PODCAST: Sedania As Salam Capital and Wasiyyah Shoppe to launch embedded digital estate planning solution in Q1

Estate planning is a major challenge in Malaysia, with the upper bound of frozen assets in the country estimated at RM90 billion (US$19.36 billion). ISFI spoke to Ariffin Sabirin, the founder of Wasiyyah Shoppe, and Khairul Nisa Ismail, CEO of Sedania As Salam Capital, about how they are collaborating to address the estate planning challenge for Muslims with the Hibah instrument.

The two entities are set to launch the digital Hibah solution 'JOMHIBAH' in Q1 this year. This will see partner financial institutions and enterprises embed the solution in their financing products, allowing Muslims to designate who they would like to gift the asset to. The partner institution may also provide financing to cover the cost of the embedded Hibah estate planning solution.

The deed for the asset will be transferred upon the asset owner’s demise, allowing the ‘Hibah-ed’ asset to be excluded from the estate asset pool, which is required to be distributed according to Islamic inheritance law, or Faraid law.

Sedania As Salam Capital, which is the fintech arm of Malaysia-based Sedania Innovator, announced its partnership with Wasiyyah Shoppe, a Muslim wills solution provider, for the digital Hibah project in March last year. The announcement followed Sedania Innovator’s acquisition of a 20% stake in Wasiyyah Shoppe shortly prior.

Khairul Nisa sees a specific use case for the solution in the Malaysian mortgage market. Roughly 75% of the contributions are from Muslims, she explained.

“These are all ownership of houses and assets … Only 0.2% of Muslims in Malaysia have done Hibah [for estate planning]. How about the 99.8% remainder? We feel that we have been called upon [to address this],” Khairul Nisa told ISFI.

Under Faraid law, the distribution of a Muslim’s estate is explicitly detailed, leaving limited room for flexibility. The multiple heirs that Faraid law mandates make provisions for, including spouses, children, parents and siblings, can hinder the efficiency of estate distribution due to the opacity of the distribution process and disagreements over the nominated administrator of the will, among others.

Arguably more significantly, the proportion of estate distribution to specific legal heirs, as well as the classification of who constitutes a legal heir, is another limitation that would hinder a person’s ability to, for example, make provisions in their will to have their estate equally divided among their adopted and biological sons and daughters.

The concept of Hibah, or gift, has been innovated upon to address these challenges. In the context of estate planning, the Hibah instrument is used to designate an asset to a beneficiary thereby bypassing the Faraid process. As there are no limitations on who a person can gift an asset to, nor is there a limitation on the size of a gift from a legal perspective, this awards the individual the ability to designate their assets as they personally see fit.

Notably, the Hibah instrument for estate planning is controversial and not universally accepted. This is due to the reimagining of the Hibah concept such that it no longer conforms to the classical definition and conditions of the instrument. Additionally, the intent to bypass explicit junctures pertaining to estate distribution raises the question of whether it constitutes legal trickery.

In Malaysia, Hibah for estate planning has been accepted by the Shariah court, which has jurisdiction over Muslim family law. Wasiyyah Shoppe obtained its first Shariah Court Hibah Order from the Alor Setar Shariah High Court in 2005.

According to Ariffin, entities from several other jurisdictions are also eyeing the digital Hibah estate planning solution.

"The last 12 months or so have been very interesting because we had enquiries from countries like Brunei, Indonesia, Oman and GCC countries.

"Initial talks have started. God willing, Insha Allah, in another 12 months or maybe less we can see some results there," Ariffin shared.

These upcoming partnerships abroad will continue to take the format of a joint effort between Sedania As Salam Capital and Wasiyyah Shoppe, Khairul Nisa shared.