Nominating Faraid Beneficiaries for CPF and ILP: Key Considerations #

Original Question: Can we nominate faraid beneficiaries for the Central Provident Fund (CPF) and Investment-Linked Insurance Policy (ILP) nominations? For instance, can a person nominate his/her spouse (at 100%) while other faraid beneficiaries are still alive?

First and foremost, it is important to determine the type of aqad (legal contract) executed in a nomination arrangement. This is because the shariah rules and principles governing hibah (gift) are distinguishable from wasiat (will) and faraid (inheritance) distributions. These distinguishable factors are the bearing reasons for whether the established ruling of one third (⅓) maximum threshold of wasiat (will) is applicable or not for CPF and ILPs nominations.

In reference to a fatwa issued by the Fatwa (Legal) Committee of the Islamic Religious Council of Singapore/Majlis Ugama Islam Singapura (MUIS), the revocable insurance nomination is considered similar to the CPF nomination. Both are accepted as valid forms of contemporary hibah and a new form of financial planning that is not found in classical writings. In other words, both nomination arrangements are not a form of wasiat (will) but are a contemporary form of lifetime gift (inter-vivos) with no expectation of anything in return.

Furthermore, the Fatwa allowed the Nominator to nominate anyone, whether or not the nominee(s) is/are a faraid beneficiary.

There are many reasons people choose to do nominations. Amongst them are:
To ease the transfer of money in CPF and insurance money to family members immediately—faster and simpler.
Avoid paying fees to the Public Trustee Office for CPF disbursement.
Avoid the need to go through court procedures to obtain a letter of administration for frozen insurance funds.
Avoid waiting for minor children’s disbursement age, which can only be given out at 18 years old and above for CPF.

Referring to the question, it is permissible for a person to nominate his/her spouse (100%). This is because the rule of one third (⅓) threshold is only applicable for wasiat (will) instruments and faraid distributions as per the Fatwa mentioned above.

However, the Fatwa should not be taken at face value. The Fatwa committee stresses the importance of the Nominator’s responsibility in evaluating the needs that protect the welfare of their family and beneficiaries in the administration of their CPF savings and insurance payout.

This evaluation and assessment must take into consideration the financial condition of the beneficiaries and determine who is in greater need of the money. Most importantly, the Nominator needs to ensure that the nomination is not intended to cause injustice toward the beneficiaries.

In addition, it is worth noting that every Muslim is responsible for ensuring that all the debts of a deceased Muslim are settled before using any of the money left behind, whether by way of faraidh, will, or nomination.