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Abstract:
Information and examples about calculating Huququ'llah transactions.
Notes:
Submitted by and posted with permission of recipient.

Huququ'llah Transactions, Examples of

by / on behalf of Universal House of Justice

1991-11-12

1. Query to the Universal House of Justice

The Universal House of Justice 
Haifa, Israel

Dear and Esteemed Universal House of Justice:

As part of my law practice, I prepare wills, trusts, and business agreements, and I handle the probate of estates. An increasing number of clients are Bahá'ís. I am trying to assist more of the believers to plan ahead, so that contributions to the funds of the Faith will increase through bequests, life insurance proceeds, trusts, and other forms of gifts. I am also striving to understand the implications of Huququ'llah. I am also presently doing research on creation of a Bahá'í Foundation for generation of additional funds for the Faith in America. While I regret asking for your time in answering the following questions, I hope that this will result in greater contributions to the Faith, so I will ask. Also, since the Huquq will become binding upon us in a few months, I need to have a clear understanding of how to provide for payment of Huququ'llah in business transactions, in wills, and in the process of probate. I want to ensure that any legal work I do in relation to the payment of Huququ'llah is properly done.

Bahá'u'lláh requires that a believer write a "testament". The provisions, to my knowledge, which the Bahá'í Writings direct should be in one's testament are: [1]

- To adorn its heading with the Most Great Name. I understand this to mean that one's will should have the word "Allah'u'Abha" at its beginning. Question 1: Is this correct?

- To testify to the oneness of God as manifested in the Day-Spring of His revelation. I understand this to mean that in his will, a believer should express his devotion to Bahá'u'lláh as the Manifestation of God for this Day. Question 2: Is this correct?

- To set forth such good deeds as he may wish to be realized. I understand this to be related to the principle that a soul may advance after death, due to the deeds done in his


    [1] Based on a passage from the Kitab-i-Aqdas quoted on page 192 of Lights of Guidance, 1988 edition.


Letter from an individual to the Universal House of Justice       Page 2

name after his entry into the next life.2 By this provision in his will, a believer may not only indicate which deeds he wishes done in this world on his behalf, but may leave funds for those purposes.

- To distribute one's assets after payment of debts and expenses.3

- The payment of Huququ'llah.

As you know, a revocable living trust is a will replacement, and practically all provisions for what happens to one's estate after death are placed in the trust. (Provision for guardianship of minor children after the parent's death can only be legitimately placed in a will, at least in the state of New Mexico.) Although a will is also drafted, the only operative provision of this will is generally to "pour over" assets into the revocable living trust. Question 3: Does preparation of a Revocable Living Trust containing the above provisions meet the requirement of Bahá'í law to make one's will and testament? From a legal point of view, there is no problem with the above items all being contained in a trust document; however, such a trust is not technically a will. From a drafting point of view, it would be at least unwieldy, and worse, might create conflicting provisions, for the above "Bahá'í provisions" including payment of unpaid Huququ'llah to be in the will, if practically everything else of a financial nature is in the trust document.

A revocable living trust is equally as binding upon the survivors and the courts as a will, as far as the distribution of assets. It generally avoids the necessity of probate, and frequently minimizes taxes, especially as between spouses. It can provide for the support of surviving spouses and minor children, and make payments over time to the funds of the Faith. A trust is an extremely flexible legal entity. As you know, the National Spiritual Assembly of the Bahá'ís of the United States is itself a trust. Inasmuch as you are likely familiar with revocable living trusts, I do not wish to burden you with details as to their nature and workings. However, I will gladly provide you with additional information about them, if you wish it, in answering my questions.

I am frequently asked to prepare "living wills" for people, as part of their estate plan. I have read your letters on this point which are published in the 1988 edition of Lights of Guidance. Question 4: Have you published any additional guidance on this question? I want to avoid anything that smacks of euthanasia, if the House of Justice views such documents as approaching that area.


    [2] "The Master has told us that gifts and good deeds done in memory of those who have passed on, are most helpful to the development of their souls in the realms beyond...." (From a letter on behalf of Shoghi Effendi, Lights of Guidance, 1988 edition, page 204.)

    [3] Letter of the Universal House of Justice quoted on page 19 of Lights of Guidance, 1988 edition.


Letter from an individual to the Universal House of Justice       Page 3

I recently wrote to the Trustees of Huququ'llah here in the United States, with questions related to the calculation and payment of Huququ'llah. Some of these questions dealt with provision in one's will for payment of the Huquq; some dealt with Huququ'llah payment during one's lifetime. One question that troubles me is this: Bahá'u'lláh stated that even if payment of Huququ'llah had been made on all of one's assets, if such a purified asset "changes hands" then Huququ'llah is again payable. If such a believer sells a purified asset to another Bahá'í whose assets are also all purified by payment of the Huququ'llah; and the purchaser must pay the Huquq on the transferred property because it has "changed hands"; then the purchaser would in effect be paying Huququ'llah twice on a portion of his assets.

