Estate Planning with Life Takaful

Estate Planning is especially important for main income earner. As a main income earner, we will want our liquid assets to be disbursed immediately to our loved ones in order for them to move on with their lives without much interruption after our passing. But is this the case with Islamic Estate Planning according to Faraidh in Malaysia?

I think there are sufficient evidences to show that wealth distribution according to the principles of Faraidh in Malaysia is time consuming. There are stories where distribution can be made as early as 6 months and as long as 10 years. That depends on the complexity of the assets and family structure. Can our family wait that long especially if our spouse is not working? Is there enough liquid assets for the family to live on before estate distribution is made?


Typically, property, savings, stocks, gold and EPF are among the assets that one owns during his/her lifetime. Among those in the list, only savings in a bank account is liquid provided either it is a joint account or the spouse have access to the bank account. All other types of assets will need to be liquidated in order for them do be distributed accordingly. Of course there are avenues where all the beneficiaries agree that the assets are distributed to the spouse and children of the deceased. But don't count too much on having that kind of agreement when it comes to assets distribution. All kind of characters will suddenly surface and don't be surprised if there are those who you never knew suddenly making claims towards the deceased assets. The best is still to prepare to the best of your ability in order for your assets to reach those in need fastest.

In this posting, I will only discuss to a certain extend how you can manage how your assets can be disbursed to those you wish IMMEDIATELY after your death with takaful products. The extend of Faraidh distribution and how it is done is a discussion only by those experts in this respective field. 

There are few common mistakes made by Muslims when purchasing insurance/takaful products for Estate Planning. Here are a few:
  1. Purchasing conventional life products and naming your spouse as the Nominee. Regardless even if you list a nominee under your conventional life product, he/she will still be only a nominee. The payout will still be in accordance to Faraidh and that will definitely consume time. Nominee is not the beneficiary of the death compensation in case of your death.
  2. Purchasing earlier version of life takaful products and naming your spouse as the Nominee. Earlier version life takaful products do not have the option of Hibah or gift to your beneficiary. The nominee still act as a nominee for distribution of your assets according to Faraidh similar to a conventional product.
  3. Nominating a person below 18 years old as a Nominee or Beneficiary. In such cases, the nominee/beneficiary will have to wait for him/her to turn 18 before any action can be taken to distribute the death compensation. Always nominate a person above 18 years old regardless as a Nominee or Beneficiary to at least smoothen the asset distribution process. 
Now let's look at takaful products offered by AIA Public Takaful that can help to distribute your death compensation immediately after your passing. Among the products are:
  • A-Life Link-i
  • A-Life Signature-i
  • A-Life Cancer360-i
  • A-EnrichGold-i
All these products contain life coverage which will pay death compensation upon the passing of the insured. Under these products, there is an option for you to choose Nominations either as Wasi (Executor) or Conditional Hibah. Let's look at the definitions of both options:

Wasi (Executor)
  1. The Nominee shall receive the Takaful benefits under the Certificate as  Wasi (Executor) and shall distribute the Takaful benefits in accordance to the Islamic Law of Inheritance (Faraidh) or Distribution Act 1958, whichever is applicable.
  2. If any Nominee dies after the death of the Participant but before any Takaful benefits has been paid to him as Nominee, AIA Public shall pay the Takaful benefits to the estate of the deceased Participant. 
Conditional Hibah
  1. The Nominee shall receive the Takaful benefits as a beneficiary and shall be entitled to the Takaful benefits in accordance with the percentages stated in the table (up to 4 Nominees can be included).
  2. If any Nominee dies after the death of the Participant but before any Takaful benefits has been paid to him as Nominee, AIA Public shall pay the Takaful benefits to the estate of the deceased Nominee. 
If you think you have taken care of the needs of your loved ones after your passing, think again. Ensure you have selected the right option for your compensation distribution and most importantly, choose the right product to leave your legacy. 

Contact me if you wish to create as ASSET for your loved ones for IMMEDIATE distribution upon your death. 

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