Dear Bahá'í Friend,
As foreseen in your fax of 18 February 1992 to the Office of Huququ'llah, your letter of 6 November 1991 to the Board of Trustees in the United States has been referred to the Bahá'í World Centre. The House of Justice has asked us to express its appreciation for your comments designed to simplify the task of answering the questions you raise and to avoid duplication of effort.
Your letter has been referred to an Ad Hoc Committee, and the House of Justice has asked us to send you the enclosed copy of the Committee's reply.
With loving Bahá'í greetings,
For Department of the Secretariat
(Baha’i Library Online)
Memorandum
To: The Universal House of Justice
Date: 5 May 1992
From: Ad Hoc Committee
Re: Questions asked by Mr. --- in his letter of 6 November 1991
We have considered the various questions [1] raised in Mr. ---'s letter of 6 November 1991 addressed to the Board of Trustees in the United States. As Mr. --- notes in his letter of 18 February 1992, a number of these matters have been covered by the answers sent in response to his letter of 12 November 1991. We have attempted below to cover the remaining issues.
The crucial point seems to be the one made in the third paragraph of Mr. ---'s letter, namely:
“I must prepare wills and trusts that provide clear, detailed instructions as to how the executor of an estate, or the successor trustee of a trust, is to calculate and pay the Huququ’llah. Sometimes these are not Bahá’ís; sometimes these are institutions, such as banks named as executors or successor trustees. If I do not provide detailed and clear guidance on the complex financial aspects of this law, I will ensure that the estate will be tied up in probate court, and that the judge will have to make the determinations. This may result in wrangling, wasted time, and the eating up of the assets in legal fees.”
This problem was alluded to in the final paragraph of our memorandum of 9 December 1991:
...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.
In view of the inherent impossibility of computing the balance of Huquq owing in the event of a person's death if he has not kept appropriate records, Mr. --- will need to think up a formula valid in American law, which would not tie up the estate or invalidate a will on the basis of obscurity.
In the fourth paragraph of his letter Mr. --- gives his understanding of the method by which a person computes his first payment of Huququ'llah. We see no problems here, except in the final sentence:
“I will refer in this letter to the original value of the Huququ'llah estate at the first calculation, as the ‘baseline amount’ of the Huququ'llah estate. My understanding is that in succeeding years, if the value of the Huququ'llah estate exceeds that baseline amount by at least 19 mithqals of gold, then Huququ'llah is again payable, only on the amount that exceeds the baseline amount.”
The element that is missing here is that there are really two "baseline amounts", the total value in Huquq units of the property brought into account, and the cumulative total, also in Huquq units, of property cleared for Huququ'llah. The first "baseline" rises and falls each year depending upon whether the person has net savings that he brings into account, or whether he has made losses and has had to draw on his cleared property to cover his normal expenses. The liability to pay more Huququ'llah arises every time the first baseline exceeds the second baseline by at least one Huquq unit.
On Mr. ---‘s numbered questions we have the following comments:
1. It seems clear that a person's debts must be offset against his assets when computing the amount of his property for Huququ'llah purposes. However, it is not necessary to set each debt off against the asset to which it may relate. For example, a person may be so greatly in need of money that he will take out a loan on the security of his residence. It should not be concluded, therefore, that a home mortgage would not reduce a person's obligation to Huququ'llah.
2. As for the question of joint ownership, it would seem that this is an area in which a Bahá'í should specify in the agreement how the property is to be treated. For example, where a brother and sister are joint owners of a parcel of real estate, it would seem logical to treat each of them as being the owner of half of the value of the plot; in which case, if they were "joint tenants with right of survivorship", each would have paid his or her Huquq on half during his lifetime, and when the survivor became sole owner, he would then become liable for Huquq on the half which was being added to his estate.
3. The same principle as in 2 above would operate if only the brother owned the property during his lifetime. It would be part of his property for Huquq purposes and, when the ownership passed to his sister on his death, it would then be added to her estate for Huquq purposes.
