Father taking a loan from his children for his business

Answered according to Hanafi Fiqh by Muftionline.co.za

Q: Kindly advise with regard to the following:

Four siblings had sold a jointly owned asset and had given their father the money which was to have been invested by him in a property. However this did not happen for whatever reason and the money remained in the father’s business. Over time it was even forgotten that this money has not been invested and has merely been left in the business. The father too had completely forgotten about this money that it is lying in the business. 14 years later one of the siblings passed away. It is now two years since his demise. He has a minor child and two adult children.

Nevertheless it has now been remembered that this money is lying in the business and was not invested. The deceased sibling’s share (R95000) has not yet been distributed to his heirs. The father is in the process of returning the money to all the siblings and to the estate of the deceased.

It has been established that none of the the siblings, including the deceased, had included this amount in calculating their zakaat liability. The questions are:

1. Do the living siblings have to pay zakaat on this wealth that has now been returned to them? If yes, how will this be calculated?

2. Will zakaat be payable on the share of the deceased (R95 000) for the period until his demise? If yes, who is responsible to discharge this?

3. Are the heirs of the deceased liable for zakaat upon their respective shares for the past 2 years?

Bismillaah

A:

1. After studying the question, we understand that subsequent to the four siblings selling their shares in a jointly owned property, they had appointed their father to invest the money they received in another property. However, instead of investing the money in another property, the father used it in his own business. If this was done with the children’s knowledge and consent, then there is no problem in what he had done.

Nevertheless, since the purpose for which the money was given to the father was to invest it in another property and not in his own business, this will not be regarded as a partnership. Hence, the Shar’ee ruling in this situation is that the children will not be regarded as shareholders in the father’s business (as there was no agreement of partnership between them). Therefore, the money taken by the father will be treated as a loan which he owes to his children. (This is what we have understood from the question. If the situation is any different, it should be clarified.)

As far as the zakaat on the money is concerned, the children will have to discharge the zakaat for all the years during which their money remained with their father as a loan.

The manner in which the zakaat will be calculated and discharged for each year is as follows: After receiving the wealth (R95 000), 2.5% of R95 000, which equals R2 375, will be calculated for the first year. After discharging R2 375, the balance will be R92 625. Thereafter, 2.5% of R92 625, which equals R2 315.63, will be calculated for the second year. After discharging R2 315.63, the balance will be R90 309.37. In this manner, one will calculate and discharge the zakaat for each remaining year.

2. The zakaat was supposed to be discharged by the deceased until his demise. However, since the deceased did not make a bequest for the zakaat to be discharged on his behalf from one third of the estate, the obligation of zakaat will no longer remain. Hence, the heirs of the deceased will not have to discharge the zakaat of the deceased for the years in which he was alive and nor for the years between his demise and the time when they received the wealth. However, if any adult heir wishes to pay for the missed zakaat of the deceased from his share of the inheritance (or from any other wealth), it will be permissible for him to do so.

3. As long as the heirs do not receive their share of the inheritance, zakaat is not obligatory upon them for the previous years.

And Allah Ta’ala (الله تعالى) knows best.

 

Answered by:

Mufti Zakaria Makada

Checked & Approved:

Mufti Ebrahim Salejee (Isipingo Beach)

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