Dissolving an estate

Category: 

Inheritance

According to Madhhab: 

Hanafi

Reference: 

1440-600

Question: 

We
kindly request assistance in the matter of an estate and the distribution
thereof to heirs, details as follows:

The Marhoom passed away in July 2012.

The Marhoom does not have living parents.

Marhoom left the following heirs:

- 1 wife

- 3 sons

- 3 daughters

The estate has not been wound up, however as at now, we are busy with the
winding up of the estate and making use of an attorney who is equipped with
matters of estates.



Query:

The Marhoom was in an equal partnership with 2 of his sons.

Assets held:

1. The partnership owned a property.

This property was acquired many years prior to the death of the father.

This property is let out to a 3rd party, and monthly rent is received.

2. The partnership owned a business.

The business is being operated by the 2 sons.



Facts:

1. Subsequent to the death of the Marhoom, the rental from the property (1)
continued to accrue and was received into the business.

2. The business also continued business as usual and profits accrued to the
business.

3. Subsequently, in 2015 and in 2017, the 2 sons registered a new company which
acquired additional properties. The acquisitions were financed from the existing
business.

4. Due to neglect, there is no conclusive financial information available for
the business as at the date of death. (i.e. stock value, debtors, creditors).

5. However, the bank balance, and cash on hand can be obtained by means of bank
statements and cash book records.



Question:

1. Please advise on how the total net value should be calculated for
distribution?

2. Should the rental accrued subsequent to death be included in the estate?

3. How will the value of the business be calculated?

4. Do the properties acquired subsequent to death of the Marhoom form part of
the estate?

I have tried to include all the facts and details.


Answer: 

1. In our scenario there are two aspects of the deceased estate and each one will have to be dealt with individually and separately. The one aspect of the deceased estate would pertain to the deceased person’s personal wealth, savings, properties, assets, watches, vehicles, etc. The personal assets of the Marhoom which do not form part of the partnership with his two sons will be distributed amongst all the heirs according to the following percentages;

WIFE -  9 shares - 12.50%
SON 1 - 14 shares - 19.44%


SON 2 - 14 shares - 19.44%


SON 3 - 14 shares - 19.44%


DAUGHTER 1 - shares  - 9.72%


DAUGHTER 2 - shares - 9.72%


DAUGHTER 3 - shares - 9.72%


TOTAL - 72 shares  - 99.98%


Due to the difficulty of rounding off, there is a remainder of 0.02% which could either be given out in charity with the consent of all the heirs or redistributed according to the above percentages.

1.1.The second aspect pertains to the partnership issue. We were telephonically informed that the Marhoom and his sons had each enjoyed a equal partnership in the business and property, meaning each one owned 1/3 (33.33%) of the business as well as the property. Taking into consideration the fact that the Marhoom owned 1/3 of the partnership, his portion of the partnership will distributed amongst his heirs in the following manner; the wife will be entitled to 4.166%; the 3 sons will each receive 6.479%; and the daughters 3.239% each; which leaves us with a total of 32.32%. Again due to the difficulty of rounding there is a remainder of 1.01% which could either be given out in charity with the consent of all the heirs or redistributed according to the above percentages.

2. The rental belonging to the Marhoom which was accrued from the property that was in joint partnership will have to be distributed according to the percentages recorded in #1.1. Yes, the rental accrued prior to the Marhoom’s demise (and was kept as savings in a trust or partnership account) will also form part of the deceased’s estate. 

3. On the Marhoom’s demise stock should have been taken, fixtures and fittings evaluated and the heirs paid their dues. However, since the 2 sons continued trading without settling the remaining heirs, the remaining heirs are now entitled to share profits in the business according to the ratios stipulated in #1.1. These heirs are entitled to profits since the Marhoom’s demise which was in 2012.

Since the Marhoom’s 2 sons contributed all their efforts towards the business whilst the remaining partners were silent, hence it will be advisable that both working and silent partners reach an agreement and comprise whereby the silent partners take a smaller portion of the profits and afford a larger portion of the profits to the working partners in lieu of their efforts.
[Re:- Contemporary Fatawaa Mufti Taqi Uthmani D.B. Pg.172]

The business should be evaluated at the current market value; that is the current market value of the stock should be taken into account and the fixtures and fittings of the business should be evaluated by two independent valuators.

4. If the two partners that registered the new company testified before witnesses at the time of purchasing properties that these properties are solely for them and not the partnership, then the properties will belong to them and not to the partnership. However, they will be required to reimburse the partnership for utilizing partnership funds without consent.

On the other hand, if they purchased the new properties with partnership funds, without testifying before witnesses at the time of purchase that it is solely for them, then these properties will form part of the partnership and all the heirs will be entitled to a share in such properties according to the ratios stipulated in #1.1. The registration of a new company by the 2 shareholders will bear no effect on the Shar’ie ruling.

وَلَِِبِِ حَنِيفَةَ أَنَّ الَِْصْلَ في كل ما يََْتَمِلُ الشَّرِكَةَ إذَا اشْ تَاهُ أَحَدُ الشَّرِيكَيِْْ أَنْ يَقَعَ المشتي مُشْتََكًا بَيْنَهُمَا من غَيِْْ إذْنٍ جَدِيدٍ من الشَّرِيكِ بِِل شرَاءِ )بدائع الصنائع(
وَيَُُالِفُهُ مَا فِي فَتَاوَى قَارِئِ الِْْدَايَةِ : إنْ أَشْهَدَ عِنْدَ ال شرَاءِ أَنَّهُ لِنَفْسِهِ فَهُوَ لَهُ ، وَإِلَّّ فَ نِْْ نَقَدَ المََّمَنَ مِنْ مَااِ الشَّرِكَةِ فَهُوَ لِلشَّ رِكَةِ ا ه.)شامي(

AND ALLAH TA’ALA ALONE IN HIS INFINITE KNOWLEDGE KNOWS BEST
ANSWERED BY: Mufti Mohammed Desai 
CHECKED AND APPROVED BY: Mufti Muhammed Saeed Motara Saheb D.B 
Date: 20 Dhul Hiujjah 1440 
English Date: 22 August 2019

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