Volume 4, Book 51, Number 2 :
Narrated by Amr bin Al-Harith (radiallaahu `anhu) (the brother of the wife of Allah’s Apostle, Juwaira bint Al-Harith)
When Allah’s Apostle (sallallaahu `alayhi wasallam) died, he did not leave any Dirham or Dinar (i.e. money), a slave or a slave woman or anything else except his white mule, his arms and a piece of land which he had given in charity.
Volume 4, Book 51, Number 3 :
Narrated by Talha bin Musarrif
I asked ‘Abdullah bin Abu Aufa (radiallaahu `anhu), “Did the Prophet (sallallaahu `alayhi wasallam) make a will?” He replied, “No,” I asked him, “How is it then that the making of a will has been enjoined on people, (or that they are ordered to make a will)?” He replied, “The Prophet (sallallaahu `alayhi wasallam) bequeathed Allah’s Book (i.e. Quran).”
Volume 4, Book 51, Number 4 :
Narrated by Al-Aswad
In the presence of ‘Aisha (radiallaahu `anhaa) some people mentioned that the Prophet (sallallaahu `alayhi wasallam) had appointed ‘Ali (radiallaahu `anhu) by will as his successor. ‘Aisha (radiallaahu `anhaa) said, “When did he appoint him by will? Verily when he died he was resting against my chest (or said: in my lap) and he asked for a wash-basin and then collapsed while in that state, and I could not even perceive that he had died, so when did he appoint him by will?”
The determining of the Prophet’s debt and fulfillment of his promises
During the time approaching his demise, the Prophet came to the mosque, and asked the people whether there was anyone who had anything owed to them from the Prophet. Following the Prophet’s insistence in asking this question, someone stood up and claimed that they were owed 3 dirham. This was paid immediately to him. Again, during this time, the Prophet asked his wife Aisha about what happened to the 7 dirham (in some hadith 6 dirham, in others 9 dirham) that he left in her care. Upon this, she immediately got the money and handed it over to the Prophet. The Prophet then distributed 5 dirham to 5 needy families from the Helpers (Ansar) and gave the remainder of the money to his wives to spend.
Even though the Prophet paid all of his debts before he died, Abu Bakr, who took the leadership of Muslims after him, saw himself as responsible for paying the debts and fulfilling all the pledges of the Prophet. The pledges of the Prophet were no different (in the importance that he gave to them) to his debts. The Prophet’s Companion Jabir explains one of the Pledges that the Prophet made to him as follows:
The Prophet said to me, “I will give you so much (the Prophet pointed thrice with his hands) when funds of Bahrain will come to me.” But the Prophet died before the money reached him. (When it came) Abu Bakr ordered an announcer to announce that whoever had a money claim on the Prophet or was promised to be given something, should come to Abu Bakr. I went to Abu Bakr and told him that the Prophet had promised to give me so much. On that Abu Bakr gave me three handfuls (of money). [Bukhari, “Gifts,” 17.]
Properties left by the Prophet and their distribution
It was not difficult to divide the property of the Prophet because he did not have so much in assets. When he passed away, nothing more than some blocks of land and the house in which he resided, in terms of assets, existed.
Based on the information given by Ibn Sa’d, it was not known what happened to the flocks of camel and sheep known to belong to the Prophet. Ibn Sa’d names the slaves and concubines belonging to the Prophet – either donated or gained through war – and narrates that they were all manumitted prior to his illness.
As for the way in which the Prophet’s inheritance was managed, his livestock and some of his personal belongings were bequeathed to Ali’s family. His mantle, sword and ring remained state property.
Following the Prophet’s demise, his heirs – first and foremost his daughter Fatima – appealed to Abu Bakr to divide his belongings and land. They were reminded of God’s Messenger saying to them, “Our (Apostles’) property should not be inherited, and whatever we leave, is to be spent in charity.” Accordingly, all the land belonging to him was given to the State. Fatima, evidently unaware of such a command, insisted on receiving her share of the land in the areas of Khaybar, Fadak, and Banu Nadir.