4. This point seems to be adequately covered by the above answers.
5. In a letter written on behalf of the Universal House of Justice on 29 March 1989, the Secretariat stated, "the Law of Huququ'llah imposes an obligation only on individual believers, not on Bahá'í institutions or corporate bodies". Many individuals these days convey their personal property to private companies or, as Mr. --- mentions, to trusts, so as to avoid or reduce the incidence of taxes on that property. This presents a problem in relation to assessment of Huququ'llah. In the case of an incorporated company the problem is minimized by the fact that the company will usually have shareholders, and the shares of the individuals constitute their share of the property concerned. A Trust, however, would seem to present a more intractable problem since thereby the property is conveyed to an impersonal owner (the Trust), which may be of virtually permanent duration, while the beneficiaries receive only those amounts which the Trust Deed prescribes. In the absence of specific legislation by the Universal House of Justice on such matters, the individuals concerned should conscientiously consider whether in fact, even though not in civil law, the property is theirs and, if it is, to arrange for Huququ'llah to be paid on it.
To take Mr. ---'s example: A "couple place all of their property in the trust during their lifetime. The trust remains the owner of the property after the first spouse's death, and even after the second spouse's death (e.g. sometimes a couple wants their property to be maintained in trust after their deaths until their child reaches a certain age, and then distributed)." It is clear that the legal title to the property does not change until it is finally distributed. However, in the spirit of Bahá'í law, it would be proper for the couple to decide, on constituting the Trust, what proportion really belongs to each of them. Assuming that, as property was put into the Trust, it was brought into account for Huququ'llah, and the Huquq was paid, the entire property would have been cleared for Huququ'llah in respect of each of the owners. Then, on the death of either, Huququ'llah would be paid on that one's proportion by the survivor, into whose estate it would then pass. On the death of the survivor, the entire Trust would effectively pass to the child to whom it would ultimately be due, and since its value would be added to his property for Huquq purposes, his Huququ'llah should be paid on it at that point.”
6. If only one of the spouses is a Bahá'í the same policy could be followed. The non-Bahá'í clearly has no liability to Huququ'llah. Thus, if the Bahá'í brings into account for Huququ'llah all his or her property when it is put into the Trust and pays Huquq on it in his lifetime, none would remain to be paid on his death. It would then pass to the non-Bahá'í who is not liable for Huquq. If the non-Bahá'í dies first, his share of the Trust only becomes liable to Huququ'llah by now being added to the property of the Bahá'í spouse, who should then pay the Huquq on it.
7. It is clear that if a person has paid all the Huququ'llah due on his property, he does not owe any more Huquq when he dies. It is only on being added to the property of another Bahá'í that any of this property becomes liable to Huquq. It is, in other words, the responsibility of the recipient. In answer to the second part of the question: Huququ'llah is payable on the accumulating total of a person's estate. If the person has losses, those losses must be recouped, and the total raised again by one Huquq unit above the former maximum before he becomes liable again.
8. Mr. ---'s understanding is correct, namely, that when a Bahá'í leaves an estate on which no Huququ'llah has been paid, the Huquq due should be deducted from it before the balance passes to the heir. That balance is then an additional possession in the hands of the heir and should be added to his property for the computation of the Huququ'llah that he is due to pay on his own behalf.
9. This question was covered in our memorandum of 9 December 1991.
10. Taxes, estate duty, etc., are all charges against the value of the estate. The problem of computations instanced by Mr. --- should be soluble by an algebraic equation.
11. When bringing an object into account for Huququ'llah one should use its current market value in terms of Huquq units.
12. An asset and a debt should be treated as separate items. It is not necessary to attempt to relate each to each
13. Profits and losses do not affect Huququ'llah until they are realized
14. If a person purchases a life insurance payable to the Huququ'llah Trust to provide the liquid assets to pay the balance of Huquq owing at the time of his death, there would seem to be two alternative ways of treating the premiums and the amount received:
a) He could treat the insurance as a method of investing, in which case each annual premium would be brought into account for Huququ'llah, and would constitute part of the savings on which he would pay Huquq. Then, when he died, the sum received (paid over by the Insurance Company to the Huququ'llah Trust) would be a realization of his investment, and the profit to be brought into account for Huququ'llah would be the current value of the sum received less the total value of all the premiums paid.
b) Alternatively, he could treat the insurance premiums as part of his annual expenses. In that case, when the Insurance Company paid out on his death, the entire sum would be an addition to his estate and would have to be brought into account in calculating the final amount of Huquq due.
In either case his estate would finally pay the correct amount of Huququ'llah due.
15. Is answered above.
16. Was answered in our memorandum of 9 December 1991, as was the final paragraph of Mr. ---'s letter.
(Baha’i Library Online)