Re-evaluating the practice of hibah trust in Malaysia

Abstract

Purpose This paper aims to re-evaluate and thus recommends possible ways in improving the current practice of hibah trust in Malaysia. Design/methodology/approach This study conducts a thorough and critical review on relevant literature on Islamic wealth management and estate distribution. Besides, the current practice and application of hibah trust by the Malaysian trustee companies such as Amanah Raya Berhad and As-Salihin Trustee Berhad is analyzed based on information gathered from their publications and direct consultation. Findings Based on the comparison made between hibah trust and its conventional counterpart, living trust, this study found that that the hibah trust product mirrors the conventional living trust, which provides a high degree of freedom to the benefactor to decide on the distribution of his wealth without taking into consideration the interest of the eligible heirs under farai’d. Nevertheless, it is undeniable that the practice of hibah trust would be able to expedite the lengthy and complex procedures of inheritance, reduce administrative costs and avoid legal impediments and inheritance tax. Practical implications This paper proposes a comprehensive framework for an improved asset distribution under hibah trust within the Malaysian Islamic wealth management industry by highlighting the significance of fara’id and wasiyyah rules. This proposed framework of hibah trust would become a useful reference for the policy makers in designing a dedicated regulation or legal provisions in the established laws that will govern the practice of hibah trust in Malaysia. Originality/value The novelty of this paper lies in highlighting the importance of adhering to the law of Islamic inheritance rules as ordained by Allah s.w.t in structuring contemporary Islamic estate planning instruments such as hibah trust, which is not evident in the current practice.

Conceptual Study: Barriers of Islamic Estate Planning

“…Under Islamic wealth management, it has an equal right that focusing both in managing the properties in their lifetime and upon the death following Shariah principle followed by the rule of Al-Quran on receiving rewards on the day after. Contrast with conventional wealth management where only emphasis on the accumulation during the lifetime of the person's (Noordin, Ismail, Abd Rahman, Haron, & Abdullah, 2016). Mentioned by Ab Aziz, Nooh, Khairi, & Johari, (2014), wealth distribution are part of managing component under Islamic wealth management.…”

The Concept and Application of Hibah as a Financial Instrument From the Malaysian Legal Perspective: An Analysis

“…The hibah thrust or amanah on the other hand, although the asset has already been transferred to the beneficiaries either legally or beneficially, the hibah donor can still enjoy the benefits of the hibah asset, provided that the written consent has been obtained from the beneficiaries. 27 On top of that, the conflict of legal jurisdiction may arise since hibah practice is originally subjected to Islamic law as clearly provided under Item 1, List II of the Ninth Schedule of Federal Constitution, whilst at the same time Section 46 (2) (b) (v) and (vi), the Administration of Islamic Law (Federal Territories) Act 1993 (Act 505), provides the matter of Syariah High Court jurisdiction pertaining to the matter of hibah.…”

Joint Tenancy In The Islamic Law And Its Application In Malaysia

“…Therefore, if any of joint tenants died, the left portion of the deceased will obligatorily be conceded to the residual sharers (Rasban, 2010). Based on the principle, joint tenancy is not a normal ownership and hence cannot be divided through inheritance process (Noordin et. al., 2016).…”

“…Thus, an acknowledgement of conditional gift (hibah ruqba) is pending on earlier arrangement between parties that indicate to own the property to the last survivor (Noordin et al, 2016;Rasban, 2010;Ramlan, 2015).…”