How will CPF Money be distributed upon the death of a Muslim

As Muslims, we have guidance for every aspect of life. Our Prophet Muhammad peace be upon Him not only guides us in matters of worship and afterlife, he also teaches us how to be a good human and live harmoniously with the community.

We are also guided on how to deal with our wealth; from earning an income to distributing your wealth when we pass on to the barzakh realm.

Distribution of Wealth

Our Prophet peace be upon teaches us in his hadith

leaving your inheritors wealthy is better than you leaving them dependent, begging people

From this hadith, we can understand that it is crucial to plan for your dependents, especially if you are the sole breadwinner.

As with all the other aspects of life, we are given guidance on how to distribute wealth upon death which via faraidh.

Faraidh is the Islamic Law of Inheritance. It is the knowledge that introduces who are the legal heirs (warith) and what are their rights or allocations from the deceased's estate or wealth.

Our Prophet peace be upon Him said:

Learn about the inheritance and teach it

The allocations from the deceased is mentioned in the Quran specifically and in the hadith of the Prophet peace be upon Him.

Muslims have been practicing this way of distribution of wealth up until this era with the guidance of scholars who extensively researched and studied on Faraidh

Wealth distribution for Singaporean Muslims

As for Muslims in Singapore, it is mandatory for us to distribute wealth via Faraidh. When I say mandatory, it is according to law.

Muslim intestate law,?faraid, is provided for under the?Administration of Muslim Law Act (AMLA)?and is administered by the Syariah Court in Singapore.?

Under?section 111(1) of the AMLA, all Muslims who are domiciled in Singapore who pass away after 1?July 1968 must have their intestate property administered according to?faraid.

However, there are certain categories of property that Muslim law and Civil law clash as to how it should be distributed.

An example of this is CPF money.

Distribution for CPF money

2 options for every CPF holder in distribution of CPF monies after death:

i. Distribution by Public Trustee according to Inheritance Certificate (Muslims)

This way, the money will be distributed automatically according to Faraidh. You have to apply for the inheritance certificate and appoint a family member to be the main administrator handling this.

ii.Nomination

The perk of this method is that it is easier and faster on the administrative side. CPF will transfer the nominees the money in 2-3 months.

However, there is a clash for nomination between civil law and Muslim law.

In the civil law, if the deceased had?made a nomination?in favour of another person for the moneys in his or her CPF account, the CPF moneys belong solely to that nominee; regardless whether they are inheritors or not.

In Muslim law, we have to distribute it according to Faraidh.

So if a Muslim did a nomination on his/her CPF, how do we distribute CPF money? Nomination or Faraidh?

Development of Fatwas for CPF Nomination

For every contemporary issue that pops out, Muslim scholars will do a research on it extensively and give ruling to it based on the principles of Islam.

These rulings are called fatwas and they are usually issued by the mufti of the country/place.

Nomination of CPF has been discussed by the Fatwa Committee of Singapore and has gone through several stages.

Fatwa on 1971

In 1971, the Fatwa Committee held that CPF monies form part of one’s estate, and as such, should be distributed upon death according to the laws of inheritance (faraidh).

The fatwa also stated that nominees are only trustees and not beneficiaries.

Thus, if you are a nominee, you are entrusted to distribute the money according to Faraidh.

Even if the intention of the deceased is to give the money to the nominee, this can be challenged by the Faraidh beneficiaries in the high court.

Updated fatwa on 2010

The Fatwa Committee has issued an updated fatwa on CPF nomination.

When a nomination is made, the Fatwa Committee holds the view that the nomination effects a valid gift (hibah). As such, a nominee can receive the monies in his/her own right.?

Hence, if you are a nominee, the money is rightfully yours. It cannot be challenged by Faraidh beneficiaries of the deceased.

This update is issued due to several reasons:-

1. Review of the transaction of CPF nomination

Initially, CPF nomination is seen as a distribution tool after death. This is invalid as for Muslims, the valid distribution tools are only via Faraidh and Wills.

After the review, the Fatwa Committee is of the view that nomination is a valid gift (hibah) in Islam. It is a transaction done before death and not as a wealth distribution tool.

This is based on the Islamic legal maxim which states that “All contracts and their conditions are permissible except what is nullified or prohibited by the law (i.e. the Syariah)”

2. Alleviating Difficulties for Muslims in Planning For Their CPF monies

Dependants and immediate family members of Muslim CPF account holders?may face difficulties and may require substantial financial support.

Certain family members may need more planning than others such as those at a young age may need an amount specifically for their education.

Awareness & Planning

As of right now, we Muslims have 2 options in distributing our CPF monies; either by nomination or by?faraidh.

There is no longer a conflict between Muslim law and the CPF Act for all forms of distribution of CPF monies.

We should be aware of this change in fatwa as currently nomination is a valid gift to the nominee.

If we nominate a person with the intention that the person is entrusted to distribute it according to Faraidh, we will have to convey this intention to the nominee and if possible, have a conversation with your beneficiaries.

Or we can undo the nomination and appoint an executor in our will to settle the distribution of the CPF money according to Faraidh.

Planning and preparation must be done because we do not want our family members and beneficiaries to fight against each other in court.

We know the dynamics of our family best.

Personal Experience

From my experience in dealing with CPF money, making a nomination is perfect as there is no hassle in the process. CPF will automatically transfer the money to the nominee's account.

This happened for my father's CPF. He actually nominated me, my sister and my mother. However, he wanted us to gather back the money and distribute it back via Faraidh. He clearly conveyed his intention to my mother.

Me & my siblings understand our father's intention and his opinion, thus we execute it according to Faraidh

This is another way to deal with CPF nomination but you will have to educate your beneficiaries and family members of your intention and Faraidh.

Conclusion

The main takeaways from this article is:-

1- Rulings in Fiqh may change and develop according to their respective situations in certain aspects of Fiqh such transactions and finance.

As long as the ruling does not go against the fundamentals of Islam and teachings of the Prophet, it is a ruling that can be taken into consideration.

2- Wealth is a sensitive issue. Hence, we must prepare and plan ahead to ensure that when we pass away, the process of wealth distribution is smooth and easy for our loved ones.

3- We are fortunate to have scholars discussing contemporary issues and issuing guidance and rulings that remove our hardship but at the same time, in accordance to Islam.

What other lessons do you gather after reading this article?

Share in the comments!