Common Mistakes in Islamic Estate Planning and How to Avoid Them

By Hani Amra, Attorney Law, Cornerstone Law Services & Amana Law

Estate planning is a crucial aspect of managing your wealth and ensuring it is distributed according to your wishes and Islamic principles. However, many Muslims unintentionally make mistakes that could jeopardize their goals for Sharia-compliant inheritance. Below, we outline common mistakes in Islamic estate planning and how to avoid them.

1. Failing to Create a Will (Wasiyyah)

Mistake: Many Muslims delay or neglect creating a will altogether, assuming it’s unnecessary or that their wealth will automatically be distributed according to Islamic law.

Why It Matters: Without a will, the estate may be distributed based on local intestacy laws, which often do not align with Sharia.

Solution:

• Create a legally binding will that specifies the Islamic distribution of your estate.
• Include clear instructions on debts, funeral expenses, and bequests (up to one-third of the estate).

2. Not Accounting for Debts and Obligations

Mistake: Overlooking debts, Zakat dues, or unpaid loans when planning an estate.

Why It Matters: Islam requires debts and obligations to be settled before distributing the estate.

Solution:

• Maintain a detailed record of debts and regularly update it.
• Ensure your executor understands the priority of settling debts.

3. Ignoring Non-Muslim Heirs

Mistake: Assuming non-Muslim family members automatically inherit under Sharia.

Why It Matters: Islamic inheritance rules do not allow non-Muslim heirs to inherit directly. Without planning, they may unintentionally be excluded.

Solution:

• Use permissible methods, such as gifts or bequests (up to one-third of the estate), to provide for non-Muslim relatives.

4. Misunderstanding the Distribution Rules

Mistake: Incorrectly allocating shares to heirs without understanding Islamic inheritance laws.

Why It Matters: Improper distribution can lead to disputes and may invalidate the will’s compliance with Sharia.

Solution:

• Consult a qualified Islamic scholar or attorney specializing in Islamic estate planning.
• Use a table to calculate inheritance shares accurately:

5. Overlooking Assets in Non-Muslim Countries

Mistake: Assuming that assets in non-Muslim countries will automatically follow Islamic rules.

Why It Matters: Local laws may override Islamic principles if the will is not Sharia-compliant and recognized by local courts.

Solution:

• Create an estate plan that complies with both Sharia and local laws.
• Include clauses that clarify your intent for Sharia-compliant distribution.

6. Neglecting to Appoint a Competent Executor

Mistake: Choosing an executor who is not familiar with Islamic inheritance laws or lacks the capability to manage the estate.

Why It Matters: An incompetent executor may mismanage the estate or fail to follow Islamic principles.

Solution:

• Appoint a trusted, capable individual who understands Islamic law.
• Alternatively, designate an attorney or financial advisor with expertise in Sharia.

7. Ignoring Lifetime Gifting

Mistake: Failing to take advantage of lifetime gifts to distribute wealth during one’s lifetime.

Why It Matters: Lifetime gifting allows for more flexibility and ensures assets are distributed as intended without disputes.

Solution:

• Gift assets during your lifetime within the bounds of fairness and Sharia.
• Document all gifts clearly to avoid future disputes.

8. Overlooking Tax Implications

Mistake: Failing to consider how estate or inheritance taxes impact the distribution of wealth.

Why It Matters: Taxes can significantly reduce the value of the estate if not planned properly.

Solution:

• Work with an attorney or financial advisor to minimize tax liabilities.
• Use trusts, charitable donations, and other tax-efficient strategies that align with Sharia.

Conclusion

Islamic estate planning requires careful attention to both religious obligations and legal requirements. By avoiding these common mistakes and seeking guidance from knowledgeable professionals, you can ensure that your estate is managed and distributed in a way that honors both Allah’s commands and your family’s needs.

For assistance with Islamic estate planning, contact Hani Amra for expert advice and personalized solutions.