Navigating Muslim personal law, inheritance, and estate planning

When tragedy strikes, the complexities of inheritance laws add another layer of hardship. This unexpected reality, often rooted in religious laws, underscores the importance of estate planning.

For instance, a young Muslim widow may be left with just a fraction of her husband’s estate under Muslim inheritance law (Muslim Personal Law (Shariat) Application Act, 1937).

Even if she had been named as the nominee of the deceased, she would receive just a quarter of her husband’s wealth if she had no children—and much less if she had, with the rest going to his parents or siblings or even distant relatives.

This misconception that a nominee inherits everything catches many individuals and families off-guard, leaving them financially vulnerable. This article explores the legal provisions and practical steps individuals can take to ensure their wealth is distributed according to their wishes.

Misconceptions and financial shocks

Under Muslim personal law, a widow would receive 25% of her husband’s estate if they had no children, and the remainder would be distributed among his parents. If his parents have passed away, the remainder of her husband’s estate would be allocated to his siblings or other relatives.

If the couple had children, the widow’s share would be halved to 12.5% of her husband’s estate, and the rest would be allocated to the children and her husband’s parents.

This reality comes as a shock as many families assume that a nominee would inherit the entire estate. In truth, inheritance laws override any nomination.

If the wife had died, her husband, under Muslim personal law, would inherit 50% of her estate if the couple didn’t have children. If they had children, his share would shrink to 25%.

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Impact on parents

Let’s take the example of a Muslim male who is unmarried or widowed and without children. If he dies, his estate would be allotted to his parents, but his mother would receive only a one-third share. If his father had passed away, his mother would still receive only a one-third share, with the remaining two-thirds going to relatives.

Dr. Tahir Mahmood, former chairman of the National Minorities Commission and a member of the Law Commission of India, said children are central to Muslim inheritance laws. “If children exist, wealth stays within the family. However, their absence triggers inheritance to distant relatives.”

Unequal distribution among siblings

Muslim personal law also dictates unequal distribution between male and female heirs. For instance, brothers inherit twice the share that sisters would receive, regardless of their marital status.

If a man dies leaving behind only one daughter, she would inherit 50% of his estate, while his widow would receive only 12.5%, said Kunal Kabra, chief executive of Kustodian.Life, an inheritance planning advisory. “The remaining wealth goes to the man’s parents, or in their absence, to distant relatives. If there are more than one daughter, they share two-thirds of the estate among themselves.”

This unequal division of wealth can leave immediate family members, especially widows and daughters, struggling financially, particularly if the deceased was the primary breadwinner.

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Estate planning: Wills and alternatives

Writing a will is not a comprehensive solution. Under Muslim personal law, only one-third of an individual’s estate can be transferred through a will. The remaining two-thirds are distributed according to religious inheritance laws, leaving limited flexibility for those who wish to provide for their immediate family members.

Understanding the differences between Shia and Sunni inheritance laws can offer additional options. Sunni Muslims cannot bequeath their estate through a will to heirs who are already entitled to a share. They can allocate it to others.

However, Shia Muslims can allocate up to one-third of their estate to anyone, including legal heirs, offering them more flexibility in estate planning. “Shias can seek consent from other legal heirs to transfer 100% of wealth to their preferred legal heirs,” said Mahmood of the National Minorities Commission.

Hiba: Gifting wealth while alive

Another option available under Muslim law is gifting wealth, a practice known as Hiba. This gift can be made to anyone and does not require any exchange or consideration. For a valid gift under Muslim law, three essential elements must be present: an offer (ijab), an acceptance (qubul), and a transfer (qabza).

The gift must involve an immediate transfer of possession, with the donor losing ownership as soon as the gift is executed.

However, this condition does not apply to inter-spousal gifts (from husband to wife, or vice versa) and gifts between parents and children (father or mother’s gift to a son or daughter, or vice versa).

“In such cases, the gifted property gets vested in the donee immediately but the donor may decide when the donee will take possession. If no time is fixed for it, the donee will take possession after the donor’s death,” said Mahmood.

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New Delhi-based Nida Khan Salim’s father has already gifted his immovable properties to his two daughters to ensure this estate is passed on to them. “Hiba is a simple and tax-efficient way of transferring one’s wealth to children,” said Salim, an advocate at the Supreme Court.

As for her father’s financial assets, Salim and her sister are added as nominees in each investment. “While our cousins can claim this amount beyond our share, we trust them that it won’t happen,” said Salim. “Nomination will ensure the money comes to our bank accounts.”

Special Marriage Act: A legal alternative

If a marriage is registered under the Special Marriage Act, 1954, a Muslim couple will no longer be governed by Muslim personal law in matters of inheritance but under the Indian Succession Act, 1925.

This gives couples full control over how their wealth is distributed through a will.

“Even couples already married under Muslim law are registering their marriages under the Special Marriage Act to avoid the rigid inheritance rules,” said Kabra of Kustodian.Life. “This allows them to ensure their wealth goes to their immediate family members.”

However, once a couple registers under this act, their descendants can no longer revert to Muslim inheritance law. This choice, while offering more control, also comes with a long-term commitment.

Interfaith marriage, conversion

Registering a marriage under the Special Marriage Act does not disqualify Muslims from inheriting wealth from their parents. Only conversion to a different religion does, said Mahmood.

Also, in the case of interfaith marriages registered under the Special Marriage Act, partners do not need to change their religion.

“The very reason for bringing in the Special Marriage Act was to ensure that people from two different religions can marry each other without changing their religion. Indian Succession Act, and not their respective personal laws, will apply to both parties and their future generations,” said Mahmood.

Wakfs and family trusts

Establishing a wakf (Islamic trust) or a private family trust offers another estate planning option for Muslims with significant assets. Wakfs can be created for public charitable purposes or for the benefit of family members and descendants.

However, wakfs come with limitations—once a property is given to wakf, it will remain under it forever. “A wakf is inalienable in India. Once declared, it cannot be revoked or amended. It is only advisable for those with large amounts of property,” Mahmood said.

Private family trusts established under the Indian Trusts Act, 1882, offer more flexibility, allowing Muslims to ensure that their “wealth is distributed according to their wishes if the trust deed specifies so”, said Farough Ahmad, an advocate at Allahabad High Court.

Trusts can also be customised to benefit specific family members, providing greater security for immediate relatives.

Rutul Shah, partner and co-founder, Aurtus Consulting Llp, said the firm’s go-to approach for Muslim clients who didn’t register under the Special Marriage Act is to create trusts.

“Running a trust (also called living will) is not expensive,” said Shah. But “it is like having an additional family member with separate income whose tax returns filing are to be done every year”.