Presently, they are residing in a double storey bungalow in Sungai Long which was purchased by Kassim 4 years ago. He bought this house using a RM1,000,000 Islamic home financing plan attached with Mortgage Reducing Term Takaful (MRTT) for 20 years at 8% profit rate per annum. The current value of similar houses in this area is at RM2,000,000 per unit. Mariam also bought a single terrace house in Kajang 2 years ago using Islamic home financing plan (with MRTT) worth RM250,000 for 25 years at the profit rate of 9% per annum. The current market value of the house is RM300,000 and has been rented out at RM500 per month. Kassim drives an Audi A7 that cost him RM350,000 when he bought it three years ago. He paid RN100,000 as the down payment, and secured a 9-year Islamic hire purchase financing (with Hire Purchase Reducing Term Takaful) to finance its balance with 5% profit rate. Mariam drives herself to school since her office schedule is different than Kassim's. For this, Kassim bought Mariam a Mini Cooper 2 years ago at the price of RM250,000. He took RM50,000 conventional hire purchase loan with 2.5% interest rate for seven years. Other than that, both of them have conventional credit cards with an outstanding balance of RM10,000 far Kassim and RM4,000 for Mariam. List of assets with their current values, owned by the couple, are as follows: Assets Mudharabah Savings Account Tabung Haji ABC Unit Trust Manjung Tin Company Shares Bank Kerjasama Rakyat Malaysia Shares SMN Bhd Shares Bitcoin Gold bar Kassim RM10,000 RM6,000 RM20,000 RM100,000 Mariam RM5,000 RM4,000 RM10,000 RM5,000 RM120,000 RM10,000 RM5,000 In January 2017, Kassim invested 20,000 shares in SMN Bhd with a face value of RM5 per share. But based on your findings and also information received from Jabatan Kemajuan Islam Malaysia (JAKIM), this company produces non halal products and is classified as Shariah Non-Compliant stock by Securities Commissions last November. You have informed this to him, and Kassim seeks your advice on the method of cleansing for this investment. In your first meeting, Kassim provides the following information on his family expenses for the year 2017. He plans to remove some of the current expenditure and asks your opinion to have 30% reduction in his ongoing costs for the telephone bill, UNIFI internet bill, dining and vacation expenses. Personal Information Kassim (40 years old) and Mariam (30 years old) have been married for five years. Kassim has a son from his previous marriage with Zubaidah; Iskandar (10 years old). Kassim is the only son in the family and his mother passed away 2 years ago. He inherits a house in Bangi with a current market value of RM500,000 from his late mother's estate and he is renting out this house at RM1,000 per month. He contributes RM1,000 per month for alimony as part of the separation agreement with Zubaidah since the last seven years. His father is currently staying with him. Mariam is currently a teacher. She contributes RM500 monthly to her mother who lives with her sister after her father died in an accident. She wanted to show that although she is the wife to Kassim, her responsibility towards her mother remains. Her mother lives in Kampung Baru and she always makes an effort to visit her every month. Her sister is the only sibling that she has. Due to the increasing cost of tertiary education, Kassim wishes to set up an education fund for Iskandar, and he prefers not to take any education financing for him. He wants to estimate how much money should be invested to prepare for Iskandar's education cost and seeks your advice on ways to set up the education plans. He anticipates that Iskandar will begin attending university at the age of 18 years old. He plans to enroll Iskandar in local universities. The average current cost of study for a 4-year social sciences degree programming, including living expenses is RM20,000 per year, and this cost is expected to rise at 5% per annum. Financial Information As a Chief Financial Officer (CFO) of Manjung Tin Company (MTC), Kassim is currently enjoying a lucrative remuneration package for his position; a salary of RM20,000 per month and the salary is expected to grow at 4% per year. For retirement purpose, he currently contributes 11% of his salary to Employee Provident Fund (EPF) while the company contributes 12%. His current EPF balance is RM300,000. Meanwhile, Mariam earns a monthly salary of RM4,000. Her salary is expected to increase 