A faraid guide for EPF contributors [BTTV]

KUALA LUMPUR: Inheritance has long been a sensitive topic in many families as it involves two touchy subjects, death and money.

The lack of or delayed conversation on inheritance is a precursor to many feuds as the assets left by the deceased family member might not be distributed via proper channels to the right beneficiaries.

For Muslims, there are two types of distributions.

One is a method whereby it has been planned out while the person is still alive which includes hibah, wakaf or donations.

These are known as gifts and the giver has set the amount and the receivers.

Another method is distribution of assets after the demise of a family member which is done according to the Islamic law known as faraid.

Under the faraid law, the assets that will be distributed are the remainder after deducting burial fees, debts and will in accordance with the shariah law.

The will or hibah should not be more than one-third of the total amount.

Of the many assets that a Muslim individual may have, one of the disputes that may crop up include money in the Employees Provident Fund (EPF).

Funds in EPF fall under the faraid law once a contributor dies.

However, many get confused between the role of a nominee and beneficiary. "There are cases where Person A named his son as the nominee. The son gets the money and does not distribute it accordingly. "When the son gets the money, he has been named as the administrator, not a beneficiary and that is something people need to understand," Amanah Raya Bhd group managing director Ahmad Feizal Sulaiman Khan told Business Times.

As of January 2018, EPF contributors can appoint AmanahRaya as a nominee to ensure the distribution of assets were done according to law. Besides being named as nominee, Feizal said AmanahRaya usually advises individuals the processes involved in making their EPF money as hibah.

Given that one-third of the total amount can be excluded from faraid, Feizal said this would enable contributors to give the allocation to those he or she finds more suited to inherit the money. "But the inheritor of this portion must not be a beneficiary, there are some intricacies to this and we will facilitate it," he said.


Faraid - protection for those in need

Due to the confusion between the two methods of distribution and the roles named under EPF for inheritance and administration, Feizal noted that the laws were meant to protect the people surrounding it.

"The spirit behind faraid is to protect. This means protecting the rightful beneficiary, the orphan, the underaged or the disabled.

"Secondly, it ensures all of the assets are captured because some wills can be very specific while some are too general. "It is important to note that the first point of reference is the will and if there is no will, the law will ensue. This would be faraid for the Muslims," he said.

Advocates and solicitors Siti Nuraisah Abdul Ghani explained that faraid serves as a guide to ensure that beneficiaries who are entitled to inheritance will receive it in accordance to Islamic way that has been underlined in the Al-Quran. "EPF adopted this method as Malaysia consists of those who are Muslims and non-Muslims whereby the Muslim is governed under Islamic law while no specific regulated law for non-Muslims in Malaysia," she said. 

The withdrawal of money from the pension fund following an individual's death is done upon submission of the death certificate.

"Action should be taken by the beneficiaries to the nominee if it was not distributed to the beneficiaries accordingly," she said when asked if legal actions can be taken on EPF if the money was not distributed "fairly" to the beneficiaries.



Categories under faraid

There are three categories under faraid namely the main beneficiaries, substitute beneficiaries (waris gantian) and collateral beneficiaries (waris sisian).

The first line of heirs include parents, spouses, sons and daughters.

These are the rightful individuals to inherit upon the death of an individual, and the portion for each person has been outlined according to the law.

Substitutes come into the picture if the deceased does not have those in the first line of beneficiaries.

For example, the grandparents will step in for the parents if the deceased parents have passed.

Meanwhile, collateral beneficiaries will inherit faraid if the deceased do not have family members that fall in the first two categories.

Siblings, uncles, aunties or nephews all fall under this category.

Should the deceased have sons, grandsons or a father that is still alive, none of the collateral beneficiaries will inherit the assets distributed under faraid.

Inheritance for wives and daughters under faraid

Therefore, Muslims need to be aware of the faraid distribution categories to avoid disputes whereby wives do not get any inheritance upon the death of their husbands.

By understanding the law, it enables the female family members to claim their inheritance although the law leans towards male family members.

Some wives have raised concerns about their position for inheritance if they do not have a son.

"If they want to distribute the assets via faraid, they need to get the faraid distribution order from the Syariah court. Only then they can distribute the assets to the husband's siblings or other beneficiaries in accordance with the order.

"Wives and daughters will get a portion but it might be small," said Nuraisah. Feizal said the faraid law has an allocation for wives and more details are required for cases that claimed the wives do not get a single cent from their husband's EPF.

"However if the husband makes a will that does not include the wife, then it is up to other beneficiaries to contest. "But if there is no contest from the beneficiaries in the will, then it will be executed accordingly."That is why we view faraid as protection but it also does not stop Muslims from making a will," he said.


Raising awareness on faraid

In an email response to Business Times, the EPF said that a joint effort with the religious authorities is required to highlight the rules and regulations of inheritance under Islamic law.

Commenting on the faraid distribution method and its lack of awareness by Muslims, the pension fund said its nomination form has outlined the role of nominee as wasi or administrator and not as a sole beneficiary.

"This is to educate Muslim members to nominate the right person to undertake such a role based on the fatwa.

"As part of the death withdrawal process, the nominees will also be required to execute Perakuan Tanggungjawab Penama/Penerima Wang Simpanan KWSP Ahli (Ahli Beragama Islam) as a declaration that they understood their role as administrator to distribute the nominated amount in accordance with the Islamic Law.

"A concerted effort with the religious authorities (Mahjlis Agama Islam negeri) is needed, especially on the fatwa implementation as well as providing guidance and awareness on the rules of Islamic inheritance," it said.

On hibah, EPF noted it is considered as a gift under Islamic law and requires the donor to have full control of their hibah properties, including the ability to transfer ownership when they are still alive.

"For EPF Muslim members to be able to move or transfer their EPF savings when they are still alive, they can do it according to the current withdrawal schemes available such as the withdrawals that have been set for ages 50, 55 and 60," it added.

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