Plan for your retirement

We all know no one is going to be working forever. They’re going to have to retire at some point of their lives. Employers know this, so they give options to their employees. Options include IRA (Individual Retirement Accounts) and 401k accounts. IRA accounts give flexibility to an investor. You will be able to choose which investments you want to make. It is much easier using an IRA account to invest according to Islamic criteria. Example: you will be able to choose which mutual fund you want to invest in. There are a number of Islamic mutual funds available, so take advantage!

401k accounts are a little different from IRA accounts. Taxes are not paid on money that is withdrawn from the account until you withdraw at retirement. Employers like 401k accounts because they are much simpler to set up. However, your ability to control which mutual funds your money is invested in will be severely limited to the list of choices selected by the employer. They may or may not include Islamic mutual funds.

Take care of your debts!

Debts are one of the most important financial aspects of your life. You don’t want to die with debt. But what if you do? There are a few things that may happen if you die with debt. And they don’t sound too exciting. Before your estate can be divided according to your will, your debts must be taken care of. This will be done before any assets are distributed to beneficiaries. Anything of value in the estate will also be sold to cover your debts. Think of it this way: the value of your estate will go down if you owe money to other people. In order to calculate the value of your estate, simply subtract the amount of debts from the value of your assets in your estate. One thing to keep in mind is that children or spouses are not responsible for your debt unless they acted as a cosigner. There are a few things you can do if you owe money to other people. List the name of your creditors as well as the amount of debts you owe. If you owe money alongside someone else, list the portion of debt that you are responsible for. You should also appoint a trusted person who will administer your debts.

Although it is true heirs will not be responsible legally for your debts, you should still make a plan for your debts after death. Islamically, a person is still responsible for their debts even after they have died. So it’s best to make a plan for your debts. The Prophet (peace be upon him) refused to pray funeral prayers on a man with debts until a man offered to pay off his debts. The Prophet (peace be upon him) also said: “The soul of the believer is held hostage because of his debt until it is paid off.” Narrated by al-Tirmidhi (1078). Don’t take this matter lightly!

Funerals: Planning for your last day

No one likes talking about the day they will die. But let’s face it: it will happen. And it can come any time. So it’s a good idea to start planning for your funeral. Every Muslim is entitled to an Islamic funeral. Imam al-Shafi said: “The funeral prayer of a Muslim (who follows the Qiblah) is not to be abandoned irrespective of him being a righteous or a sinful (Muslim).” You might be thinking about mentioning about your funeral in your will. Don’t do that! Wills are not usually read until after the funeral. Give your preferences in writing to your attorney and family members instead. Make sure that family members know you should be buried as soon as possible. Your body should not just lie around unnecessarily.  Make sure that you will be buried in an Islamic way, as practices such as cremation are not allowed in Islam. Make sure you are aware of all costs associated with your funeral. You do not want to place a burden on your family later on. You should specify where you would like the costs to come from (savings, investments, etc.). The more information you give on your funeral, the easier the process will be. Some funeral services even provide a prepayment option. You should also consider the location of your burial. According to the European Council for Fatwa and Research, it is recommended to bury a body in the locality of your death. There are unnecessary costs and difficulties associated with transferring bodies to other places.

There are a few things to keep in mind regarding burial laws. Although most states do not require a funeral director to be appointed, some states do. Also, cemeteries have different rules regarding burial. For example, most cemeteries require a vault. Make sure that soil is spread on the bottom of the vault if your cemetery requires this.  If you choose to pre plan your funeral, make sure you receive a list of all costs associated with your burial. It is the law for cemeteries to give this information.

Halal Mutual Funds Available to Muslims

Do you want to invest in a mutual fund, but aren’t sure how to invest in an Islamic way? Most mutual funds are generally off limits for a Muslim investor. This is because there will happen to be investments which are haram, and a large portion of profit from these companies will come from selling haram products. Now, that doesn’t sound too exciting. A number of mutual funds are available to a Muslim living in America.

Some examples of mutual funds which are available to a Muslim investor are the Iman, Amana and Azzad Funds. Amana Mutual Funds has three funds available. Within the general mutual fund category, they offer some options. These include income funds (which focus on paying dividends), growth funds (which focus on capital appreciation), as well as international funds (which focus on the international markets). Each fund is Shariah compliant and has an advisory board overseeing its activities.

There still remains risk in any investment. Just because a fund is Shariah compliant does not make it free from risk. However, there is the option of halal investments. So invest away! Muslims can take advantage of investment opportunities. Just know your limits.


Dying Without A Will

Let’s first dispel the common misconception that inevitably comes up here. No, the state does not take away all your money if you die without a will. That is a common misconception that we hear from clients and sometimes Islamic speakers that discus this topic. Yikes!

And if the state does indeed take away your assets (say in the event you have no heirs in the United States), there are legal procedures and ways to take those asset back. But there is one tragic consequence of dying without a will – you don’t get to choose how your assets are distributed. When an individual passes without a will, he/she is considered to have passed intestate. In such a case, the intestacy laws of the state in which person who passed lived in dictate how the assets are distributed.

In other words, you have the right to choose how your assets are distributed through a will. But if you don’t take advantage of this and don’t execute a proper will, the state’s law in which you lived dictated how your assets are distributed. Often, if not the majority of cases, these default state laws will distribute assets very differently from the Islamic inheritance schedule if that is your preference. Each state has different intestate laws (how assets are distributed).


Take the following scenario: Ahmad is married to Sara, and they have two grown children. Ahmad and Sara own a large bank account in joint tenancy, and Ahmad has a 401k naming Sara as the beneficiary. When Ahmad dies, Sara receives the 401k proceeds and inherits the bank account outright. If Ahmad owned a good deal of other property that would have passed under a will, this property would pass pursuant to the intestacy laws of the state they live in.


So in Michigan, Sara would inherit the first $150,000 of the intestate property, plus 1/2 of the balance, and your descendants (children) inherit the remaining in equal shares depending on the number of children. In Texas, if you leave a spouse and children, 1/3 of the estate goes to your surviving spouse, and the children inherit the rest in equal shares.

More importantly, if you have children under the age of 18 years old, the will would provide whom you wish to take care of your children in the event you unexpectedly pass. Your estate plan should also include certain basic documents with regards to your finances and healthcare issues and whom should have power to act on your behalf in the event you cannot.