On what basis have the scholars allowed to set up trust funds for the beneficiaries of a deceased? Surely, the estate should be distributed to the rightful heirs as soon as possible? However, by setting up trust funds, the heirs do not have access to the full amount, which is then passed on to their heirs upon their death.
Please correct me if I’m missing something.
JazakAllah khayra in advance.
The use of trusts is not absolute and depends on specific scenarios. Likewise, the types of trusts used differ based on the circumstances. Scholars have permitted the use of trusts in certain scenarios. Scholars cite the following verse as an evidence to support this:
“And test the orphans [in their abilities] until they reach marriageable age. Then if you perceive in them sound judgement, release their property to them. And do not consume it excessively and quickly, [anticipating] that they will grow up. And whoever, [when acting as guardian], is self-sufficient should refrain [from taking a fee]; and whoever is poor - let him take according to what is acceptable. Then when you release their property to them, bring witnesses upon them. And sufficient is Allah as Accountant.” [Qur’an 4:6]
The books of Tafseer state that one of the causes of revelation for this verse was the death of a companion known as Rifa’ah. He left behind a small child. The uncle of the child came to ask in regard to the estate at which the following verse was revealed.
The verse expressly permits withholding the estate from the orphans and minors. Of course, this is most sensible considering that the wealth can be consumed against the long-term interests of the minor. In fact, delaying the estate in such a scenario is the best course of action as it can be invested by the trustees and the portfolio can grow. When the child comes of age and it is in their best interest to release the funds, the funds should be released. Thus, this verse sets a precedent to delay the distribution of the estate when it is established to be in the best interests of the beneficiaries.
Allah knows best