Budget 2024: What This Means For UK Muslims
31 October 2024 6 min read
12 min read
Published:
Updated:
Ibrahim Khan
Co-founder
is best.
How our inheritance is handled is the last impactful legacy we can leave on this world. We should therefore really should make sure it is done in a way pleasing to Allah.
The Prophet said “It is not permissible for any Muslim who has something to will to stay for two nights without having his last will and testament written and kept ready with him.” (Bukhari).
A will is a legally-binding document that gives instructions on the way that your estate (the assets you leave behind) should be distributed. In a conventional, non-Islamic will, you simply leave what you want to whomever you want. That’s why you get stories like this or this with people leaving all their money to charity or even pets.
Islam tells us something different. It pre-determines who inherits our assets (read the early verses of Surah an-Nisa (chapter 4) for the verses on this). Although these calculations can get tricky for the average person to manually work out, the point is that there is a set way of slicing up the pie to which we have to adhere.
This Islamic will inheritance calculator will help to give you an understanding on how Islamic inheritance works (this is a great online tool but it can be prone to error so always get it manually checked by somebody qualified).
In a nutshell, the pre-set inheritance is the key difference in an Islamic will.
And in a non-Muslim country, you need to leave a will that sets all of that out in detail, because domestic laws will otherwise revert to the laws of intestacy, not the laws of Islam. As long you as you detail how you want your assets to be distributed, English law (and likely other domestic law) will not interfere with that.
Wills usually include sections on:
There are a few legal peculiarities to signing a will validly in the UK. Your signature should be witnessed by two individuals (who are not going to inherit anything from your will), any bequests (explained below) you make need to be carefully drafted or they can otherwise be invalid, and your will should expressly deal with any previous wills you might have written and are now wishing to change.
As we’ve established, Islam has rules on who inherits your assets. However, you can actually change that (and that’s perfectly fine). Let’s do a test case so you fully understand the position on why you might want to do this, before we explain how you go about doing this Islamically.
Let’s say we’ve got a man named Hussain. Hussain has a wife, two sons and both his parents are still alive. Islamically, his inheritors would be as follows:
It’s easy to see why Hussain might want more provision for his wife. In order to do this, he could get written consent for his parents to assign their share over to his wife. Provided that this consent is given freely, then this is fine. You then simply draft the will such that the parents are not included, and the wife’s share is increased proportionately.
It’s important to ensure you document this correctly from a domestic law and Islamic law perspective so, again, make sure you speak to someone qualified.
The other even simpler way of inheritance planning, is to transfer over assets to whomever you want to before you die. That way, they already own the asset when you die. And, under current UK tax laws, as long as you live more than 7 years from when you make a gift to someone, the recipient of this gift will not have to pay any inheritance tax (40% at the moment) on your gift when you die. But if you die before 7 years have passed, there may be tax to pay (calculated on a sliding scale. See here for a nice little summary of key tax issues.
We’ve explained that under Islamic law, your estate gets divided up in a certain way. We’ve also gone through how you change that (provided consent is given from the relevant inheritors).
But an Islamic will differs in one other crucial respect.
Islam gives you the flexibility to do pretty much what you want up to a maximum of 1/3 of your estate. So the Islamic rules about who gets what that we talked about before can apply to all your assets if you want them to, but you can also have them only apply to 2/3 of your estate. You then choose to do whatever you want (subject to the rules below) with the remaining 1/3.
This flexibility over 1/3 is known as a bequest.
The rules are quite simple.
Adherents to certain schools of thought (e.g. some hanafis) like to leave a certain portion of their wealth as a kaffarah (compensation/penalty payment) for missed fasts and prayers. This needs to be carefully drafted. If that’s you, then you should really get someone to write your will and not do it yourself – but more on that later.
If Islam sets out the rules anyway, what is the point making a will? Quite apart from the religious reasons given in the introduction, making a will makes sense from a legal, practical and commercial perspective. Here’s just a few reasons for you to make a will:
We have trawled the internet and our contacts so you don’t have to.
There are two free good Islamic options that you can avail of:
Here are the relative pros and cons of going for this approach.
Pros | Cons |
---|---|
Free | Your will isn’t checked – this is fine a lot of the time, but a significant number of times, it is not. |
Quick - 30 minutes | You don’t get a bespoke breakdown of your sharia inheritors and have to DIY it using a calculator – this is not fool-proof, requires a bit of understanding of the sharia rules, and can lead to the same disputes you were seeking to avoid by doing a will in the first place! |
The 1st Ethical version has been reviewed by lawyers and scholars and signed off | Your specific bequests may not be drafted correctly so as to be valid – this happens often in our experience |
The Free Islamic Wills version has been reviewed and signed off by a scholar | The Free Islamic Wills version comes with an inheritance schedule to help your executor work out the Islamic inheritance. However it is extremely dense and counterintuitive |
If your estate is well within the Nil-Rate Band (£325,000) then you don’t need to worry about tax planning. In most cases, using the spousal exemption and the additional residential nil-rate band, you can pass on up to £1m to your family tax-free these days. | The Free Islamic Wills online platform is not intuitive and can be a bit clunky |
Can’t deal with large estates that need tax planning | |
Can’t deal effectively with estates that leave business assets | |
Can’t effectively deal with foreign assets | |
If things change you need to write a new will | |
Don’t have the ability to deal with leaving assets to disabled children (as it needs advice on trusts) |
Pros | Cons |
---|---|
Cheap - £98 | Can’t deal with large estates over £2m. |
Quick - 30 minutes | Can’t deal effectively with estates that leave extensive business assets over £2m |
Will is drafted and checked by lawyers - see our profiles here: About | Don’t provide a probate service - but we can point you in the right direction |
IFG call you if we have any questions, and IFG are happy to response to your questions | Don’t provide a professional executor/trustee service - but we can refer you |
Inheritance worked out through a sharia inheritance model that has been developed with mufti and refined through ad hoc queries | |
The ability to leave loved ones messages | |
The ability to easily leave charitable bequests | |
If your estate is well within the Nil-Rate Band (£325,000) then you don’t need to worry about tax planning. | |
Very intuitive form that makes the journey to a will easy | |
If your estate is well within the Nil-Rate Band (£325,000) then you don’t need to worry about tax planning. In most cases, using the spousal exemption and the additional residential nil-rate band, you can pass on up to £1m to your family tax-free these days. | |
If things change , you can subscribe to our annual £10 update service and we’ll make all the necessary updates |
Pros | Cons |
---|---|
Bespoke legal advice | Expensive – ranging from a thousand upwards. |
Can deal with large estates (>£2m) that need tax planning | Legal appointments and meeting with solicitors necessary |
Can deal with estates comprising extensive business assets | Not every solicitor will check every will with a mufti or even provide a breakdown of your inheritance |
You can often call them up and get some legal advice | The process isn’t designed to be frictionless or personal. |
Offer a probate service – make all the relevant applications to the relevant people for a few hundred pounds extra | |
Offer a professional executor/trustee service - this is where solicitors generally tend to make the profit, as the fee is a percentage of the overall estate, so can add up to thousands – but for a larger estate that might make sense |