Is Zakat Due on Child Trust Funds?

Zakat is not due on children who are minor and prepubescent in the Hanafi school. In the Hanafi school, the issue of Zakat on Child Trust Funds will only be questioned upon maturity and puberty of the child.

However, according to the Shafi’i, Maliki and Hanbali schools, Zakat is obligatory on the wealth of minor children also.

There are three types of Child Trust Funds:

Stakeholder account

These accounts see your children’s savings put into stock market investments. Stakeholder rules mean that charges are capped at 1.5% a year, and they have to be invested in a wide mix of investment types. After the child’s 13th birthday, the investments are transferred to less risky portfolios.

Shares account

These types of accounts allowed you to either pick an investment fund to put your children’s savings onto the stock market or pick your own investments.

In regards to the Stakeholder and Shares Child Trust Funds, Zakat will be due on the underlying Zakatable assets in the fund. This can be gauged by looking at the asset composition in the fund. One will pay Zakat on the proportion of Zakatable assets in the fund. Savings account

Such Child Trust Funds (CTFs) are not invested in shares, rather, they accrue interest.

In a savings Child Trust Fund, the entire amount minus the interest element is Zakatable. All of the interest earnings must be relinquished in charity. At the same time, one should move to a Shariah-compliant CTF.

Timing of Zakat on Child Trust Funds

Regarding the timing of Zakat on CTFs, the mature child can pay Zakat on it every year before having the ability to access the funds. It is also permissible to delay the payment of Zakat upon accessing the funds. If one chooses to wait until access, it will be obligatory to backdate and pay Zakat for the previous years after becoming mature until acquiring access.

And Allah Ta’ālā Alone Knows Best

Mufti Faraz Adam

Approved by Mufti Amjad 13th August 2023