Wakaf

To Muslims, estate planning is not just to provide financial assistance to their loved ones, but to also gain merits in the eyes of the Almighty. One of the ways in which Islam encourages the act of charity, is to dispose of property by way of wakaf.

The first question to ask is, what constitutes a wakaf? Four elements must be met before a wakaf can be created.

• Founder (wakaf) - He or she must be the legal and beneficial owner of the property which is to be utilised as wakaf. He must be above 18 years of age and of sound mind. The declaration to wakaf the property must also be done voluntarily and without coercion.
  

• Party who creates the wakaf (beneficiary) or object (mawquf alaih) - The beneficiary can be virtually anybody or any legal entity that has the capability to own property, be it moveable or immoveable . Thus, a wakaf can be created in favour of family members, the orphanage, foundations, charitable organisations, the Muslim ummah in general, or even non-Muslims as long as it is not against the syariah.
  

• Mawquf - The subject matter of a wakaf can be anything that can exist in perpetuity. This can be land, money, shares, bonds and so forth. By that same reasoning, anything that is considered perishable, such as food, cannot be dedicated for the purpose of creating a wakaf.
  

• Sighah - It can be either direct or indirect. A direct sighah is where a person donates his land to a particular person. An indirect declaration could be: "I donate my property to the poor, whereby this property cannot be sold, given away as a gift (hibah) or be the subject matter of inheritance".

To complete the understanding, we now look at the characteristics of a wakaf:

• Wakaf property cannot be sold, given away as a give (hibah) or be the subject of inheritance.
• Under strict conditions, property that has been designated as wakaf property by the founder can be substituted for another property of similar or higher value.
• A wakaf takes effect immediately after declaration unless the time for commencement is specifically stated, for example, "at the time of my death'.
  

Every Muslim has to bear in mind that in sofar as Islam is concerned, the purpose of estate planning is not merely to provide financial assistance to the loved ones but to also gain merits in the hereafter.

Source: SmartInvestor, April 2006, Wakaf by Jasmin Jamaludin of As-Salihin Trustee Berhad

Living Trust

A trust is always deemed sacred and something which should not be treated lightly. Its fulfillment is not an act for wanton human recognition but for worship in its purest form. Thus, taking care of your family is a trust. Seeking knowledge is a trust. As the Quran in Surah Al-Nisa verse 58 puts it:

"Allah does command you to render back you trusts to those to whom they are due and when you judge between man and man that you judge with justice. Verily, how excellent is the teaching which He (Allah) gives you. For Allah is He who hears and sees all things."

In legal parlance, a trust is a legal obligation that comes into existence when an individual or other legal entity (The settlor) transfers the legal ownership of his assets to another person or persons (The Trustee) to hold not for their benefit but for the benefit of the beneficiaries who can be individuals or otherwise. The Trustees become the legal owners of trust assets once the assets are transfered to them.

The clear benefits of Living Trusts are many:

• They are not governed by the laws of Faraid;
• They can be enjoyed immediately;
• They are not liable for the deceased's debts;
• They are not restricted to the one third rule as per any testamentary bequest.

To avoid such a complication, Trustees should be chosen from amongst a number of trust corporations. They can exist in perpetuity and are controlled by stringent statutory rules (such as those contained in the Trustee Act 1949 and the Trust Companies Act 1949).

All assets, moveable or otherwise, are technically frozen once a person is deceased. Each and every Muslim would have to weigh the best mode on how to manage his assets but manage he must, for truly whatever has been endowed upon us is indeed a gift entrusted by Allah.

Source: SmartInvestor, February 2006, by Jasmin Jamaludin of As-Salihin Trustee Berhad

Be Humble

Be humble, the stock market is probably smarter than you.

Overconfidence might help secure a job promotion or the attention of another at a nightclub,

but in the stock market, it can be disastrous.

When considering investment decision, think about the other millions of other investors out there and ask

yourself do I really have an edge?

Interesting thought...