Another saying of the Prophet regarding his inheritance is as follows, as narrated by Abu Huraira:
God’s Messenger said, “Not even a single Dinar of my property should be distributed (after my death to my inheritors, but whatever I leave excluding the provision for my wives and my servants, should be spent in charity.” [Bukhari, “Laws of Inheritance,” 33; “Jihad,” 202.]
As such, the Prophet’s wives would be entitled to receive the allowance he determined for them during his life, for the rest of their lives. Intended by his ‘servants’ is without doubt those looking after his property and managing its income and the employees and workers working on his lands which were not given to others to manage.
As for the rooms in which the Prophet’s wives resided, he bequeathed these to them. They were to live in these rooms and once his wives passed away, the rooms, like the Prophet’s land, were to be included among his charity.
In this way the Prophet, who had prohibited the appropriation of all kinds of income obtained from the Muslims to both himself and his relatives, left behind the property either donated to him or acquired as war spoils to the State, as charity for the Muslim community. In so doing, the Prophet used his spiritual and material authority not in the way of hoarding wealth for himself and his family, but purely and solely for the purpose of bringing all Muslims a happiness which encompassed their lives in both this world and the next.
The inheritance of the rights owned by the Prophet
The Prophet Muhammad has many attributes, the chief of which are undoubtedly his being a Prophet of God and Head of State. The Last Prophet would, for all eternity, have no heir in Prophethood. In this respect, the handing down and bequest of the rights he had by virtue of his being a Prophet of God is inconceivable. After him, only those who the people elected and pledged allegiance to would assume the position of Head of State. With respect to the rights he had that were associated with his role as Head of State, these would be transferred to Heads of State succeeding him. At this point, we will not discuss all these rights, but make mention of only those pertaining to economics, from the perspective of the legal Schools of Thought.
The Hanafis – on the basis of the practices of the Rightly Guided Caliphs (the four Caliphs succeeding the Prophet) – claim that the share belonging to the Prophet and his relatives are null and void with his demise. In their view, the Prophet Muhammad held these rights not by virtue of his being Head of State, but by virtue of his being a Prophet. As for Imam Shafii, he is of the opinion that the share belonging to the Prophet is transferred to the Caliphs who would succeed him as Head of State after his demise. According to him, just as the Prophet had particular expenses in the way of giving gifts to visiting delegations and ambassadors, the caliphs too, had the same need. As far as Shafii is concerned, Heads of State have an adequate share in this right because, like the Prophet, they dedicate themselves to the service of society. In actual fact, Shafii is of the view that the share falling to the Prophet from spoils of war and booty is transferred to the caliphs, not as personal assets or rights, but purely for use in the way of public good. We glean this from and clearly see this in both his own work and that of Mawardi.
However, as can be understood from Kasani (d. 587), Shafii is of the view that the Head of state also can personally benefit from these rights. Like Shafii, there are others scholars who confer this right, to be used for the benefit of society, to the Head of State. The Hanbalis hold the view that the share belonging to the Prophet can be used for public good and the benefit of society, public service as well as investment.
Taken from LastProphet.info
Volume 3, Book 37, Number 495 :
Narrated by Abu Huraira (radiallaahu `anhu)
Whenever a dead man in debt was brought to Allah’s Apostle (sallallaahu `alayhi wasallam) he would ask, “Has he left anything to repay his debt?” If he was informed that he had left something to repay his debts, he would offer his funeral prayer, otherwise he would tell the Muslims to offer their friend’s funeral prayer. When Allah made the Prophet (sallallaahu `alayhi wasallam) wealthy through conquests, he said, “I am more rightful than other believers to be the guardian of the believers, so if a Muslim dies while in debt, I am responsible for the repayment of his debt, and whoever leaves wealth (after his death) it will belong to his heirs.”
The first part of this hadith has been covered before. Read it here.
So initially the Prophet (sallallaahu `alayhi wasallam) would refuse to offer the funeral prayer of a person who hadn’t left anything to repay his debt(s) with.. but later on, when the Bayt-ul-Maal was sufficiently stocked, he would have their debts repaid from the state treasury, considering himself the guardian of the believers.
And that’s how it should be. If someone dies in debt leaving behind nothing, the state should repay their debts.