4% per year. She has chosen the pension scheme as her retirement option; therefore, she does not contribute to EPF. As a government servant, she receives yearly bonus amounting to half of her monthly salary. Kassim contributes RM1,000 while Mariam contributes RM200 per month for their Takaful protection plans and they are entitled to a total coverage of RM500,000 and RM100,000 respectively. The current cash value for both Takaful plans is RM100,000 for Kassim and RM20,000 for Mariam. They are also covered by their organisation's coverage, where the death benefit is at ten times of their basic monthly salary. For health coverage, Kassim participated in a medical Takaful plan which provides cover for all of his family members since the last four years, with an annual contribution of RM5,000 Kassim and Mariam submit separate tax assessment to Inland Revenue Board of Malaysia (IRBM), and both have been paying taxes of RM1,000 and RM200 every month respectively. They also pay zakat; RM3,000 from Kassim and RM500 from Mariam annually. They have asked you on the current status of these tax and zakat payments, including zakat on wealth. Assets Mariam Yearly (RM) 2,500 Groceries Utilities Telephone UNIFI (TV satellite) Dining Out Clothing Books Personal Expenses Maid Mak Senah Vacation Miscellaneous Car Takaful & Road Tax Car Maintenance Petrol Kassim Yearly (RM) 6,000 2,000 5,000 2,400 6,000 5,000 1,000 2,000 5,000 1,000 3,000 9,000 20,000 4,000 1,500 3,000 4,000 2,000 800 2,000 2,000 Kassim and Mariam plan to perform haj together five years from now. Due to the limited national haj quota, they opt to choose a private haj package which will cost them RM50,000 each and this rate is expected to rise at 4% per annum. They want you to estimate the amount of fund needed for the haj purpose. They plan to continue working until they reach 50 years old. After Kassim's retirement, they plan to reside in Kassim's house in Bangi. They estimate that an allowance of RM15,000 per month in its current value is sufficient for them to maintain their lifestyle for the next 20 years. The bungalow in Sg Long will be rented out. At present, the monthly rental rate for a similar house in the area is around RM2,000 and is estimated to increase at 3% a year. QUESTION: You have been asked to advise them on how to achieve this retirement target. At the same time, they have also realized the importance of have a proper plan for estate planning, and they seek your advice on Faraid distributions. The couple also indicates their willingness to share the matrimonial assets at a ratio of 50:50 on the assets when one of them dies. ASSUMPTIONS: Inflation rate is at 3% per annum. Future EPF dividends are expected at 5% a year. EPF withdrawal at the age of 50: one third of EPF balance or Account II. The rate of return on equity investment is 8%, REIT at 6% and saving account at 3%. While unit trust is 8% and Tabung Haji is 6%. For unspecified investments, weighted returns will be used in the calculation. All return is reinvested. Income tax as at 2018 rate. No dividends are expected from stock investments held and the market value is not expected to change substantially in the near term. All cars depreciate in value at an annual rate of 15%. Life expectancy for male and female: 80 years. Tabung Haji account is dedicated for Hajj planning only. Zakat calculation is based on Lembaga Zakat Selangor for the year 2018. Based on LZS, for financial assets, nisab for 2018 is RM14,850 Post retirement return on investment is expected to be at 6%. Investment in Bitcoin has been giving 20% average return annually, gold bar 5% average return per annum. Bank Kerjasama Rakyat Malaysia has been declaring an annual dividend of 15% in average. RETIREMENT NEED ANALYSIS AT AGE 50 1 Lump Sum Retirement Need Current EPF Balance Calculation 3 Analysis Kassim Kassim Mariam Mariam ??? ?? 20 10 Balance (PV) Yrs to Retriement EPF Return FV EPF @ 50 ?? 10 5% 20 20 20 5% 4% Total Gross Annual Income No of years to retirement Retirement Years Income Growth Unspecified investment return Post Retirement Return Inflation Rate Inflation Adjusted Rate [(1.0674/1.03)-1]*100 6.74% 6% 3% Current EPF Contribution untill 4 Age 50 3.631% Income EPF ?? 23% ?? Based On Expense Method ??? Contribution (PMT) ?? Annual Expense CMPD BEGIN MODE, PV =, i=3%, n=10 Growth Adjusted [ia] *0.9615% SOLVE PV of contribution ??? FV of Annual Expenses @ 50 ??? 