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The effects of Shari’a law on will drafting & estate planning

Author: Jo Summers (jsummers@pwtadvice.co.uk) - 16/11/2010

When does Shari’a law apply?

Practitioners need to be aware of the conflict of law rules, which apply where the laws of more than one jurisdiction are involved. These rules determine which of two or more conflicting laws take priority.

The conflict rules in relation to wills and estates are extremely complex and would merit an article of their own. The following is a summary but, when in doubt, practitioners should seek specialist advice.

The concept of ‘renvoi’ determines which laws apply to the individual’s estate. Briefly, each jurisdiction has to decide whether to apply its own laws to the succession or the laws of the deceased’s domicile (where different).

In England & Wales, the courts will apply the law of the deceased’s domicile in relation to certain assets, even if located here. It follows that an English law will may not be valid in respect of all of its dispositions, where it is written for a non-UK domiciled individual. For ease, this article refers to ‘UK domicile’ although strictly there is no such thing: a client must be domiciled in one of three jurisdictions: England & Wales, Northern Ireland or Scotland.

The recent cases of Cyganik v. Agulian [2006] EWCA Civ 129 and Holliday v Musa [2010] EWCA Civ 335, show that foreign clients can live here for many years, indeed decades, without becoming UK domiciled for succession purposes. Both cases related to claims under the Inheritance (Family and Dependants) Act 1975 (“the 1975 Act”) and both claims failed because the deceased had not acquired a domicile of choice in the UK. The court has no jurisdiction to hear a 1975 Act claim against the estate of a foreign domiciled person. In Cyganik the deceased had lived and worked in the UK for 43 years without losing his Cypriot domicile of origin. In Holliday the deceased had maintained his domicile of origin, also in Cyprus, despite moving to the UK in 1958.

Following Re Fuld (No. 3) [1968] P 675, the courts will look at all the circumstances of the person’s life, in order to determine if he had become UK domiciled at any time prior to his death. The court will weigh the strength of the individual’s links with his home jurisdiction against the strength of his ties to the UK. One has to look at the overall picture to determine if there has been a change of domicile.

Three points are worthy of mention here. First, Longmore LJ observed in the Cyganik case, "it is easier to show a change from one domicile of choice to another domicile of choice than it is to show a change to a domicile of choice from a domicile of origin." In other words, there is an ‘adhesive’ quality to a client’s original domicile.

Second, the burden of proof usually falls on the person who alleges the change of domicile. So in succession cases, like Cyganik and Holliday, the person bringing a claim under the 1975 Act must prove that the foreign domiciled deceased had acquired a UK domicile of choice prior to death.

Third, even clients who have been born in the UK may have a foreign domicile of origin. If the child was born to a foreign domiciled father (or mother if the parents weren’t married), then the child inherits that foreign domicile despite being born here (and possibly also having British nationality and a British passport). This may mean that Shari’a laws are relevant, if these apply in the country of domicile.

Having determined the domicile of the deceased, the next question is which laws apply to his estate. This in turn depends significantly on the type of assets. The key is the distinction between ‘immoveable’ assets, such as real estate, and ‘moveable’ assets e.g. cash and shares. In England, if the testator is foreign domiciled at the date of death, then English law will only apply to the disposition of any English real estate the deceased may have owned. This is because the law of the situs of the asset (lex situs) governs the validity of dispositions of immoveable assets.

On the other hand, the laws of the jurisdiction in which the testator was domiciled at the date of death govern moveable assets, such as cash, chattels and investments, even if those assets are physically situated in England & Wales. This is known as lex domicilii.

This means an English law will may only be valid in respect of the foreign domiciled client’s immoveable assets situated here. An English court will recognise that Shari’a law applies to all moveable assets in the estate, due to the deceased’s domicile, even if those assets are located here. The personal representatives will have to administer at least part of the estate according to Shari’a rules. The laws of the testator’s domicile will prevail, notwithstanding that there might be a valid English will that attempts to distribute the assets in a different manner.

It may be sensible, therefore, for an individual who is not domiciled in England to limit their English law will to the immoveable assets situated here. If the English law will purports to govern all assets here, it may not be valid in respect of the moveable assets, to the extent it conflicts with the laws of the testator’s domicile.

