1. Hibah is the concept of voluntary
transfer of assets as gifts during the lifetime of the donor. It is very much
part of Islamic practice, for the purposes of financial and estate planning.
Having been transferred during lifetime of the donor, the asset does not form
part of the estate at the time of his death and therefore, not subject to the
faraid rules of distribution.
2. The Islamic Financial Services Act
2013 modified this traditional concept of hibah and introduced what is known as
Conditional Hibah in takaful contracts.
3. In family or personal accident takaful contracts, the participant (owner of the contract) can choose a nominee and declare that person to receive the death claim proceeds as the beneficiary of a conditional hibah.
4. The features and benefits of this
arrangement of a conditional hibah in the contract, which are indeed unique, are
as follows:
i) The
participant of a contract may be a Muslim or a Non-Muslim.
ii) The nominee appointed may be a Muslim or Non-Muslim. Thus, a Muslim participant may
appoint a Non-Muslim nominee and vice versa (traditionally a Non-Muslim is not
entitled to inherit from the estate of a Muslim).
iii) The
nominee receives the claim moneys and is beneficially entitled to all of it, as
the proceeds are not subject to the faraid rules.
iv) The
participant has the right to change the name of the nominee at any time prior
to his death, without the need of consent of the said nominee.
v) The
death claim proceeds do not form part of the estate of the participant for
purposes of creditors in a bankruptcy action, laying a claim to it (creditor
proof). If the participant is a Muslim, this is the only asset that has this
unique benefit as provided by legislation (traditionally the concept of
“creditor proof” does not apply to Muslims).
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