2 Principal Liquidation Method ??? PV [BEGIN MODE] SOLVE FV of the contribution [i:5;n:10;PV:???] FV of contribution at Lump Sum Needed at age 50 pmt ?? ?? tillage n 20 70 ? 50# i 3.631% SOLVE PV ?? 5 TOTAL EPF at age 50 ?? LESS: ZAKAT@2.5% ?? CMPD BEGIN MODE Retirement Funds Needed: [Begin Mode] EPF value available at 50 ?? ???? *[(1.05/1.04)-1]*100 # ??/1+g; ??/1.04 Recommendation: (1) Clients have surplus funds to cover their expenses after retirement 8 Retirement Fund Available at age 50 EPF ?? ?? Investment (Kassim n Mariam) FV Net Surplus * not applicable due to deficit (App 1) Rental Income (Sg Long House) ?? Note*: Since Mariam turns 40 at the retirement age of Kassim turns 50, and took pension scheme, only EPF of Kassim is applicable Retirement Fund Available ??? Funding Gap: Surplus/(Deficit) ???? 6 Value of the Investment when Kassim turn 50 years PV Kasim ??? Mariam ??? n 10 10 i% 6.74 6.25 FV@50 ?? ?? ??? 7 Rental income of Sg Long House n 10 i% 3.00 1st Step PV ?? PMT ?? FV@50 ?? PV@50 ?? 2nd Step 20 3 Note Note Mariam With As is planning 5,000 4,000 10,000 ANSWER FOR ESTATE PLANNING NET WORTH STATEMENT FOR 2018 Kassim ASSETS As is With planning Saving Account 10,000 Tabung Haji 6,000 ABC unit trust 20,000 Manjung Tin Company Shares 100,000 Bank Rakyat Share SMN shares 120,000 EPF 300,000 Takaful 100,000 House Bangi 500,000 Sg long House 2,000,000 House Kajang Audi 192,500 Mini Cooper 175,000 Gold Bar Bitcoin 10,000 Total assets ?? 5,000 ??? 20,000 300,000 5,000 ?? Kassim LIABILITIES (Debt) With planning As is 10,000 904,333 Mariam With As is planning 4,000 ??? 244,160 ??? ?? Credit card Sglong House Kajang house Audi Mini Cooper Tax due (from App 4) Zakat due (from App 5) Total Liabilities 1 191,437 37,479 26,020 8,661 ?? -1,732 1,063 ?? NET WORTH ?? ?? ?? 500,000 ?? 100,000 200,000 ?? ?? ??? ??? NET WORTH Add: Takaful proceeds Organization Group Takaful Death Benefit Estate value after Debt Less: Matrimonial assets Estate value after Matrimonial assets Add: EPF Estate value before Bequest Less: Bequest(max 1/3 of estate) ?? ?? 0 ?? ?? No bequest request 0 ?? 0 ?? NET ESTATE VALUE ?? ?? Event As is With Planning As is With Planning Event If Mariam Dies If Kassim die Mariam = Kassim = Father = Mum = Son (Asobah) = Sister = Presently, they are residing in a double storey bungalow in Sungai Long which was purchased by Kassim 4 years ago. He bought this house using a RM1,000,000 Islamic home financing plan attached with Mortgage Reducing Term Takaful (MRTT) for 20 years at 8% profit rate per annum. The current value of similar houses in this area is at RM2,000,000 per unit. Mariam also bought a single terrace house in Kajang 2 years ago using Islamic home financing plan (with MRTT) worth RM250,000 for 25 years at the profit rate of 9% per annum. The current market value of the house is RM300,000 and has been rented out at RM500 per month. Kassim drives an Audi A7 that cost him RM350,000 when he bought it three years ago. He paid RN100,000 as the down payment, and secured a 9-year Islamic hire purchase financing (with Hire Purchase Reducing Term Takaful) to finance its balance with 5% profit rate. Mariam drives herself to school since her office schedule is different than Kassim's. For this, Kassim bought Mariam a Mini Cooper 2 years ago at the price of RM250,000. He took RM50,000 conventional hire purchase loan with 2.5% interest rate for seven years. Other than that, both of them have conventional credit cards with an outstanding balance of RM10,000 far Kassim and RM4,000 for Mariam. List of assets with their current values, owned by the couple, are as follows: Assets Mudharabah Savings Account Tabung Haji ABC Unit Trust Manjung Tin Company Shares Bank Kerjasama Rakyat Malaysia Shares SMN Bhd Shares Bitcoin Gold bar Kassim RM10,000 RM6,000 RM20,000 RM100,000 Mariam RM5,000 RM4,000 RM10,000 RM5,000 RM120,000 RM10,000 RM5,000 In January 2017, Kassim invested 20,000 shares in SMN Bhd with a face value of RM5 per share. But based on your findings and also information received from Jabatan Kemajuan Islam Malaysia (JAKIM), this company produces non halal products and is classified as Shariah Non-Compliant stock by Securities Commissions last November. You have informed this to him, and Kassim seeks your advice on the method of cleansing for this investment. In your first meeting, Kassim provides the following information on his family expenses for the year 2017. He plans to remove some of the current expenditure and asks your