It is also sensible to discuss the nature of the client’s assets. This distinction between ‘moveable’ and ‘immoveable’ assets is key. It can mean that different succession laws apply to the house than to its contents. This could cause difficulties if the testator wants to give the house including contents to the same person, rather than having the contents split between the Shari’a heirs. This should be possible if the will is drafted correctly to take advantage of the ‘freely disposable third’ of the estate (see further below).

It’s also vital to look at the property ownership structure. Holding the property via a company means the client owns moveable property (the shares) instead of immoveable property (the house).

What happens where the will conflicts with Shari’a law?

What if the English will-writer is not aware of the lex domicilii rules and simply drafts an English law worldwide will? To the extent this conflicts with the Shari’a laws of succession, what then happens?

The first point to note is that it may not be entirely clear which laws apply to the will. In England, will-writers are quite familiar and comfortable with the concept of preparing an English law worldwide will. However it may be less common to find a governing law clause in the will itself. Where the deceased is English domiciled and all his assets are in England, this will not be a problem. It can be presumed that English law applies to the will.

However where the deceased was not English domiciled, or the will is to govern assets overseas, it may be vital to have a governing law clause. Otherwise the first question for the court to address may be to determine which law is meant to apply, before deciding whether that choice of law is valid. The costs of that initial determination could be payable by the will-writer, if the court decides that omitting the governing law clause was negligent.

Where a will does conflict with Shari’a law, the heirs will wish to confirm the disposition of the estate under the applicable foreign law. Usually this is achieved by applying to the Shari’a court for a succession order or a certificate of succession, confirming:

a) that the deceased was still domiciled in that country, not in England, at the date of his death;
b) that Shari’a law applies whenever lex domicilii is relevant; and
c) the correct Shari’a heirs and their respective entitlements.

This can often be a surprise to the executors who are acting on the (incorrect) belief that the will that appointed them governs the entire succession. Clearly the English practitioner will need a translation of any foreign certificate of succession, usually certified by a notary or lawyer, to understand the applicable Shari’a succession laws.

Take the following example:

A Kuwaiti domiciled man had been living in England for 30 years. He asked local solicitors to prepare a new will for him. They drafted their standard English-law worldwide will, giving everything to his wife if she survived him. They advised him this was the most tax efficient due to the inheritance tax spouse exemption and the transferability of the nil rate band.

The solicitors were unaware that Shari’a law applied, due to the client’s domicile. Equally they did not know that Shari’a law prevents a man giving everything to his wife (see below).

The English will was invalid in respect of all the client’s moveable assets. Further examination of his estate showed that the only real estate he owned (the family home) was held via an offshore company. This structure had been put in place for tax reasons. The result, however, was that the client owned moveable assets (the shares in the offshore company) and did not own any immoveable assets. Shari’a law therefore applied to his whole estate and the conflicting English law will was invalid.

What are the Shari’a succession laws?

The Shari’a laws of succession, also known as mawarith, merit a book on their own (and the author is currently co-writing such a book!). There are differences between the Sunni and Shia succession laws. Since around 90% of the world’s Muslims are Sunni, it is more likely UK practitioners will need to understand the Sunni succession laws.

The estate is applied in the following order:

1. First the estate pays the expenses of enshrouding and burial of the deceased;
2. Second, the estate must fulfil any monetary or religious debts the deceased may have had:
3. From the remaining wealth, 1/3rd will be allocated on fulfilling the Will of the deceased (see below);
4. The remaining 2/3rds will be distributed amongst the heirs of the deceased as ascribed by the Shari’a.

The third point above relates to the ‘freely disposable third’. This means the testator can distribute up to one-third of his net estate to charity or to individuals who are not heirs under the Shari’a rules of succession. Certain rules apply to this ‘freely disposable third’:

• Any bequest to non-heirs will only be valid up to a maximum of 1/3rd of the estate (it is not possible to give more than 1/3rd to non-heirs except under the default provisions set out below).
• There is no obligation to distribute this 1/3rd to non-heirs, so the testator may prefer to leave his entire estate to the Shari’a heirs.
• Bequests cannot be made from the freely disposable third to people who are already Shari’a heirs (in other words, the testator cannot try to favour one heir by giving him/her more than the amount they are entitled to under Shari’a law).

