ZAKAT AND ESTATE PLANNING – PART 2
We began discussing Zakat last week and highlighted the point that Zakat is viewed as a form of worship and self-purification. As the third pillar of Islam, Zakat is the compulsory giving of a specific portion of your wealth, computed as 2.5% of the net value of your wealth in any lunar year. Zakat has the potential of creating strong and healthy communities as it serves as a platform for social insurance. Today, we delve into the issue of ‘Nisab’ and how Zakat fits into your Estate Plan.
For the purpose of Zakat, ‘Nisab’ is the traditional way of computing your Zakat and the exemption limit for the payment of Zakat. This calculation is based on the remaining part of your wealth after you have deducted the basic living expenses, taxes, rent and wages to employees in the lunar year. Some schools of thought believe that even if you make a large sum of money and spend it on basic needs—without unnecessary luxury—no Zakat is due at the end of the lunar year. If, however, you save part of that money in the same lunar year, then Zakat is payable on the remaining amount, provided it equals or exceeds ‘Nisab’.
In modern day terms, the ‘Nisab’ can be computed as:
- The cash equivalent of 2 ounces / 87.48grams of gold; or
- 21 ounces / 612.36grams of silver
The starting point in the computation of Zakat is having a clear picture of your assets and liabilities. Assets could be:
- Investment properties
- Business income
- Other assets (e.g. precious metals)
The important thing is to determine how much your Zakat-eligible assets are worth for the year.
Another key consideration are your liabilities – all forms of debts (personal loans). If you obtained a personal loan of any type (car, home, cash), then look at how much you pay per month to your creditors (not the entire outstanding debt). Add up the total loan repayment fiure and multiply it by 12 to calculate your annual liability. Your ‘Zakatable’ networth in this instance, would be your ‘Zakatable’ assets, less your ‘Zakatable’ liabilities.
If your personal wealth (what you own), exceeds the ‘Nisab’, you are eligible to pay Zakat. If your personal wealth is below the ‘Nisab’, you are not expected to pay Zakat. To help compute ‘Nisab’, you can use the current market price of gold or silver. You may get the current market rates from established platforms or better still, contact FBN Trustees to assist with establishing a proper framework for you in the management and payment of Zakat.
In conclusion, where your personal wealth is always above Zakat, it is recommended that you create an Estate Plan around it to ensure that a professional manages the entire process for you. You may select any date during the year to pay and keep track of this date to monitor future payments.
Many people choose Ramadan as the month to pay Zakat. Ramadan is one of the five pillars of Islam and is a sacred time when Muslims read the Qur’an and fast from dawn to dusk. Paying Zakat is another way to cleanse the soul during this holy period.
FBN Trustees can assist with the utilisation/disbursement of the Zakat payment towards your desired objectives, creating a structure that will outlive you; whether for indigent students, building of hospitals, sponsoring of pilgrimage to the Holy Land, etc. we can help ensure that your legacy is well preserved, and according to Islamic guidelines.
Contact us today – call, text or send a WhatsApp message to +234 (0) 805 4000 299. You may also send an email to email@example.com. Connect with us on Twitter @fbnquest, Facebook and LinkedIn – fbnquest.
For more insights on Estate Planning, Trusts, Wills, Executorship and Estate Administration, tune in to the Legacy Series on Classic 97.3 FM Lagos by 7pm on Mondays or Cool 96.9FM Abuja, by 8.30am on Tuesdays.
Visit www.fbnquest.com/legacyseries for more information.
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