opinion to have 30% reduction in his ongoing costs for the telephone bill, UNIFI internet bill, dining and vacation expenses. Personal Information Kassim (40 years old) and Mariam (30 years old) have been married for five years. Kassim has a son from his previous marriage with Zubaidah; Iskandar (10 years old). Kassim is the only son in the family and his mother passed away 2 years ago. He inherits a house in Bangi with a current market value of RM500,000 from his late mother's estate and he is renting out this house at RM1,000 per month. He contributes RM1,000 per month for alimony as part of the separation agreement with Zubaidah since the last seven years. His father is currently staying with him. Mariam is currently a teacher. She contributes RM500 monthly to her mother who lives with her sister after her father died in an accident. She wanted to show that although she is the wife to Kassim, her responsibility towards her mother remains. Her mother lives in Kampung Baru and she always makes an effort to visit her every month. Her sister is the only sibling that she has. Due to the increasing cost of tertiary education, Kassim wishes to set up an education fund for Iskandar, and he prefers not to take any education financing for him. He wants to estimate how much money should be invested to prepare for Iskandar's education cost and seeks your advice on ways to set up the education plans. He anticipates that Iskandar will begin attending university at the age of 18 years old. He plans to enroll Iskandar in local universities. The average current cost of study for a 4-year social sciences degree programming, including living expenses is RM20,000 per year, and this cost is expected to rise at 5% per annum. Financial Information As a Chief Financial Officer (CFO) of Manjung Tin Company (MTC), Kassim is currently enjoying a lucrative remuneration package for his position; a salary of RM20,000 per month and the salary is expected to grow at 4% per year. For retirement purpose, he currently contributes 11% of his salary to Employee Provident Fund (EPF) while the company contributes 12%. His current EPF balance is RM300,000. Meanwhile, Mariam earns a monthly salary of RM4,000. Her salary is expected to increase 4% per year. She has chosen the pension scheme as her retirement option; therefore, she does not contribute to EPF. As a government servant, she receives yearly bonus amounting to half of her monthly salary. Kassim contributes RM1,000 while Mariam contributes RM200 per month for their Takaful protection plans and they are entitled to a total coverage of RM500,000 and RM100,000 respectively. The current cash value for both Takaful plans is RM100,000 for Kassim and RM20,000 for Mariam. They are also covered by their organisation's coverage, where the death benefit is at ten times of their basic monthly salary. For health coverage, Kassim participated in a medical Takaful plan which provides cover for all of his family members since the last four years, with an annual contribution of RM5,000 Kassim and Mariam submit separate tax assessment to Inland Revenue Board of Malaysia (IRBM), and both have been paying taxes of RM1,000 and RM200 every month respectively. They also pay zakat; RM3,000 from Kassim and RM500 from Mariam annually. They have asked you on the current status of these tax and zakat payments, including zakat on wealth. Assets Mariam Yearly (RM) 2,500 Groceries Utilities Telephone UNIFI (TV satellite) Dining Out Clothing Books Personal Expenses Maid Mak Senah Vacation Miscellaneous Car Takaful & Road Tax Car Maintenance Petrol Kassim Yearly (RM) 6,000 2,000 5,000 2,400 6,000 5,000 1,000 2,000 5,000 1,000 3,000 9,000 20,000 4,000 1,500 3,000 4,000 2,000 800 2,000 2,000 Kassim and Mariam plan to perform haj together five years from now. Due to the limited national haj quota, they opt to choose a private haj package which will cost them RM50,000 each and this rate is expected to rise at 4% per annum. They want you to estimate the amount of fund needed for the haj purpose. They plan to continue working until they reach 50 years old. After Kassim's retirement, they plan to reside in Kassim's house in Bangi. They estimate that an allowance of RM15,000 per month in its current value is sufficient for them to maintain their lifestyle for the next 20 years. The bungalow in Sg Long will be rented out. At present, the monthly rental rate for a similar house in the area is around RM2,000 and is estimated