Question #5: If the purchaser had as his total assets $81,000 in the bank, which had been purified by previous payment of Huququ'llah, and he purchased from the other believer a piece of purified property worth $81,000; when the property is sold, would the purchaser automatically have to pay Huququ'llah, despite the fact of his being otherwise "current" on Huququ'llah payments? The total amount of property the purchaser owns would not have changed: His $81,000 would now be in real estate instead of cash in the bank. By the same token, his $81,000 cash on which he had already paid Huququ'llah has "changed hands" and is now in the possession of the property seller. The seller's assets still total $81,000, but are in the form of cash, instead of real estate. If both believers must pay Huququ'llah because the cash has "changed hands" and the real estate has "changed hands", then both estates will be reduced by payment of Huququ'llah to a value of $65,610. With each successive sale and purchase, a believer's capital would be reduced by 19%. In the long run, commerce between believers will be greatly reduced.

There is no problem, from a drafting point of view, with providing for a bequest to the Fund or to Huququ'llah in a specific dollar amount; but there are significant problems- if I must provide a method of calculation. It may be best for the present to have no testamentary provisions for the payment of Huququ'llah other than for specific amounts. I also understand that it may not be in keeping with wisdom for you to further clarify the Law of Huququ'llah at the present time. I am grateful for your guidance, whatever it is. I ask for your prayers as I assist the friends to carry out the provisions of Bahá'í law in the course of their commercial transactions, and to help them properly provide for payment of Huququ'llah in their contracts, wills and trusts.

With warmest Bahá'í love, xxxx

2. Response from the Universal House of Justice

Department of the Secretariat

Dear Bahá'í Friend,

The Universal House of Justice received your letter of 12 November 1991 and has asked us to send you the following response.

The House of Justice was very pleased to see the degree to which you are helping those believers and Bahá'í institutions which are eager to adopt legal measures to follow the principles and laws of the Faith in relation to their estates and also to augment the income of the Bahá'í funds. Undoubtedly, once the law of Huququ'llah becomes universally applicable next Ridvan, you will receive many more questions on this subject. The House of Justice is glad to help you in these matters.

Your first two questions which relate to the matters to be covered in a will as prescribed in the Kitab-i-Aqdas will be elucidated when the translation of the Most Holy Book is published. In general, the conclusions you have drawn are not incorrect, but it would be preferable not to go into them at the present time, and to confine your advice to the financial aspects of wills.

Question #3: It would seem from your description of the procedure, that a Revocable Living Trust constitutes a legal document which supplements the will. If this is so, there is no objection to its use as you outline it. The Bahá'í law leaves a believer free as to the distribution of his possessions at his death. If his will points to a document which makes clear what is to be done, that is entirely acceptable. Provisions as to the payment of debts and the balance of Huququ'llah due could also be in the Trust document.

Question #4: We do not know of any guidance on the subject of "living wills" beyond that published in Lights of Guidance.

Question #5: Since the answer to this question requires some detailed examples, the question was referred to an Ad Hoc Committee. Its memorandum on the subject is enclosed, and the House of Justice hopes that these comments will be helpful to you.

    With loving Bahá'í greetings,
    For Department of the Secretariat

    cc: International Teaching Centre
    The Trustee of Huququ'llah
    Hand of the Cause of God Dr. 'Ali-Muhammad Varqa
    Office of Huququ'llah in the Holy Land
    Board of Trustees of Huququ'llah in the United States


M E M O R A N D U M

To: The Universal House of Justice
Date: 9 December 1991
From: Ad Hoc Committee

Re: Questions asked by Mr. xxxx in his letter of 12 November 1991 [online here].

We have considered question #5 of Mr. xxxx's letter, which you referred to us, and have the following comments.

We feel that to understand the principle by which Huququ'llah becomes payable again on property when it changes hands, it is necessary to realize that Huququ'llah is payable on the accumulation of a believer's assets (other than the exempt ones) so that, by the end of his life, he will have paid 19% of his accumulated savings when they reached their highest point.

When a particular asset passes from one believer to another it is deducted from the first person's total assets, and added to the second owner's. In considering the outcome one must distinguish between an asset's becoming assessable to Huququ'llah when passing from one person to another and the consequent liability to actually pay Huququ'llah. In the illustration that Mr. xxxx gives, for example, neither Bahá'í has had an increase in the total of his-assessable possessions. One has reduced his assessable property by $81,000 in cash and increased it by $81,000 in real estate; the other vice versa. Thus, although the cash and real estate become assessable again on passing from one owner to another, neither believer would have to pay additional Huququ'llah as a result of the transaction.

