Hibah: A Gift in Estate Planning Process for Wealth Protection

Introduction

Not many of us especially Malaysian really aware about Hibah. This is simply due to the fact that our financial literacy rate is merely 36% [1]. While at the same time takaful penetration rate is only 16% [2]. This figure is so worrying.

In literal, the term hibah is derived from the Arabic root word of habubah, which means passing or blowing. Practically, hibah means transfer of ownership of an asset to a person without any consideration. It is classified as a unilateral contract [3].

For a layman

According to Bank Negara Malaysia it is a benevolent contract for the unilateral transfer of ownership of an asset [4]. Refers to a transfer of ownership of an asset from a donor (wahib) to a recipient (mawhub lahu) without any consideration.

The purpose

In Islam, the practice of giving this instrument is encouraged among the Muslims as it promotes the concept of maqasid of Shariah in term of the protection of the wealth as well as strengthening the relationship with one another.

In Malaysia, this instrument is usually used by Muslims in planning asset distribution to the intended beneficiaries in relation to specific assets. Whereby the ownership of the asset is transferred to the beneficiary during the donor’s lifetime (inter vivos) or in certain limited circumstances, conditionally passed over after the donor’s death [5]

The benefit

Generally to facilitate the process of distributing the property of the deceased (donor) and prevent disputes between the donee and the deceased’s heirs over the property’s ownership after his demise. Other benefits are [6]:

1. A heir cannot challenge the property
2. Documents are made during the donor’s lifetime but the change of title is made after the demise of the donor.
3. Property can be indisputably awarded to non-beneficiaries.
4. Hibah assets are discharged from the will.
5. Property inheritance is clearer.
6. The transfer of ownership process is clearer.

In Takaful industry

In takaful industry, the concept is used in several family takaful products in which participants could give hibah in the form of assigning the takaful benefit to the nominee or hibah recipient.

Giving hibah and gift is highly recommended as suggested in the following verse of Al-Quran:

“…but if they choose of their own accord to make over to you a part of it, then you may enjoy it with pleasure and good cheer.”

Surah Al-Nisa, verse 4

Takaful with hibah integration concept will be more competitive in nature as compared to conventional insurance which obviously is without this application [7]

Source

1. Global Financial Literacy Survey 2014
2. Malaysian Takaful Association Annual Report 2019
3. Re-evaluating the practice of hibah trust in Malaysia
4. Hibah
5. The Concept and Application of Hibah as A Financial Instrument from The Malaysian Legal Perspective: An Analysis
6. Hibah in The Administration of Islamic Property: Ijtihadi Elements and Reality in Malaysia
7. The Practise of Hibah in Takaful Institutions: A Case Study in Takaful Ikhlas Sdn. Bhd.