Harta Sepencarian

Harta sepencarian is a derivative of Malay custom, conceptualized long before independence. Only properties acquired during the subsistence of a valid marriage shall fall within the ambit of harta sepencarian. Gifts and properties received through the mechanics of inheritance and EPF contributions are outside the scope.

If a Muslim man decides to take on an additional wife and such polygamous endeavour is accepted by the Syariah court, any party to the existing marriage can make an application to:

a) to require a person to pay maintenance to his existing wife or wives ; OR;
b) to order the division between the parties of the marriage of any assets acquired by them during the marriage by their joint effort.

A possible protection is a harta Sepencarian Declaration. It is a mutual declaration by the husband and his wife at itemising what each party can claim as jointly acquired property. It avoids ambiguity and gives a level of certainty and security. Ascertaining and contesting harta sepencarian at the material time can be extremely acrimonious.

Whatever the recourse one takes to protect oneself, take heed that no amount of protection can ever substitute the protection Allah gives His creation.

Source : SmartInvestor Magazine, March 2006, by Jasmin Jamaluddin of As-Salihin Trustee Bhd

Wasiat...Must We Have One?

وَلْيَخْشَ الَّذِينَ لَوْ تَرَكُواْ مِنْ خَلْفِهِمْ ذُرِّيَّةً ضِعَافًا خَافُواْ عَلَيْهِمْ فَلْيَتَّقُوا اللّهَ وَلْيَقُولُواْ قَوْلاً سَدِي

Let those (disposing of an estate) have the same fear in their minds as they would have for their own if they had left a helpless family behind: Let them fear God, and speak words of appropriate (comfort).

Dan hendaklah takut kepada Allah orang-orang yang seandainya meninggalkan dibelakang mereka anak-anak yang lemah, yang mereka khawatir terhadap (kesejahteraan) mereka. Oleh sebab itu hendaklah mereka bertakwa kepada Allah dan hendaklah mereka mengucapkan perkataan yang benar.

Surah An Nisaa' [ 4.9 ]

Winding Up a Muslim Estate

We provided a general perspective on the need for IEP and covered areas of living trust, wasiat, harta sepencarian, wakaf, executorship and estate administration. However, such explanations only go so far as to provide Muslims with possible alternatives to faraid for consideration. They do not address the practical aspects taht go into winding up a Muslim estate, whether they embrace the alternatives discussed or not.

In relation to winding up estate, lawyers or trust companies for that matter, are merely facilitators. Lawyers or trust companies can only act on information and supporting documents furnished to them. Following is a common but non-exhaustive documents that are required for winding up a deceased 's estate:

• Original and extract death certificates of the deceased;
• The extract is submitted to the relevantMahkamah Syariah to apply for a Sijil Faraid;
• Information on the deceased's parents and grandparents must be ascertained with death certificates;
• List of surviving heirs, copies of their Identity Cards or birth certificates;
• Copy of deceased's Marriage Certificate, if applicable;
• List of assets,with copies of evidence over same such as land titles, bank account book;
• List of liabilities with copies of evidence over same, if any;
• valuation report on all immovable properties belonging to the deceased;
• Wasiat or trust deed executed by the deceased.
  

It is equally important for us to prepare and organise worldly affairs so that when death occurs, our surviving heirs are not burdened or overwhelmed.

Source: SmartInvestor Magazine, August 2006 by Jasmin Jamaluddin of AsSalihin Trustee Bhd

Executor and Estate Administration

Having a Wasiat can hasten the distribution of one's estate upon death. In any case, an executor or administrator needs to be appointed. A party that is entrusted to manage a testate estate is known as an Executor, whereas one that manages an intestate estate is known as an Administrator that ensure the beneficiaries' interest are fully protected and cared for.

