Frequently Asked Questions (FAQ) – Hibah

 

No. Question Answer
1. What is Hibah? Hibah is a gift made to someone during the donor’s lifetime.
2. What is Wasiat? Wasiat is a contribution executed after one’s demise.
3. What is Faraid? The distribution of a Muslim’s estate as in the Al-Qur’an in Surah An-Nisa 11, 12 & 176.
4. What is the difference between Hibah, Wasiat and Faraid. Refer to Table 1.

 

5. What type of property can be transferred through Hibah? Both moveable and immovable property.

 

Moveable property includes cars, cash, EPF, insurance, branded handbags, and any other valuables.

 

Immovable property on the other hand, includes land and houses.

6. To whom can the property be transferred through Hibah?

 

Anyone, regardless of whether they are heirs or not.

 

7, Who should make a Hibah? Anyone can make a Hibah.  Hibah is an admired act that is encouraged in Islam.  Amongst the people that are advised to make a Hibah includes-

(a)  married couples with no children;

(b) married couples with sons and daughters;

(c)  married couples with only daughters; and

(d) any other person.

8. What is the purpose of Hibah? Amongst others, to ensure the welfare of loved ones are taken care of.

 

9. What is a charged property? Charged property refers to a property that is purchased and charged or assigned (through registration of a charge on said title) to a financial institution or government or individual as security to protect the interest of such parties to enable loan payments to be made to the seller or developer.

 

A charged property will only be discharged from the charge and/or the Deed of Assignment will only be canceled after all loans have been settled by the property owner.

 

Therefore, during the term of the loan and as long as the loan is not settled, transfers on the charged property cannot be executed by the property owner without the permission and approval of the chargee.

 

This is because the property is a security for a loan that has been made by the mortgagee or assignee.

10. Can I make Hibah for a charged property? Hibah of a charged property is subject to the consent of the chargee/ bank.

 

11. What are the requirements to acquire the bank’s consent? In general, the charge/loan must be protected by an insurance policy or Takaful, such as MRTA/MRTT.

 

The policy must also cover the entire loan and the entire period of the charge/loan.

12. What is MRTA/ MRTT? Mortgage Reducing Term Assurance (MRTA) is a type of housing loan insurance where the sum insured decreases over time, together with the term of your housing loan.

 

Mortgage Reduction Term Takaful (MRTT) is a Takaful protection plan that is Syariah compliant and is designed to protect your mortgage obligations in the event of death or total permanent disability (TPD) during the protection period.

 

Example-

Individual A-

Housing loan amount  RM 500,000.00
Housing loan period Thirty (30) years
MRTT RM30, 000.00 – paid in lump sum to the insurance company at the time the housing loan is made with the bank.
MRTT period                   Thirty (30) years
Situation         Individual A passed away on the twentieth (20th) year
Solution The insurance company will settle the remaining amount of the housing loan with the bank  as Individual A passed away within the  period covered by the MRTT.

 

Individual B-

Housing loan amount  RM 500,000.00
Housing loan period Thirty (30) years
MRTT RM15, 000.00 – paid in lump sum to the insurance company at the time the housing loan is made with the bank.
MRTT period Fifteen (15) years
Situation Individual B passed away on the twentieth (20th) year
Solution Individual B passed away after the MRTT period (the MRTT period has expired), thus, the insurance company will not settle the remaining amount of the housing loan with the bank.  Therefore, Individual B’s heirs will have to settle the remaining amount of the said housing loan.
13. What is the difference between insurance and takaful? Insurance is the transfer of risk from an individual to an insurance company.  Insurance contributors are known as policyholders.  The insurance company will receive payment from the policyholder in the form of premium (monthly payment) and if the policyholder suffers an injury, illness, etc. that is specified in the insurance policy, the insurance company will pay compensation to the policyholder and/or nominee and/or beneficiary.

 

Takaful is a scheme that is based on fraternity, solidarity and mutual aid that provides help and financial assistance to participants if required in which participants mutually agree to contribute for that purpose.   By contributing a sum of money into the takaful fund in the form of a participation contribution (tabarru), the takaful contributor enters into a contract (aqad) that enables him to become a participant by agreeing to mutually assist each other, should one of the participants suffer a defined loss.

 

In essence, insurance and takaful are the same in which it provides protection to contributors in the event of certain circumstances as provided in the insurance or takaful policy.

14. What happens if the protection under the MRTA has no coverage/ is not fully covered? If clients would want to make a charged property Hibah that does not have a full MRTA/ MRTT coverage, it is recommended to take out a MLTT policy.

 

However, the charged property hibah is subject to the consent of the chargee/bank.

15. What is MLTT? Mortgage Level Term Takaful (MLTT) Is a form of takaful protection that is designed to provide financial support, in the event of death or a total permanent disability.

