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ADAMS WAQF (ENDOWMENT)

ADAMS WAQF (ENDOWMENT). Wills & Trusts and Endowment Building. Importance of Wills & Trusts in America Following Islamic Shari’ah. If you don’t have a Will, the state we live in has one for you… but you will not like how it divides your assets and selects guardian for your children.

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ADAMS WAQF (ENDOWMENT)

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  1. ADAMS WAQF (ENDOWMENT) Wills & Trusts and Endowment Building

  2. Importance of Wills & Trusts in America Following Islamic Shari’ah • If you don’t have a Will, the state we live in has one for you… but you will not like how it divides your assets and selects guardian for your children. • Quran: Making a Will is a Duty incumbent upon a Muslim (not an option) “The Will is made obligatory before the death of anyone of you, who is leaving some property behind to bequest it equitably to his parents and relatives. This is a duty incumbent of the righteous” (Surah Al-Baqarah:180-182, Al-Nisa:12) • Hadith: “It is not right for a Muslim who has property to bequeath, that he should pass two nights without having a written Will with him.”

  3. Purpose of a Will • To create an individualized plan to distribute assets to inheritors according to Shariah distribution schedule. And gifts to individuals (non-inheritors) or one or more charities after death but no more than 1/3 of the total assets.

  4. Will • Everyone (called Testator) should have a Will – especially if you have underage children (male or female). • Must be at least 18 years and of sound mind. • Must be able to differentiate between good and bad (otherwise Will in not valid). • The executor is a person appointed to carry out the provisions and directions in the testator’s Will. Has commonsense, good judgment and fairness of a referee. • A guardian is a person legally placed in change of the affairs of the testator’s minor children. • Will is to will but not to negate willing. Up to 1/3 of the estate after paying liabilities can be willed to non-inheritors and charities.

  5. Will (cont.) • Will can be oral or written. However, under most state law Will must be in writing acknowledging signature in the presence of two adult disinterested witnesses, present at the same time who will sign in the conscious presence of testator, i.e. the person making the Will. Testator signed willingly as his/her free and voluntary act. • No particular language is necessary to constitute a valid Will. Could be handwritten. • Will may be revoked or replaced, but “do not edit” it. • Attach to your Will the schedule of “Mawarith”, Shariah distribution of the estate. • Several identical originals should be placed in different places for safe keeping.

  6. Will (cont.) • The person making the Will should realize that he/she is really doing good and not depriving anyone of his/her due rights and that he/she is not disobeying Allah. • “The Last Will and Testament”, a booklet on how to make an Islamic Will with schedule of “Mawarith” is available free from the ISNA website, www.isna.net

  7. Trust • Revocable trust can incorporate your desires and pass assets according to Shari’ah. • A revocable trust managed by a trustee can provide administration of assets during (incompetent, old age, etc.) and after resignation or death of the trustee. • A revocable trust avoids probate administration. • To provide for the special needs of beneficiaries, particularly in cases of minors or family members or other individuals with a disability. • Won’t cut estate tax and does not provide asset protection.

  8. Concept of a Waqf • Endowment • A gift that provides an income for an institution or person for a determined objective • Waqf (Trust) • Entrusted property; tying up the property in ownership of Allah for the good of mankind • Mutawali (Trustee) • Person(s) who manage(s) the trust

  9. Objectives of a Waqf • Organize and institutionalize voluntary charities • Provide financial support to charity organizations • Community Organizations • Community centers, mosques, playgrounds, hospitals • Educational Organizations • Schools, colleges, libraries, scholarship funds, dormitories • Social Organizations • Shelters for the elderly, orphans, poor, sick, prisoners and needy persons, persons in debt, needing counseling and other social services

  10. Kinds of Contribution • Zakah • Wasiyyah - Bequest (through Will) • Hibah - Gifts

  11. Zakah • Zakah means blessings, growth, cleanliness, or betterment • Zakah is mentioned 30 times in the Quran • Payment of Zakah is obligatory (2:3, 43, 100, 177, 195, 254, 277) • Allah punishes those who do not give charity (9:34)

  12. Zakah is due on: • Earned income (2:267), i.e. current year’s gross income (before taxes) • Less Nisab (essential needs for a lunar year) • Income of past savings and investments (kept more than a year) Active 10.3% of the income Passive 2.57% of capital + profits

  13. Wassiyah - Bequest (thru a Will): • Wasa means: • he conveyed (upon death) (2:180-182) • Maximum of 1/3 of the assets (no more) can be made, only to non-inheritors • Name a favorite individual(s) or charity(ies)

  14. Gift – Hibah, Hudiyyah, and Sadaqah • Gifts made cannot be returned • Gifts to a poor can be considered a charitable donation • Every Muslim has to give in a charity and whoever does not find anything to give, should do good deeds • Give charity within limit (17:29) • Allah says, “And pay the due thereof upon the harvest day” (7:142) • “And race to do good deeds” (2:148) • Also, the Prophet said “The best of good deeds is the one which is done promptly”

  15. Giving in Charity • Allah will multiply what you spend in charity • “The parable of those who spend their substance in the way of Allah is that of a grain of corn: it grows seven ears and each ear has a hundred grains. Allah gives manifold increase to whom He pleases: and Allah cares for all and He knows all things” (2:261). Also see (2:265, 276, 280; 30:39; 34:39; 35:29; 57:11; 64:17)

  16. Investment of Funds • Investing to make a profit is not easy • Diversify, diversify and diversify • Seek professional management - Amana Mutual Funds - Dow Jones Islamic Fund - NAIT - Azzad Mutual Funds - University Bank (Profit Sharing, Money Market & CDs)

  17. Estate Planning • Wills and Bequests • Charitable Remainder Trust (CRT) Deduct now, receive income and transfer later • Charitable Lead Trust (CLT) Income goes to charity. Assets reclaimed or to kids.

  18. Charitable Remainder Trust • Cost of an asset = $25,000 • FMV: $100,000 Age:70 years • Tax Deduction: $60,310 • Income: $5,000/yr for life • Upon death charity gets the asset • Charitable deduction • Income for life • Avoidance of capital gains tax • Reduction or no estate tax

  19. Charitable Lead Trust Cost of an asset: $25,000 FMV: $100,000 (20 yr 6.5% annuity) Income to charity: $6,500 per year Tax Deduction: $48,787 After 20 years, asset returns to you or kids

  20. ADAMS Waqf (Endowment) Compiled by: Dr. M. Yaqub Mirza Sterling Management Group, Inc. www.sterlingmgmt.com Phone: 703 471 6060 ext. 214 Fax: 703 471 1211

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