The remainder of the estate (a minimum of 2/3rd) is divided between the Shari’a heirs. As with many civil law jurisdictions, Shari’a law has a system of pre-determined heirship. Again strict rules apply to the residuary estate:

• The Shari’a heirs cannot be deprived from their entitlement to inherit.
• The heirs’ entitlement is fixed, depending on the number and nature of the heirs who survive.
• It is not possible to say in advance who will inherit: it is only at the date of death that the division can be calculated.

Two main types of Shari’a heir are entitled to inherit. First, the estate will be distributed amongst the Ashabul Fara’id (also known as Zawil Furood). These are the obligatory or primary heirs: those individuals whose share has been prescribed in the Shari’a.

After the Ashabul Fara’id receive their prescribed share, the remaining estate will be distributed amongst the Asabat (plural of asaba which means residuary). Asaba are those relatives of the deceased who receive the remainder or residue of the estate after the primary heirs have received their shares. If there are no primary heirs, then the residuary (Asaba) heirs will receive the estate in its entirety.

The Shari’a default provisions can be quite complex:

1. First, if there are no residuary heirs, then the entire estate is divided between the primary heirs pro rata to their original entitlements.

2. If there are no primary heirs and no residuary heirs, the estate goes to the Zawil Arham (distant kindred). Zawil Arham are those blood relatives of the deceased who are neither primary heirs nor residuary heirs.

3. If the testator has absolutely no family, so there are no primary or residuary heirs and no distant relatives, then it is possible to create heirs. This can be done in two ways.

a. First, the individual can name a Mawlal Muwalat (successor by contract) to receive the inheritance. Muwalat means to ‘befriend’. In Islamic jurisprudence, it refers to a distinct type of contract, Aqd Muwalat or the contract of friendship. This can be a two way process, so that each person will be a Mawlal Muwalat of the other.
b. Second, it is also possible for the individual to ratify kinship with another person, making him an Al-Muqirun lahu bin-nasab.

4. In the absence of anyone in the above categories who are able to inherit, the estate is divided between those heirs who received the freely disposable third. This is the only scenario where non-heirs can receive more than 1/3rd of the estate.

5. If there is no one to inherit, then the entire estate goes to the Bayt-ul Mal (the Treasury of an Islamic government).

Certain principles of Shari’a law may surprise practitioners who are used to English succession laws. For example, it is not possible to inherit under Shari’a law via a deceased relative. So if the testator has two sons, one of whom predeceased, only the surviving son is entitled to inherit. The deceased son’s own children could only benefit from the freely disposable third.

No distinction is made between children of different marriages, but illegitimate and adopted children are not Shari’a heirs. The male heirs in most cases receive double the amount inherited by a female heir of the same class. It is worth adding that individuals who are non-Muslims may not inherit at all.

Looking again at the example above, where the English law will was invalid, the deceased was survived by the following people:

• Second wife,
• 3 children (2 sons and 1 daughter) by a first marriage and
• 2 sons by a second marriage.
• First wife (divorced).

According to the certificate of succession, the estate had to be divided into 72 shares, distributed as follows:

Surviving wife: 9/72
4 Sons: 14/72 each
Daughter 7/72

The first wife did not inherit under Shari’a law. No distinction is made between the 5 children, all of whom are Shari’a heirs, but the sons receive twice the amount received by the daughter.

However, the English law will purported to give everything to the second wife and her children and nothing to the children of the first marriage. The Shari’a certificate of succession overruled the English will. As a result, inheritance tax became payable due to the loss of the spouse exemption for 63/72 of the estate.

Conclusion

Shari’a laws of succession are complex but cannot be ignored by practitioners. An English law will could be invalid, if it conflicts with Shari’a laws of succession, depending on the nature and location of the testator’s assets. This can have an impact on standard UK estate planning, particularly inheritance tax, since the spouse cannot inherit the entire estate under Shari’a law.

By Jo Summers with many thanks to Mufti Talha Ahmad Azami for his helpful comments

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Please Note:
These articles were based on the legislation in force at the date of publication. The laws may well have changed since. These articles should not be taken as being or replacing proper legal advice.

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