 

The sum insured under this protection remains the same and does not change throughout the plan. MLTT is an Islamic finance product that ensures the payment throughout the plan remains the same throughout the period of the plan.

 

This maintains the value of the insured payment, which means the insurance value that is to be paid during the claim is the same from the first until the last year of the protection.

 

Example-

Individual C-

Housing loan amount RM 500,000.00
Housing loan period Thirty (30) years
MLTT RM 500, 000.00 – paid monthly at RM250/ per month
MLTT period Until Individual C is 70 years old
Situation Individual C passed away on the fifteenth (15th) year of the housing loan period/ at the age of 45 years old
Solution (a)  Individual C’s heirs will receive the MLTT compensation amounting to RM 500, 000 + cash value (savings);

(b)  The remaining amount of the housing loan with the bank amounting to RM 250,000 will be settled through the RM 500,000 compensation + said cash value

16. What is the difference between MRTA/ MRTT/ MLTT? Refer to Table 2.

 

 

 

 

TABLE 1 – DIFFERENCES BETWEEN FARAID, WASIAT & HIBAH

 

DIFFERENCE FARAID WASIAT HIBAH
Definition Distribution of a Muslim’s estate as in the Al-Qur’an in Surah An-Nisa 11, 12 & 176.

 

Contribution executed after one’s demise. A gift given to someone during the donor’s lifetime.
Pillars (a) Deceased

(b) Heir

(c)  Estate

 

(a) Testator

(b) Beneficiary

(c)  Estate

(d) Lafaz wasiat (sighah)

(a) Hibah donor

(b) Hibah donee

(c)  Estate

(d) Contract of hibah (aqad)

Conditions (a) Deceased’s estate (a) Testator

●      Sound mind when making the wasiat

●      Baligh

●      Willingly (rela hati)

 

(b) Beneficiary

●      Alive during testator’s demise

●      Not an heir

 

(c)  Estate

●      Lawful according to syarak

●      The bequeathed estate must be specified

●      Does not exceed 1/3 of the testator’s estate value

 

(a) Hibah Donor

●      Owner of the estate

●      Sound mind

●      Baligh

●      Mukallaf/ can manage own estate

●      Willingly

●      No coercion

 

(b) Hibah Donee

●      Mukallaf

●      Disabled people/ minors must be represented by a trustee

●      Alive at the time the Hibah was made

 

(c)  Estate

●      Lawful according to syarak

●      Present during the aqad

●      Owned by the hibah donor

Rate As has been laid out in the Al-Qu’ran and Sunnah. 1/3 of the estate’s value. Unlimited and does not require heir’s consent.
Heir’s consent Not necessary. Not necessary if wasiat is only 1/3 of the estate.

 

If it exceeds, other heirs’ consent is required.

 

If heir does not consent, therefore only entitled to 1/3 of the estate only.

Not necessary.
Beneficiary Eligible heirs. Anyone other than heirs. Anyone.
Execution Executed after deduction of funeral costs, debts, wasiat, matrimonial property, hibah. Executed after the testator’s death. Executed during the donor’s lifetime.

 

 

 

 

TABLE 2- DIFFERENCES BETWEEN MRTT, MRTA & MLTT

 

DIFFERENCE MRTT MRTA MLTT
Definition Mortgage Reducing Term Takaful (MRTT) Is a Takaful protection plan that intends to provide protection for mortgage obligations in the event of a total permanent disability (TPD) or death.

 

Mortgage Reducing Term Assurance (MRTA) is a type of housing loan insurance where the sum insured decreases over time, together with the term of your housing loan.

 

Mortgage Level Term Takaful (MLTT) is a form of takaful protection that is designed to provide financial support to your family, in the event of death or a total permanent disability.
Protection

 

Death and total permanent disability Death and total permanent disability Death and total permanent disability
Amount of protection

 

Decreases according to the period of the plan. Decreases according to the period of the plan.

 

Remains the same throughout the period of the plan.
Policy payment

 

Lump-sum payment at the start of the plan. Lump-sum payment at the start of the plan. Payment-

●      monthly;

●      quarterly;

●      bi-annually; or

●      annually.

 

The amount of the payment remains the same throughout the entire period of the plan.

Paid to (in the event of death or a total permanent disability) Bank or financial institution who is the lender of the housing loan. Bank or financial institution who is the lender of the housing loan. Bank, to settle the remaining value of the housing loans

 

AND/OR

 

+Payment of the excess policy to the beneficiary

 

 

Cost

 

Lump-sum payment and can be paid using the housing loan. Reflects a reduction in the value of the payment.

 

Lump-sum payment and can be included in the housing loan.  Reflects a reduction in the value of the payment.

 

Higher long-term costs due to the fixed amount of coverage, paid in installments.
Islamic Banking Principle Yes. No.

 

Yes.

 

 

Prepared by,

Nur Syaheerah Razailani

Messrs Misyail Othman & Co.

 

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