It is always advantageous to have a trust company partake in administering one's estate or without a wasiat. Compared to appointing individuals, trust companies offer the following benefits :

• Expediency : Having specialized in handling estate matters.
• Exemption from administration bond: A trust company is exempt from providing Administration Bond, which is required of individuals as security for administer estate that exceeds RM50,000
• Perpetual existence : A trust company can exist in perpetuity. A trust company can ensure continuity in the administration process until the final distribution is made.
• Accountability and impartiality : A trust company ensure that the monies bequeathed are properly managed, accounted for and distributed.
• Professionalism and competence : By appointing a trust company, the assurance of professionalism and competence in the overall administration work done, at a very competitive pricing.
• Convenience and professional service : Islamic Estate Planners can visit the customer at a time and place (within reasonable limits) of the customer' choice, to give them flexibility, privacy, comfort and peace of mind.
  

It is encourage all not just meticulously plan their individual selves but to integrate the practical, financial and consequential well-being of their loved ones even if they are no longer around.

Source : SmartInverstor magazine, June 2006 by Jasmin Jamaluddin of As-Salihin Trustee Bhd.

Estate Administration: An Overlooked Subject

What is Estate Administration?

When a person passes away, the assets and debts he leaves behind are referred to as his estate. Where there is valid Will, the personal representative is referred to as the executor and where there is none, the administrator. The personal representative is responsible for locating and collecting the deceased's assets, paying off the debts and distributing the assets.

Estate administration can be an extremely tedious and difficult process. It is quite another to find out what real properties the deceased has or which private limited company he held shares in. Upon the conclusion of the estate administration, the executor is obliged to prepare a statement accounts to be given to the beneficiaries.

Upon the demise of a person, the family members are immediately faced with significant expenses. These include funeral expenses and testamentary expenses such as lawyers fees and disbursements. These expenses together with any debts of the deceased will be paid out from the assets of the estate which includes of outstanding medical bills, credit card debts, housing loan etc.

Source : SmartInvestor Magazine, June 2006 by Ong Eu Jin of OSK Trustee Bhd

Islamic Estate Planning

Is it possible for a Muslim to make a will or must he or she rely completely on the mechanics of Faraid? Who has overall control over a Muslim's estate?

As a Muslim, the above questions are but some of the many possible scenarios or issues that may trouble us at some point in time. This is the essence of Islamic Estate Planning (IEP), which is to provide such assistance to those in need. IEP is seen as a noble service, helping Muslims become aware of their responsibilities to their families.

IEP can help you prepare the necessary documentation which will clarify the position of your existing assets, what is to be done with them upon your death or to see how your children is to be cared for or even ensuring that your non-Muslim family is taken care of and not just your Islamic brethren. At the very least, IEP may help foster better relationships between surviving family members.

If a person wishes to go beyond the realms of division according to Islam's holy scripture, customised but duly acceptable planning needs to be done. If one needs a stronger reason other than practical ones for IEP, the following reminder from the prophet ( peace and blessings be upon him) as recorded by At-Tirmithi might be compelling enough:

"A human being's feet will not depart from before his Lord on the day of Resurrection until he is questioned about five things:
1. His lifetime - how did he consume it?
2. His youth and body - how did he utilise them?
3. His wealth - how did he earn it?
4. His wealth - how did he spend it?
5. And what did he do in regard to what he knew?

Source : SmartInvestor Magazine, December 2005 by Jasmin Jamaluddin of As-Salihin Trustee Bhd

The Importance of Wasiat Under Malaysian Law

Muslim have always been encouraged to write their Wasiat.

As the prophet s.a.w said : "it is not permissible for any Muslim who has something to will to stay for two nights without having his last Will and Testament written and kept ready with him. (Sahih Al-Bukhari vol IV p.1).

Wasiat lets the person to choose a trusted person as an Executor. A male testator is empowered by Muslim law to appoint a guardian a person whom he trusts the most. The assets and liabilities of the deceased fall under the generic term "estate". If a Muslim dies intestate (without a wasiat), a beneficiary must take several steps before he can benefit from the inheritance.

Distribution of the proceeds of an intestate estate may take one to two years or longer. If there are obstacles, such as the failure of beneficiaries to agree on the choice of administrators, or the inability of the administrator to provide adequate sureties. Until all these legal requirements are met, the estate of the deceased remains frozen.

