ADAMS WAQF (ENDOWMENT)

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ADAMS WAQF (ENDOWMENT)

• Wills Trusts and Endowment Building

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Importance of Wills Trusts in America Following
Islamic Shariah

• If you dont 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-Baqarah180-182, Al-Nisa12)
• 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.

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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.

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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 testators
  Will. Has common sense, good judgment and
  fairness of a referee.
• A guardian is a person legally placed in change
  of the affairs of the testators 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.

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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.

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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

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Trust

• Revocable trust can incorporate your desires and
  pass assets according to Shariah.
• 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.
• Wont cut estate tax and does not provide asset
  protection.

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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

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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

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Kinds of Contribution

• Zakah
• Wasiyyah - Bequest (through Will)
• Hibah - Gifts

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Zakah

• Zakah means blessings, growth, cleanliness, or
  betterment
• Zakah is mentioned 30 times in the Quran
• Payment of Zakah is obligatory (23, 43, 100,
  177, 195, 254, 277)
• Allah punishes those who do not give charity
  (934)

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Zakah is due on

• Earned income (2267), i.e. current years 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

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Wassiyah - Bequest (thru a Will)

• Wasa means
• he conveyed (upon death) (2180-182)
• Maximum of 1/3 of the assets (no more) can be
  made, only to non-inheritors
• Name a favorite individual(s) or charity(ies)

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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 (1729)
• Allah says, And pay the due thereof upon the
  harvest day (7142)
• And race to do good deeds (2148)
• Also, the Prophet said The best of good deeds is
  the one which is done promptly

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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 (2261). Also see (2265, 276, 280
  3039 3439 3529 5711 6417)

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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)

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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.

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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

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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

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ADAMS Waqf (Endowment)

• Compiled by
• Dr. M. Yaqub Mirza
• Sterling Management Group, Inc.
• www.sterlingmgmt.com
• Phone [phone] ext. 214
• Fax [phone]