An in-depth analysis of Estate Planning in Kenya: Setting up a trust as an option for you.
It is undeniable that many people are afraid of planning their estates. Estate planning, at least in the African context, is often associated with death. It may be very scary and perhaps akin to “inviting death” or “tempting the evil eye”. However, this does not always have to be the case.
So, what really is Estate Planning?
Estate planning is defined simply as the process of preparing during a person’s life, for the management and disposal of their assets in the event of their death or incapacitation. The planning includes the bequest of assets to heirs as well as reducing any uncertainties when it comes to the estate. Think of it this way, you work very hard throughout your life to create wealth for yourself and your loved ones, but do you put as much effort into ensuring that your legacy lives on? Have you thought about who you would entrust to handle your business affairs in time of incapacitation or take care of your estate in the event of your unfortunate demise?
A good estate plan should always take into consideration the following:
- Identify your assets;
- Identify your beneficiaries;
- Identify how you want your assets to devolve prior to or upon your death or incapacitation;
- Identify an administrator for your estate;
- Identify how and when you want your beneficiaries to receive their inheritance;
- Identify ways of reducing any potential estate tax liability.
Estate planning is often done with the help of a lawyer who has the necessary experience to guide clients into making the choice that is right for them. We, at ANO Advocates LLP, pride ourselves in providing clients with the necessary advice and guidance so that they can make the appropriate choices when it comes to the management of their estates.
Although there are many estate planning options, we shall focus our attention on setting up of trusts:
Trusts
Setting up a trust is a viable alternative to making a Will and also has many advantages over a Will. Generally, a trust establishes a relationship between the following important parties, i.e., the person transferring the property legally known as the ‘settlor’; the person who appointed to hold the property for the benefit of a third party, who is known as the ‘trustee’; and the party who receives the benefit of the property, known as the ‘beneficiary’. A Trust is therefore a legal arrangement where your appointed person or entity, the Trustee, acts on your behalf to oversee the management of your property and other assets, for the benefit of your intended beneficiaries.
In Kenya, trusts are governed by the Trustees Act and the Trustees (Perpetual Succession) Act. Ordinarily, Trusts are created through a Trust Deed which must be registered in accordance with the Registration of Documents Act. A Trust Deed is an instrument governing the relationship between you as the settlor and the trustee. It lays down the objects of the trust, the properties held under the trust, the powers of the trustee under the Trust, and the administration of the Trust. The Trust Deed as an instrument is, in itself, proof of ownership of properties in the trust.
Since your assets will form part of the Trust Fund, it becomes exempt from probate as the same is no longer considered part of your free property. Therefore, unlike Wills, the creation of trusts presents some level of privacy as the same may not necessarily be a matter of public record or subject of contestation. Trusts, especially those created under the Trustees (Perpetual Succession) Act have an edge over making of Wills, as it gains a separate legal personality which protects the assets therein from any potential lawsuits by creditors that may arise against the settlor in his personal capacity. The same cannot be said for Wills as creditors may sue the Estate to recover debts owed by the maker of the Will.
Although setting up trusts may sometimes have high-cost implications, it must be noted that the same is not only a preserve for high net-worth individuals. Anyone can utilize Trusts. Setting one up is not entirely out of financial reach.
In conclusion, the decision on whether to create a trust or adopt another option such as writing Wills as an Estate planning tool, is a matter of choice which would often be informed by a number of factors including the level of control one would like to maintain over the assets forming part of the Estate. As such, it is always important to consult your legal advisor on the best option for you.
*Disclaimer: This is an informative article and contains general information. It should not be construed as legal advice. Should legal advice be required, do not hesitate to contact ANO Advocates LLP at info@anoadvocates.com for further assistance.