The existence of Faraid does not mean that a benefiaciary can obtain his entitlement immediately after the death of a person. Faraid exists in harmony with wasiat. The rights of heirs are protected under faraid and yet a testator may still make provisions to benefit loved ones who do not fall within the category of heirs in Islam such as adopted children or non-Muslim parents or any charitable body and the like. With a wasiat, he can still divide his assets according to Faraid.

Source: Smart Investor Magazine, January 2006 by Amna Fazillah Ismail of As-Salihin Trustee Berhad

Long Term vs Short Term

This has always been a subject of discussion when I talk to people about building their long term wealth or the "Golden Goose".

The main idea is to have your money work as hard for you as you do for it. Our mission should be to save and invest rather than to spend it all. And this is a skill which we have to choose to develop, the rich skill and the poverty skill. It's may sound like a funny way of describing it, nevertheless it holds a lot of truth.

Rich skill is to have a lot of money and spend a little, while the poverty skill is having a little and spend a lot.

So long-term versus short-term, lets put it in simple terms: Poverty skill: people work to earn money to live today.
Rich skill: work to earn money to pay for investments, which will pay for the future.

Financial Freedom

The great debate!

In his book "Secrets of the Millionaire Mind" T.Harv Eker said when it's comes to the money game, most people don't have a clue to what it takes to win. That got me thinking and I read on to discover a unique blueprint that can easily be understood and applied.

His definition of financial freedom is simple: it's the ability to live the lifestyle you desire without having to work or rely on anyone else for money.

The desired lifestyle would cost money! Therefore to be "free" you will need to earn money without working. To win the money game, the goal is to earn enough passive income.

Two primary sources of passive income.

1. Money working for you.
This includes investment income from your stocks, unit trust, ASB as well as owning properties or other assets that appreciate in value and can be liquidated for cash.

2. Business working for you.
This means generating an ongoing income from a business where you do not need to be personally involved. WOW...that means the business must have it's systems in place. Of course, you need to build it up first...but once that is done...passive income comes in.

So by choosing business opportunities that immediately or eventually produce passive income, you'll have the best of both worlds - working income for now and passive income later.

Now, go have fun building up your investments and that business...just make sure that it's got the passive income structure. Good or good?

Buy America. I Am.

This is an extract from the text of an opinion piece written by Warren Buffett and published in the New York Times on Friday, October 17, 2008:

In his opening remarks this is what he said.

The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary. So ... I’ve been buying American stocks.



This is some of the points, in summary of his reasons why.

1. A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.

2. Fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

3. I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up.

4. Bad news is an investor’s best friend.

5. Equities will almost certainly outperform cash over the next decade, probably by a substantial degree.

So there we have it, Mr Buffett's strategy. He's buying America. Question ... who are you buying?

You can read the full article at New York Times.

If you want further elaboration, you can also see what our team member, Mr Techno Lim has to say. Just click here to go to his blog.

A day in history

Look at the picture closely. Do you see any resemblance? Is it the same building? What differences do you notice?

What's with the financial bail out's?

In the 1998 Asian Financial Crisis, the Malaysia Government made a significant stand to "bailout" and even peg the RM to USD. The respond from the other side of the world was that this is unjust and not a practice of "democracy".

Then we ask the question as to how this current financial tsunami happened? How can big companies like AIG go bankrupt and need UD$85 bil bailout or how did the world's fourth largest investment bank, a 158 year old giant, Lehman Brothers end up with US$660 bil in debts?

So now when the other side of the world has a financial crisis and suddenly has to fork out a US$700 bil "bailout", what do we say?

I am of the opinion that we will always do this, first for self, family, company, community, country.

If this holds true, shouldn't we be focused on our situation first and shouldn't we be the ones taking responsibility and pride to ensure that the local stock market, financial sector and economy and even political stability be our priority?

What would your comments be I wonder?

Malaysia BOLEH...! or ?

