RM70 billion in frozen Muslim family assets, a casualty of Malaysia's complex inheritance laws?

Some RM70 billion in assets had been frozen in the country as of two years ago due to what has been described as the inefficient management of faraid, or the Muslim inheritance system.

Faraid is a concept in shariah law which determines the distribution of property to heirs.

Data from 2020 shows that billions in inheritance property remained suspended as of that year instead of being claimed by heirs.

There is also concern about a lack of understanding regarding the division of property which has victimised many single mothers and children following the death of husbands and fathers.

This has given rise to the perception of injustice in the faraid system.

But lawyers specialising in Islamic law say the problem is mostly due to ignorance on the part of heirs regarding matters of estate management.

There is also the issue of weaknesses in the administration system itself.

Irfan Shafie of the Muslim Lawyers Association of Malaysia, said for many Malay-Muslims, the issue of inheritance is a sensitive matter.

"Sometimes, people who own property also keep their assets a secret, to the point that their heirs are unaware of it after their death.

"This is a factor in the dumping of unclaimed properties as well," he said.

But the living also play a role in the inefficient distribution of property, he added.

Wasiat and hibah

The way that property is managed is a matter recorded in both conventional and shariah law.

Muslims who want to divide their property during their lifetime can do so through wills and grants (hibah), two instruments that can be made with either civil or shariah lawyers.

But according to lawyer Nur Hidayah A Bakar, companies managing family estate are more interested in the pursuit of profits through these two instruments.

"All matters come at a cost but lower costs can be obtained through discussions with lawyers," she added, commenting on the challenges faced by Muslims who wish to chart out the division of their property.

The agencies involved in the management of the estates of both Muslims and non-Muslims include the High Court, the Small Estates Distribution Unit at the Department of Lands and Mines, Amanah Raya Bhd and the Shariah Court.

Each agency has its own jurisdiction and responsibilities in the division of estates.

In Malaysia, there are three categories of inheritance – small, medium and large – the distribution of which is subject to the value of the property and whether or not a will is left.

The claims process for the inheritance of Muslims and non-Muslims involves the same procedure, but the distribution of Muslim property is subject to faraid.

Lawyer Muhammad Nazmi Kamis said while it was necessary to undergo the faraid system, it was not mandatory for the recipients to take their share.

"The heirs need to be attentive and ready to give and take to release the faraid rights," he said.

In his experience, many heirs are willing to donate their rights to the wife and children of the deceased.

Shariah-civil clash

For him, the biggest challenge is in harmonising the existing laws to facilitate the management of the issue.

In some cases, for example, there is a clash of civil and shariah law.

"Say a child wants to take out a loan but has no property to pledge," he said.

"He might borrow his father's land grant so that the loan will be approved. From the point of view of civil law, the land belongs to the child but according to Islamic law, it is only borrowed."

Family enactments, the laws governing wills and the implementation of grants also differ from state to state, which further complicates the process of property division.

The freezing of property might also contribute to the trend of parents buying houses for their children even before they are grown.

Companies that develop grant-related products have also emerged in recent years, in what could be a sign that society is becoming more aware of the issue at hand.

For Irfan, such efforts are a good initiative on the part of the parents although the matter remains whether or not the grant meets the necessary principles.

"If there is no grant confirmation order from the Shariah Court, the legality of the grant instrument agreement will likely be challenged by other heirs after the grantor's death," he said.

Even so, Nazmi added, the issue of faraid will still arise if the grant recipient dies first.

"Faraid serves as a guideline but we consider it as pressuring the wife when in actuality, the wife and children will be the recipients of the majority of the property."