In real life, however, such a transaction will be more complicated, because one s liability to pay Huququ'llah depends upon a number of factors which affect the value of the assets for Huquq purposes at the time of the transaction. We append a reconstruction of the transaction that Mr. xxxx instances, applied to two hypothetical individual believers.

From this example it can be seen that the seller of the real estate, who had bought it for $70.000 and now received $81,000 for it. made a profit of HU.11.80 (Huquq Units). Since he had a balance of HU.0.56 which had not yet been cleared, the total rose to HU.12.36, which meant that he was liable to pay the Huququ'llah on 12 units and this amounted to $1,861.42.

The purchaser of the real estate, on the other hand, used $81,000, which had been valued at HU.93.60 when brought into account, to acquire the land worth $81,000 currently valued at HU.99.21. He therefore increased the value of his assessable assets by HU.5.61. Adding to this the uncleared balance of HU.0.60, gave a total of HU.6.21, so he was due to pay the Huququ'llah on 6 units and this amounted to $930.71.


Ad Hoc Committee Memorandum - Question from Mr. xxxx       Page 2

This example is, as we mentioned, purely hypothetical, and the values of the dollars entered for each year are not necessarily accurate. It is merely intended to demonstrate that it is not normally possible to calculate the Huququ'llah due on a single transaction without having other information about the financial status of the individuals concerned in relation to their liability to Huququ'llah.

In light of the above considerations it is suggested that it is unlikely to be possible to include in a will either a dollar amount to be paid in Huququ'llah or to provide a method of calculation. What a testator can do, however, is to instruct his executor in his will to pay whatever amount of Huququ'llah is outstanding at the date of his death, and to refer to an account book or list on which will be recorded an up-to-date description of which specific items of his property, which investments and which bank accounts have been cleared for Huququ'llah, what is the accumulated value of his property for Huquq purposes (in Huquq units), and what is the value in Huquq units of the property cleared. With that information in hand the executor would be able to compute the balance of Huququ'llah owing and would have authority to pay it.


Ad Hoc Committee Memorandum - Question from Mr. xxxx       Page 3

HYPOTHETICAL EXAMPLE OF
HUQUQU'LLAH TRANSACTIONS

(HU.l.OO - One Huquq Unit of 19 mithqals of gold)
[Note: These tables are as close a replica of the original hardcopy as possible;
all that is missing are vertical lines separating the columns. -J.W., 1997]

Believer 'A'. the seller of the Real Estate:


Date          Item           Dollar    Conversion   Huquq   Property   Huquq
                             Value        Rate      Value   Cleared    Paid 

                              US$                    HU        HU        HU
  
1980 Balance b/f                                    438.23   438.00     83.22
1984 Cash brought into A/c   60,000.00   800.8416    74.92
1984 Land brought into A/c   70,000.00   800.8416    87.41
                                                    600.56
1984 Huquq paid             (24,649.90)  800.8416            162.00     30.78
                                                    600.56   600.00    114.00
1991 Land sold              (70,000.00)  800.8416  ( 87.41)
                                                    513.15
1991 Proceeds of land        81,000.00   816.4135    99.21
                                                    612.36
1991 Cash taken out of A/c  ( 1,861.42)  800.8416  (  2.32)
1991 Cash brought into A/c    1,861.42   816.4135     2.28
1991 Huquq paid             ( 1,861.42)  816.4135             12.00      2.28
                                                    612.32   612.00    116.28



Believer 'B'. the purchaser of the Real Estate:


Date          Item           Dollar    Conversion   Huquq   Property   Huquq
                             Value        Rate      Value   Cleared    Paid 
 
                              US$                    HU        HU        HU

1989 Balance b/f                                    672.48    672.00   127.68
1989 Cash deposited in Bank 200,000.00  865.3538    23l.12
                                                    903.60
1989 Huquq paid            (37,980.38)  865.3538              231.00    43.89
                                                    903.60    903.00   149.53
1991 Cash paid for land    (81,000.00)  865.3538   ( 93.60)
                                                    810.00
1991 Land acquired          81,000.00   816.4135     99.21
                                                    909.21
1991 Cash taken out of A/c    (930.71)  865.3538    ( 1.07)
1991 Cash brought into A/c     930.71   816.4135      1.14
1991 Huquq paid               (930.71)  816.4135                6.00     1.14
                                                    909.28    909.00   150.67
                                                                             
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