LVG Launching

Thanks to Berita Harian for publishing LVG Launching. Congratulations to the partners, Nash and Jash for such a memorable event.

What would the trend be in Malaysia ...

It's interesting to look at how matured market like the United States have grown in the mutual fund industry. Just have a look at some of the statistics.

As at end of 2007, the United States has US$12 trillion (RM36 trillion) worth of assets under management, Malaysia on it's private sector unit trust has about RM70 billion. The US has more then 8,000 funds and Malaysia has about 500. There are more funds available in the US than there are stocks on the NYSE.

How will this trend affect the local unit trust industry? Will it create more opportunity, will we see more funds being introduced, will the fees be going down further? Well, as I am not one of those futurist, what I can say, as far as learning and experience ... the best is yet to come.

Thanks Eddie...

Eddie is one of our senior consultants at LVG Consultants. Thanks Eddie for your contribution on the 4-Step Success Strategy:

1. Journey (or time period)
Unit trust investment is not meant for short-term gain. The recommended time period is three to five years.

2. Discipline
Consider investing regularly. This way, the investor rides both the ups and downs of the market to optimise their returns. This investing strategy is known as “Ringgit Cost Averaging”.

3. Monitoring and review
Engage a professional consultant or advisor who can constantly keep you updated with market developments as well as your investment portfolio. The advisor should offer a solid investment
strategy for the medium to long term period.

4. Taking action
Decide in advance what action must be taken when:

• the investment returns target is met
• market conditions indicate change, either for an upturn or downturn
• your risk profile changes
• your financial goal changes

A classic .... do you agree?

This to me is one of those classic newspaper headlines. It poses the question can you retire? It's an interesting article with very staggering statistics. But sad to say, just next to the headline we see that Malaysia is celebrating it's 5o years of independence! Well my assumption is that the country's independence does not equal an individual's financial independence.

Well, I guess there's not much to write about, my work needs to carry on. May we build upon our vision of building a financial fortress in every home. Possibly we can change that heading to "Most Malaysians are well on their way to financial security & independence"

Planning for the kids education funding

Recently I met a few people who wanted to start their children's education funding program. So I asked them how old their kids were and almost all did not answer "newborn" baby. Why I want to highlight this is because if your kids is already one year old, what did you do for the last one year for him or her.

It's funny to me sometimes to think that we all read and know about the importance of education, we also know that the prices are not coming down, so what more does it take to just get started on the savings. My guess is, it's a long way to go right! 18 to 20 years from now is a long time ... are you sure. Don't get caught.

I got this idea from one of the books I read. The way to plan for the long term, is to not call it long term ... but rather a few short months. For example, for a 5 year plan, call it your 60 short months plan. If you start doing this and implemented it on paper ... i can bet you see results.

When I implemented this idea, I got sick to the stomach to realize how much time I have wasted. More like, how many years that is. You see, once you quantify it into monthly blocks, you can see it very clearly and it stares right back at you, if you don't do anything.

So now for me planning has become easy. Well, at least the planning part ... implementation is another skill to be mastered. So back to the question of wanting to start that education or college fund for the kids. Let's just take my examples this time round.

I've got 3 kids, Amira is 10, Amir is 7 and the last girl, Aldelia is 5. Now lets say we plan for Amira. She's got another 8 to 9 years before she comes to me and ask for that money I promised for her to go to college. I sure am going to feel pressured and I want to be able to tell her .... ok darling.

So say 8 years, still quite a long time. Now you break it to months ... it's only 96 short months. Oh man! Now with that you draw up in an excel spreadsheet and line up the boxed and put it at a visible place. Every month that you put aside the money, you can cross off the box. Now you can not only see it, but feel how you are progressing each month. Believe me it is effective.

Financial planning may seem like a complex subject with the stock market, unpredictable returns, complex products and so on. But the bottom line is this my friends ..... it's not how much you earn, it's how much you put aside for the later use of those money. That's basically the basics. Then we can talk about the complex structures and returns.

I do hope all of you will get started with this simple idea.

Do you see more months or more money at the end of the months.