Insurance policies and pension plans a guide for south carolina muslims www.scmuslim.com
www.scmuslim.comInsurance Policiesand Pension Plans: AGuide for SouthCarolina MuslimsIn the Name of Allah, Most Gracious, Most Merciful.INSURANCE AND PENSION:If one’s insurance or pension policy is written in a trustof nominated beneficiaries, upon one’s death, these items willpass outside of one’s Islamic Will (Wasiyyah) directly to one’sdesignated beneficiaries. The reason why insurance/pensionpolicies will pass outside of one’s Islamic will is because,these items are not regarded as one’s wealth due to the factthat they will not be in one’s possession at the time of theirdeath. However, in the case of a pension, since this item isaccrued from years of service, in principle, the retirementpension scheme constitutes Mudaraba (The first party, the rabbal-mal, contributes the capital to the mudaraba and does not getinvolved in its management, while the second party, the mudarib,
brings no funds but only his expertise and entrepreneurialskills to manage the mudaraba.); so, the proceeds from saidtransaction will become the right of all the legal heirs.Furthermore, even if one dies before obtaining their pension,the value of said item must be included in their estate.According to a June 30, 2003 article in Arab News Islam,"Pension plans are generally acceptable. They work onpractically the same basis as life insurance, with somedifferences. Pension plans are operated by most, if not all,Muslim countries. They are also applicable to Al-Azhar and otherIslamic universities. Normally pension plans provide support toa retired employee, his wife, and children below a certain age.The idea is that after that age, which is normally 21, childrenshould be able to support themselves. Pension is a benefit givento those who are at a stage of life when they cannot supportthemselves. This is why it is paid to a retired employee and hiswife, or spouse. It is not part of a person’s savings, unlessthe plan specifies that. As such, it is not treated as part ofone’s estate, which is divided according to the law ofinheritance."It should also be noted that any insurance policy that is"required" for a South Carolina resident or employee is lawfulaccording to Islamic law. On the contrary, Life insurance
policies are unlawful if not required by State law or aworkplace agreement. However, for those Muslims who engage insuch policies, upon their death, the funds from said policieswill pass directly to the beneficiary named within the document.One cannot inherit funds from their own Life insurance policydue to the fact that they will be deceased when the plan pays-out. As a result, one’s spouse is generally the primarybeneficiary of said policies; even if they are not ones desiredchoice.If one feels as though they could end up in this type ofdilemma, it is advantageous to utilize a Letter of Wishes tochange the way that an asset is held so that it pays directlyinto their estate; such as, changing one’s pension fund fromdirectly paying their beneficiaries to paying into their estate.Basically, one can include a Letter of Wishes for each assetthat passes outside of their Will. This Letter will be addressedto the beneficiary of that asset. It must be signed and dated bythe Testator (Person who owns/writes the Will) and can be eitherwritten or type. It does not require witness signatures.However, unlike the Will, the Letter of Wishes does not become apublicly available document upon death and therefore should bekept with ones Last Will and Testament.
The Letter of Wishes can also request that a particularbeneficiary include their share of the asset as part of thetestator’s estate. In principle, this ensures that the asset tobe distributed will be done so according to Islamic law. Thisfact is evident from SECTION 62-2-512 of South Carolina Code ofLaws pertaining to: Separate writing identifying bequest oftangible property, which maintains: "A will may refer to awritten statement or list to dispose of items of tangiblepersonal property not otherwise specifically disposed of by thewill, other than money, evidences of indebtedness, documents oftitle (as defined in Section 36-1-201(15); i.e., Document oftitle" includes bill of lading, dock warrant, dock receipt,warehouse receipt or order for the delivery of goods, and alsoany other document which in the regular course of business orfinancing is treated as adequately evidencing that the person inpossession of it is entitled to receive, hold and dispose of thedocument and the goods it covers. To be a document of title, adocument must purport to be issued by or addressed to a baileeand purport to cover goods in the bailees possession which areeither identified or are fungible portions of an identifiedmass.), securities (as defined in Section 36-8-102(1)(A)), andproperty used in trade or business. To be admissible under thissection as evidence of the intended disposition, the writingmust either be in the handwriting of the testator or be signed
by him and must describe the items and the devisees withreasonable certainty. The writing may be referred to as one tobe in existence at the time of the testators death; it may beprepared before or after the execution of the will; it may bealtered by the testator after its preparation; and it may be awriting which has no significance apart from its effect upon thedispositions made by the will." However, it is important to notethat a Letter of Wishes is not legally binding on one’sbeneficiaries; i.e., after one’s demise, there is no way toguarantee that their heirs will comply with the agreement.Nevertheless, as a backup plan, a testator can have theirexecutor reiterate to the beneficiaries in question theimportance of fearing Allah and honoring the testator’s finalwishes. With this being said, as detailed on theISLAMTOMORROW.com document: Last Will and Testament - ImportantNotes - Point #6 - Case of more than one wife, every Muslim malewriting a will should reflect upon the following point of thedocument which reads: "Although I believe that the legal ban inAmerica and other Western countries on marrying more than onewife is wrong and instead, I call for regulating pluralmarriage, in a way that is consistent with Shariah, I do notcondone any violation of the law of the land. But since thereare a few Muslim men who have more than one wife withoutregistering the second marriage or both marriages, I feel a need
to protect the rights of unregistered wives in the estate. Insuch a case I suggest personalizing the Last Will and mentioningthe names of the wives, registered or not, along with astatement that requires the distribution of any share of a wifein the Schedule of Mawarith equally between the survivingwives."