Shari’a successions laws (Part 2 of 3)
In the last article, we looked at the basics of Shari’a succession laws. After payment of burial expenses and debts, up to one third of the net estate is allocated to legacies. This is known as the ‘freely disposable third’.
This means the Shari’a testator can distribute up to one-third of his net estate to charity or to individuals who are not heirs under the Shari’a rules of succession (see next article). Certain rules apply to this ‘freely disposable third’.
First, there is no obligation to distribute this one third to non-heirs, so the testator may prefer to leave his entire estate to the Shari’a heirs. Without a valid Will, the whole estate will be distributed according to the Shari’a, so a Will is required if the testator wishes to make gifts to non-heirs.
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Second, bequests cannot be made from the freely disposable third to people who are already Shari’a heirs. In other words, the testator cannot try to favour one heir by giving him/her more than the amount they are entitled to under Shari’a law. However, this principle can be overridden if all the other Shari’a heirs give their consent.
Finally, any bequest to non-heirs will only be valid up to a maximum of one third of the estate. To the extent a gift is greater than this one third, perhaps because of changes in asset values, the maximum one third will be given and the rest will fall into the residue to be distributed to the Shari’a heirs. It is possible to give more than one third to non-heirs but only with the consent of the Shari’a heirs or if one of the default provisions applies (see next article).
If the practitioner is preparing a Will for a Shari’a client, these rules will have to be borne in mind. For example, it may not be possible to do ‘standard’ estate planning, such as giving everything to the testator’s wife, either outright or on a life interest (IPDI) trust. This could have an impact on the amount of inheritance tax payable by the estate. In practice, it may be sensible to get all the heirs to consent to a gift that maximises use of the spouse exemption.
Care will be needed with legacies of assets. If the value of those assets grows, they may be worth more than the ‘freely disposable’ third. It may be safer to draft legacies by reference to percentages, to guarantee the legacies never exceed one third of the net estate.
Similarly, it will be necessary to determine whether a ‘nil rate band’ legacy or trust is covered by the freely disposable one third. To the extent the nil rate band is greater than one third of the estate, it may not be possible to give the full tax-exempt amount away without the consent of the Shari’a heirs.
Certain principles of Shari’a law may also surprise practitioners who are used to English succession laws. For example, it is not possible to inherit under Shari’a law via a deceased relative. So if the testator has two sons, one of whom predeceased, only the surviving son is entitled to inherit. The deceased son’s own children could only benefit from the freely disposable third.
This may mean having to amend or delete standard definitions in the Will. For example, the practitioner would need to exclude the provisions of s33 of the Wills Act 1837 because these operate to pass a gift to the children of a deceased ‘descendent’. Under Shari’a law, as explained above, the children of a deceased heir have no entitlement, but can benefit from the freely disposable third.
Similarly, it may be necessary to remove clauses stating that the term ‘children’ or ‘issue’ includes those who are illegitimate or adopted, since such offspring are not heirs under Shari’a law. Only legitimate children inherit automatically. A gift to an adopted or illegitimate child would have to come out of the ‘freely disposable third’.
Will-drafting for a Shari’a client can be complex, particularly ensuring legacies do not exceed the ‘freely disposable third’. This in turn can have an impact on standard estate planning, such as use of the nil rate band and spouse exemptions.
The next article looks at the Shari’a succession laws that apply to the remainder of the estate, after the ‘freely disposable third’ has been distributed.
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