Deciding which assets to add to your Waqf Fund and when is perhaps the key decision you will make. Arriving at the correct solution is a balancing act, which is made easier by the flexibility the concept of Waqf.
Although almost anything can be added to Waqf, most Waqf funds will consist of some primary classes of assets. Click on a type of asset below to find out more.
Many people own shares in various listed companies. These shares can be added to your Waqf fund. The Waqf will then own the value of the shares as these go up and down in the market. Any dividend payments that are issued by the listed company are also then due to your Waqf fund and can be used to make distributions to beneficiaries or built up to purchase additional shares in future, thereby growing the value of the Waqf. In the same way that an individual may buy and sell shares depending on the performance of the company, so too can your Waqf fund, with the Trustees ensuring that decisions are made in the best interests of the company. Rather than owning individual shares, some people own a portfolio of shares within a fund, these too can be added to the Waqf and managed accordingly.
For those who own a business or a share in a business of some type, whether this is a limited company, partnership or sole trading business, another option is to consider gifting a share of your business to the Waqf fund. The business will continue to be run in the usual manner, with no need to adjust the legal ownership or accounting, however any income generated in favour of the owners, by way of dividends, should thereafter be distributed/held in favour of the Waqf fund as appropriate. This method can be a very useful way of ensuring certain family members (such as those working within the business) receive access to a larger share of the business after death, as otherwise, according to the usual Islamic inheritance rules, all beneficiaries have a fixed share, whether they participated in the running and growth of the business or not. In this way the business can be held separate from your other assets and continue to benefit family without the need to break-up the business and distribute the shares Islamically.
Types of Asset
When you add assets to the Waqf you will need to make a choice between whether you are adding the asset as a Waqf asset or a non-Waqf asset. The choice is important as it will determine how the asset can be utilised in future.
It is the Waqf assets within your Waqf fund which constitute the permanency of the Waqf. When adding an asset as a Waqf asset, you need to be aware that this asset can no longer be distributed to beneficiaries. Instead, all Waqf-assets are held, maintained and best practice is to try and grow the value of the same by prudent investment. A Waqf fund with Waqf assets added and held on this basis, can then form the basis of a long-term multi-generational fund, that can benefit your family and charitable causes far into the future. Waqf assets can never be converted to non-Waqf assets.
When to add assets?
It can seem daunting to decide how much of your estate you can add now and/or whether to wait until death to add the majority of assets. Read on to see what restrictions apply in each case.
During my lifetime
There is no limit to the amount or percentage of your estate which you can add to your Waqf fund during your lifetime, you can even add assets over time, as and when you become more familiar and comfortable with the concept. This is the position, so long as you include your close family as one of the beneficiaries of your Waqf fund. If you create a purely charitable Waqf fund then the maximum amount we would usually recommend is one-third of your estate, so as not to deprive your family.
After my death
Any assets added your Waqf fund via your Islamic Will or during a death-bed illness, must be limited to a maximum of one-third (taking together with any other gifts you are making) of your estate at that time. More than this and for Islamic purposes it is up to your surviving inheritors to decide whether they will agree to the excess. This one-third is known as the ‘Wasiyyah’ and is the maximum amount that can be given to non-inheritors on death. This applies whether or not family can still benefit from the Waqf fund.
Maintaining the Waqf
You will need to make sure that all the expenses associated with maintaining the assets of the Waqf fund are covered. Some classes of assets will require greater maintenance then other. For example, a property will have costs associated with repairs, managements agent fees and insurance. The role of the Trustees is to ensure that these expenses can all be covered and this will be one of their primary tasks in maintaining the Waqf.
A portion of any income generated within the Waqf fund should also be considered for re-investment. This allows additional assets to be purchased and for the Waqf fund to be grown over time. In a similar manner to how a business owner re-invests profits of their business to grow it, the Trustees must also consider how best to grow the Waqf in order to generate greaters levels of income and benefit for beneficiaries.
On occasion the value of assets within the Waqf fund may fall or there may not be sufficient income and/or non-Waqf assets to properly maintain the Waqf fund. On such occasions it will be up to the Trustees to decide when to sell assets and purchase other assets. Sale of Waqf assets should be a last resort where there are no viable other options.
In a falling market, the sale of shares may be necessitated.
You may have employed a financial advisor to ensure your share portfolio is invested as prudently as possible.
Sometimes the state of disrepair of a property means that it is not viable to maintain the property.
The property can then be sold and another property purchased in its place.
Waqf Fund created with £10
Property added to Waqf Fund as a Waqf asset.
Property generates an income of £1,000, £500 of which is given to beneficiaries.
Property needs renovation and repairs, but there is insufficient funds from income.
Non-waqf assets may be added to the Waqf Fund to provide an additional source of funds.
Property fully renovated and repaired using £10,000 of non-Waqf assets. Remaining non-Waqf assets can be held, invested or distributed to beneficiaries, depending on needs and priorities of Waqf Fund.