Is ‘Hibah’ Still Relevant If It Can Be Challenged In Court?

Hibah, which in Islamic law refers to assets voluntarily given or transferred to a beneficiary by a person during their lifetime, is generally viewed as final and not open to dispute.

However, a recent decision by the High Court came as a shock to many when it annulled a takaful (Islamic insurance) hibah worth RM1 million that had been given to the policyholder’s widow.

(The above case involved a takaful policyholder who named his wife as the hibah recipient. But, after his death, his family filed a claim in the Syariah Court to challenge the takaful hibah but the court upheld the widow’s right to the funds. The family then brought the case before the civil court, which ruled in favour of the family and ordered that the funds be redistributed according to faraid or Islamic inheritance law.)

The case sparked a heated debate on social media because the general perception is that hibah cannot be challenged by other heirs.

Many netizens, who had placed full trust in the “immunity” of hibah from legal disputes, questioned the validity of takaful hibah. Some even accused their takaful agents of being “scammers” because there is no guarantee that the hibah cannot be challenged in court.

CAN BE CHALLENGED

Elaborating on the issue, lawyer Dr Mahmud Abdul Jumaat said hibah is a voluntary transfer of property from a giver to a recipient during the giver’s lifetime, usually done to avoid inheritance disputes later on.

Hibah also refers to the immediate transfer of asset ownership, made without expecting anything in return and based on love or affection.

Hibah can be challenged in court by heirs if there are weaknesses or non-compliance with legal or religious requirements.

“However, in reality, hibah can be challenged in court by heirs if there are weaknesses or non-compliance with legal or religious requirements, like, for example, the hibah document is unclear or incomplete,” he told Bernama recently.

“Similarly, if the gift (hibah) doesn’t fulfill the pillars and conditions of Islamic law or lacks the recipient’s consent, or the property is not fully owned by the giver, then heirs have the right to question its validity in court.

“Challenges usually arise when heirs feel dissatisfied, for example, if they believe the hibah undermines their faraid rights, or suspect fraud or coercion in the process.”

According to Mahmud, if a hibah is made while the giver is suffering from a terminal illness, it (gift) will be treated as part of the giver’s estate and, hence, will be subject to the appropriate conditions.

In such cases, he said, heirs may challenge the hibah on the grounds that it violates Islamic inheritance laws.

He also clarified that under Malaysia’s legal framework, hibah falls under the jurisdiction of both the syariah and civil courts.

The Syariah Court holds specific authority to verify the validity of a hibah under Islamic law, while estate administration (distribution of estate after death) falls under civil jurisdiction, such as the Small Estate Office or the Civil High Court.

“Conflicts can arise if there’s overlap or confusion between these two jurisdictions. For instance, heirs may challenge a hibah in civil court by claiming that the property concerned is still part of the estate and must be distributed via faraid, even if the syariah court had already confirmed the hibah as valid.”

“This is exactly what happened in the recent takaful hibah court case, where a legal technicality (involving Schedule 10 of the Islamic Financial Services Act (IFSA) 2013 regarding hibah nominations) led to a contradiction between the syariah and civil court rulings.

“Overall, a hibah can be challenged if it doesn’t meet religious or legal conditions. But if it is properly executed in line with syariah principles and legal requirements, it is usually upheld as valid, even if contested,” he explained.

UNDERSTAND THE PROCEDURES

On experts and estate planning practitioners’ assertion that hibah remains a relevant instrument for asset distribution as long as the procedures are carried out properly, Mahmud said the fact that hibah can be challenged does not mean it is automatically invalid or illegal. Rather, it simply means hibah is not an “untouchable” instrument immune from scrutiny.

“If something is challengeable, it doesn’t mean it’s inherently bad. Just like a will or any other legal document, hibah offers a good solution for estate planning but it must be executed carefully in accordance with Islamic principles. In fact, under Islamic law, hibah is permissible and considered a suitable practice as long as it doesn’t contradict faraid and fulfills syariah requirements.

“The recent court case highlights the importance of understanding the legal processes involved in hibah, rather than rejecting its benefits outright,” he said.

He also said it is important to realise that court challenges usually stem from technical or procedural weaknesses and not because the concept of hibah is invalid. Pointing to the recent court case, he said it involved specific legal provisions (takaful hibah nominations under IFSA 2013), adding that the court decision is not final yet as it is expected to be appealed.

Dr Mahmud Abdul Jumaat, lawyer.

Mahmud also noted that most other forms of hibah, such as property, cash or other assets, are recognised as valid if they fulfill the necessary conditions. Therefore, he added, the public need not panic but should instead focus on strengthening their hibah procedures.

“Hibah continues to be an important tool for Islamic estate planning in Malaysia. It allows the wishes of the deceased to be honoured (for example, protecting the welfare of specific family members or chosen recipients) without breaching faraid, if handled correctly.

“What’s crucial is to understand that hibah is not an absolute guarantee on paper alone… it requires proper understanding and correct execution to ensure the giver’s intentions are fulfilled smoothly and without future disputes,” he said.

