sizes passing to the beneficiaries can dramatically alter, when there is a change of family circumstances. This can cause an additional cost over and above the initial cost.

For example, if at the time of making the Will, a testator has only one daughter, then she shall receive one half of the deceased estate. However, if a second daughter is born, the Will should be updated to reflect that both daughters shall share in two-thirds of the estate.

As a trust-based Islamic Will is flexible in nature, the Will itself may not need to be changed. Consequently, there may be no additional cost over the course of a lifetime. This is likely to represent a significant saving, and thus the trust based Will is better value for money.

• You may have a limited budget.
• Your assets may be modest in size.
• You may want it to be clear which beneficiary will get what.
• You may not necessarily want to give the Executors and Trustees any discretion over the distribution of your estate.