Is it permissible for him to divide his wealth among his heirs when he is still alive?
Yes, that is permissible subject to conditions, unless he intends thereby to harm some of his heirs, such as withholding from some or giving them less than they are entitled to in order to harm them.
Allaah Himself has stated how the inheritance is to be shared, and He has issued a warning against ignoring this division. He says (interpretation of the meaning):
“These are the limits (set by) Allaah (or ordainments as regards laws of inheritance), and whosoever obeys Allaah and His Messenger (Muhammad) will be admitted to Gardens under which rivers flow (in Paradise), to abide therein, and that will be the great success.
14. And whosoever disobeys Allaah and His Messenger (Muhammad), and transgresses His limits, He will cast him into the Fire, to abide therein; and he shall have a disgraceful torment”
[al-Nisa’ 4:13, 14]
But it is better not to do that. Rather he should keep his wealth with him, then when he dies it should be distributed among the heirs who are present at the time of death, according to the manner outlined in sharee’ah. No one knows who is going to die first so that he might share his wealth among his heirs. He may live for a long time and need this money.
It says in al-Insaaf (7/142): It is not makrooh for a living person to share out his wealth among his heirs, according to the correct view. And it was narrated from him (i.e., Imam Ahmad, in another report) that this is makrooh. It says in al-Ri’aayah al-Kubra: It is makrooh for anyone to divide his wealth among his heirs when he is still alive, if it is possible that he may have another child. End quote.
It says in Fataawa al-Lajnah al-Daa’imah (16/463): We advise your father not to divide his wealth when he is still alive, for he may need it after that. End quote.
And Allaah knows best.