ALTERNATIVES

According to Mahmud, aside from hibah, there are several alternative methods to transfer wealth or assets to loved ones that carry a lower risk of being challenged. These include direct transfers during one’s lifetime through standard ownership transfers or gifts, without relying on formal hibah documents.

“For example, a husband may give cash or transfer property ownership to his wife legally while still alive. Once the property is registered in the wife’s name, it becomes her absolute right and is no longer considered part of the husband’s estate after his death.

“In other words, assets given during the giver’s lifetime are not subject to faraid distribution because ownership had already changed hands before death. These direct transfers (whether via a deed of gift, transfer of ownership at the land office for real estate, or bank account balance transfer) can help avoid disputes as other heirs no longer have a claim on the assets given as gifts.

“In addition, married couples may consider joint ownership arrangements. For example, registering assets like a house or bank account under both husband and wife’s names. Depending on legal practices, this method sometimes allows the asset to automatically pass to the surviving joint owner without going through the inheritance process,” he said.

He also noted that for Muslim couples in Malaysia, a wife can also make a claim for joint matrimonial property in the Syariah Court after the husband’s death, and vice versa. Through this claim, the court will determine a portion of the jointly acquired assets as the wife’s rightful share. This portion is removed from the deceased’s estate and cannot be disputed by other heirs as it already belongs to the wife.

Another alternative is to use a trust as an asset distribution tool. The asset owner can appoint a trustee institution or trust company, such as Amanah Raya Bhd or a private trust firm, and transfer specific assets to the trustee through a formal trust agreement, with instructions that the assets be held for the benefit of a chosen recipient.

“For instance, a father may place a sum of money or property into a trust for his child under certain conditions. Upon his death, those assets are not included in his estate because they were already placed in trust during his lifetime.

“The trustee will distribute the assets to the child according to the terms of the trust, and other heirs cannot challenge it because legally, the assets no longer belonged to the deceased at the time of death,” he said, adding that trusts usually involve costs and require professional management.

WILLS CAN BE CHALLENGED

Explaining that Muslims can also consider making a will, Mahmud said this is permissible within certain limits, one of which is that only up to one-third of the estate (after deducting debts) can be given to non-heirs. Additionally, a will cannot include faraid heirs unless with the consent of all other heirs.

A will is a written or verbal declaration by someone about how their assets should be distributed after death and it only takes effect upon their passing.

A will is a written or verbal declaration by someone about how their assets should be distributed after death and it only takes effect upon their passing.

“If the will exceeds the legal limit or is made in favour of a faraid heir without the consent of others, it can be challenged. Any portion exceeding one-third will revert to faraid distribution, and any bequest to an heir without consent will be invalid unless all other heirs agree to it.

“For Muslims, a will must be validated by the Syariah Court via a will confirmation order, whereas for non-Muslims, the probate process must be conducted in the civil court before assets can be distributed. Wills take time and may be contested if there are questions about their validity,” he added.

ENSURE DOCUMENTS ARE COMPLETE

To ensure a hibah is strong and less likely to be challenged, Mahmud said both the giver and recipient must make sure its documentation is clear and complete. It should include details such as the identities of the giver and recipient; a description of the asset to be given as a gift; offer and acceptance declarations; signatures; and witnesses. 

He said the hibah documents must be free of ambiguity and meet all requirements of Islamic law and existing regulations.

“It’s always better for a hibah to be done in writing (rather than verbally), as written documents serve as strong proof of intention and mutual consent. Moreover, anyone planning to gift assets through hibah is encouraged to seek Syariah Court confirmation and prepare formal documentation.

“Confirmation from the Syariah Court (via a hibah confirmation order) certifies the validity of the hibah under Islamic law and makes it binding on other heirs.

“It’s also advisable for the hibah giver to seek professional advice from a syariah lawyer, religious institution officer or estate planning consultant before and during the process,” he said, adding the experts can ensure no technical aspects are overlooked, such as, in the case of property, whether it is still under mortgage or if there is a need to obtain bank consent; or for takaful hibah, whether the correct nomination procedures have been followed.

CONDITIONAL ‘HIBAH’

Al-Isra' Group associate manager Reefa Shahidah Mohd Razali, meanwhile, said the issue of takaful hibah being disputed in court would not arise if its implementation follows the existing legal framework under IFSA 2013.

Reefa Shahidah Mohd Razali, Al-Isra' Group associate manager.

She explained that the hibah used in the current takaful industry is conditional hibah, that is, a direct gift made by the policyholder to the nominated recipient in the takaful certificate.

“There’s no basis for accusing takaful agents of misleading clients because the implementation of this hibah is based on valid legal provisions under IFSA 2013, specifically Schedule 10, which outlines the hibah instrument.

“Hibah management in today’s takaful differs from older plans that existed before IFSA 2013. Before the Act was enforced, most plans used the concept of wasi (trustee), not absolute ownership-based hibah.

“That’s why there was confusion in the past… it was not clearly stated whether the gift to heirs was through hibah or wasi. Today, it’s clear. In current takaful plans, conditional hibah is valid and legally grounded,” she said, adding that hibah nominations are valid and cannot be contested unless there is an element of fraud or breach of contract.

“Everything is based on the law. In fact, we encourage clients to fully understand the concept of conditional hibah before signing any policy.”