to increase at 3% a year. QUESTION: You have been asked to advise them on how to achieve this retirement target. At the same time, they have also realized the importance of have a proper plan for estate planning, and they seek your advice on Faraid distributions. The couple also indicates their willingness to share the matrimonial assets at a ratio of 50:50 on the assets when one of them dies. ASSUMPTIONS: Inflation rate is at 3% per annum. Future EPF dividends are expected at 5% a year. EPF withdrawal at the age of 50: one third of EPF balance or Account II. The rate of return on equity investment is 8%, REIT at 6% and saving account at 3%. While unit trust is 8% and Tabung Haji is 6%. For unspecified investments, weighted returns will be used in the calculation. All return is reinvested. Income tax as at 2018 rate. No dividends are expected from stock investments held and the market value is not expected to change substantially in the near term. All cars depreciate in value at an annual rate of 15%. Life expectancy for male and female: 80 years. Tabung Haji account is dedicated for Hajj planning only. Zakat calculation is based on Lembaga Zakat Selangor for the year 2018. Based on LZS, for financial assets, nisab for 2018 is RM14,850 Post retirement return on investment is expected to be at 6%. Investment in Bitcoin has been giving 20% average return annually, gold bar 5% average return per annum. Bank Kerjasama Rakyat Malaysia has been declaring an annual dividend of 15% in average. RETIREMENT NEED ANALYSIS AT AGE 50 1 Lump Sum Retirement Need Current EPF Balance Calculation 3 Analysis Kassim Kassim Mariam Mariam ??? ?? 20 10 Balance (PV) Yrs to Retriement EPF Return FV EPF @ 50 ?? 10 5% 20 20 20 5% 4% Total Gross Annual Income No of years to retirement Retirement Years Income Growth Unspecified investment return Post Retirement Return Inflation Rate Inflation Adjusted Rate [(1.0674/1.03)-1]*100 6.74% 6% 3% Current EPF Contribution untill 4 Age 50 3.631% Income EPF ?? 23% ?? Based On Expense Method ??? Contribution (PMT) ?? Annual Expense CMPD BEGIN MODE, PV =, i=3%, n=10 Growth Adjusted [ia] *0.9615% SOLVE PV of contribution ??? FV of Annual Expenses @ 50 ??? 2 Principal Liquidation Method ??? PV [BEGIN MODE] SOLVE FV of the contribution [i:5;n:10;PV:???] FV of contribution at Lump Sum Needed at age 50 pmt ?? ?? tillage n 20 70 ? 50# i 3.631% SOLVE PV ?? 5 TOTAL EPF at age 50 ?? LESS: ZAKAT@2.5% ?? CMPD BEGIN MODE Retirement Funds Needed: [Begin Mode] EPF value available at 50 ?? ???? *[(1.05/1.04)-1]*100 # ??/1+g; ??/1.04 Recommendation: (1) Clients have surplus funds to cover their expenses after retirement 8 Retirement Fund Available at age 50 EPF ?? ?? Investment (Kassim n Mariam) FV Net Surplus * not applicable due to deficit (App 1) Rental Income (Sg Long House) ?? Note*: Since Mariam turns 40 at the retirement age of Kassim turns 50, and took pension scheme, only EPF of Kassim is applicable Retirement Fund Available ??? Funding Gap: Surplus/(Deficit) ???? 6 Value of the Investment when Kassim turn 50 years PV Kasim ??? Mariam ??? n 10 10 i% 6.74 6.25 FV@50 ?? ?? ??? 7 Rental income of Sg Long House n 10 i% 3.00 1st Step PV ?? PMT ?? FV@50 ?? PV@50 ?? 2nd Step 20 3 Note Note Mariam With As is planning 5,000 4,000 10,000 ANSWER FOR ESTATE PLANNING NET WORTH STATEMENT FOR 2018 Kassim ASSETS As is With planning Saving Account 10,000 Tabung Haji 6,000 ABC unit trust 20,000 Manjung Tin Company Shares 100,000 Bank Rakyat Share SMN shares 120,000 EPF 300,000 Takaful 100,000 House Bangi 500,000 Sg long House 2,000,000 House Kajang Audi 192,500 Mini Cooper 175,000 Gold Bar Bitcoin 10,000 Total assets ?? 5,000 ??? 20,000 300,000 5,000 ?? Kassim LIABILITIES (Debt) With planning As is 10,000 904,333 Mariam With As is planning 4,000 ??? 244,160 ??? ?? Credit card Sglong House Kajang house Audi Mini Cooper Tax due (from App 4) Zakat due (from App 5) Total Liabilities 1 191,437 37,479 26,020 8,661 ?? -1,732 1,063 ?? NET WORTH ?? ?? ?? 500,000 ?? 100,000 200,000 ?? ?? ??? ??? NET WORTH Add: Takaful proceeds Organization Group Takaful Death Benefit Estate value after Debt Less: Matrimonial assets Estate value after Matrimonial assets Add: EPF Estate value before Bequest Less: Bequest(max 1/3 of estate) ?? ?? 0 ?? ?? No bequest request 0 ?? 0 ?? NET ESTATE VALUE ?? ?? Event As is With Planning As is With Planning Event If Mariam Dies If Kassim die Mariam = Kassim = Father = Mum = Son (Asobah) = Sister =