We are honored to bring you this guest post from Dr. M Yaqub Mirza, President & CEO, Sterling Management Group, Inc. and author of “Five Pillars of Prosperity: Essentials of Faith-Based Wealth Building” which is available on Amazon. This article is an excerpt from his book released here in two parts.
It is the practice of loving and giving that makes life worth living
A man came to the Prophet and asked, “O Allah’s Apostle! Which charity is the most superior in reward?” He replied, “The charity which you practice while you are healthy, miserly and afraid of poverty and wish to become wealthy. Do not delay it to the time of approaching death and then say, ‘Give so much to such and such, and so much to such and such.’ And it has already belonged to such and such (as it is too late).”
Following this Hadith, I strongly argue for giving while living. Why? Giving while living provides you with an opportunity to see the effects of your gift. While living, you can direct or redirect the use of your contributions. If a project you contribute to does not succeed, you have the opportunity to contribute to another one.
Imagine what would happen if no one gave while living—if everyone only willed, upon death, a portion of their wealth (up to one-third of their estate, according to Islamic law) to the poor or needy and non-inheritors. The recipients would be praying for the person’s death, waiting to receive the charity to fulfill their needs! Instead, during one’s lifetime, once the loved ones are provided for and zakah has been paid, one should give back (sadaqah) to the community.
Abu Sa’id al-Khudri reported God’s Messenger as saying, “It is better for a man to give a dirham as sadaqah (charity) during his lifetime, than to give a hundred at the time of his death.”
You may ask: “Is it better to leave for a child a trust account or a great society?”
Gifts can be made in favor of a living person capable of holding property. However, unless you use your life-time exemption, under IRS rules, gifts per person per year that exceed the gift tax exemption ($14,000 in 2013) are subject to the gift tax. On the other hand, unlimited personal gifts can be made to a mosque, a community center, a school, or any charitable institution (as well to your spouse, provided your spouse is a U.S. citizen).
We often wonder what will happen and how will inheritance be distributed? Can I find a trustworthy administrator who will do exactly as I have willed? Will the inheritors cooperate with him? To respond to these questions one should distribute most, if not all assets to his or her spouse, children and to various charities during life, while keeping some reserves to live on.
You can accomplish this by using your lifetime exemption ($ 5 million in 2013) to give to anyone you please. Children, siblings, friends, charities etc. However, please keep in mind the following:
The Prophet allowed a person who insisted on giving virtually all his wealth to the poor to bequeath only one-third of his wealth to them, thus establishing the upper limit of what one can give via a will to non-inheritors. At least two-thirds was to be left for the dependents. The Prophet said, “Leaving your dependents well off is better than leaving them poor as they are looking up not to the mercy of others. Every expenditure which you expend on your dependents is a sadaqah (charitable expenditure), and therefore meritorious.”
 Dawud, “Readings on Charity and Kindness in Islam” (Plainfield, IN: ISNA Development Foundation, 2002), p.19
 Op. cit.., 25. Ahmad, al-Tirmidhi, ibn Majah, and Abu Da’ud.