In India, Muslim personal law governs Muslims' succession and inheritance according to the Quran and Hadith. Even though such rules provide clarity, they leave a person with not much scope to introduce a change in the distribution of wealth upon death. For example, as per Muslim law, an individual can only bequeath one-third of his property to non-heirs; the rest must be disposed off among legal heirs in predetermined shares. Under such circumstances, the institution of a trust is a practical consideration. It allows people to provide for dependents, manage property, and make provision for specific requirements—without necessarily breaching Sharia principles.
What is a trust in Muslim law?
A trust, also known as a waqf in Islamic law when the creation is on philanthropic or religious motives, or a private trust under the Indian Trusts Act, is a legal arrangement by which property is transferred to trustees for the benefit of specified beneficiaries. In the Muslim family, a trust may be used to ensure minors, widows, or vulnerable dependents are provided with financial support on a continuous basis. Unlike a will, which is operative only after death, a trust can operate both in one's lifetime and after, ensuring continuity and security.
Principal benefits of setting up a trust
The greatest advantage is control and security. You can reserve money to cover children's education, medical needs, or family upkeep through a trust. It protects heirs from conflicts that would normally result from the division of property. A trust also preserves vulnerable beneficiaries such as minors, disabled heirs, or women who could be financially or socially embattled. Besides, trusts avoid the breaking up of property by keeping property in its entirety form in the hands of trustees so that it can remain useful to the whole family.
How it operates in practice
Establishing a trust involves the settlor (the person creating the trust) transferring specific property to trustees who, in turn, manage it for titled beneficiaries. Caution is exercised on the part of Muslims not to violate Sharia inheritance rules in establishing the trust. For example, it is impossible to disinherit a legal heir from their Quranic share by placing assets in an additional trust beyond the permissible one-third share without the heirs' consent. The trusts can be useful tools of financial planning under these constraints. For example, a parent can establish a trust for a handicapped child, providing for lifetime assistance without infringing on inheritance entitlements of other heirs.
Points to bear in mind
While establishing a trust under Muslim law, it is crucial to make sure:
• The purpose and beneficiaries of the trust are explicitly mentioned in the trust deed.
• The transfer adheres to Muslim law restrictions on alienation of property.
• Careful selection of trustees, preferably those whom the family or professional institutions confide in.
• The trust is not contrary to public policy or Sharia principles.
Seeking advice from both a trust lawyer and an expert in Muslim personal law ensures that the arrangement is enforceable and effective.
FAQs
Q. Can I use a trust to avoid Muslim inheritance law?
No. Muslim law restricts deviation from the pre-set shares of heirs. A trust can only manipulate not more than one-third of the estate freely unless all heirs consent. Beyond that limit, Sharia principles must apply.
Q. How is a waqf different from a private trust?
A waqf is an irrevocable trust of immovable property for religious or charitable purposes. A private trust, governed by the Indian Trusts Act, is for specific persons, i.e., relatives.
Q. Can a trust help in protecting weaker heirs such as children or widows?
Yes. A trust can provide for regular financial support, medical treatment, or education to such dependents, preventing disputes and preserving their interests even after the death of the settlor.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
