Estate planning 101: Securing the future of family and business

Life is paved with uncertainty. Take the Covid-19 pandemic, for instance, which has affected so many businesses.

Firms have been forced to uncharted territory, with many having to scale down operations and some to shut down. Therefore, for the sustainability of your business and family’s financial security, it is important to plan for an unprecedented event.

There are three levels of transition that one should consider; preparing for injury or disability, death and retirement.

Estate planning enables you to preserve family wealth, provide for a surviving spouse and children, fund your children’s or grandchildren’s education, or leave a legacy behind for a charitable cause.

It involves determining how your assets will be preserved, managed and distributed. It also takes care of your financial obligations in the event of these transitions.

Assets that could make up an individual’s estate include houses, cars, stocks and businesses.

For life insurance, pension and Sacco proceeds, it is important that you have a well thought-out and updated nomination of beneficiary form. This is the document that will determine how these assets are managed when you die.

Knowing that you have a proper plan in place that will protect your family and business gives you all peace of mind. Key to note is that estate planning is not just for the rich. Everyone has an estate no matter how small.

Without a plan in place, settling your affairs after you die, become incapacitated or retire could have a long-lasting and costly impact on your loved ones or business.

No one really likes to think about their own death or the possibility of being unable to make decisions for themselves. This is exactly why so many families are caught off-guard and unprepared when incapacitation or death strikes.

One can put a plan in place now and review it as time goes by. Estate planning is a continuous process and we have to be comfortable with the fact that we will not always be here.

Octagon Africa Group Chief Executive Fred Waswa shares a guide on estate planning, an area the organisation specialises in, that will ensure you are not caught off-guard in case of a transition.

Create governance structures

It is common to find businesses going under after the death of the founder. It is therefore important for business owners, especially small and medium enterprises, to formalise their operations to provide for disability, death and retirement.

One way to ensure this is by streamlining governance structures. Creating a board, for instance, will ensure crucial succession decisions are made in the event you are unable to work.

This formalisation will ensure your business moves forward seamlessly.

Write a Will

A last Will and testament is the best-known part of an estate plan. It is a legal document that provides instructions on how an individual’s property and custody of minor children, if any, should be handled after death.

A properly prepared Will minimises the likelihood of someone challenging or contesting it. You can use it to name a guardian for your children.

A Will also enables you to name your executor, the person you want to handle your affairs and oversee the probate process. You can direct the establishment of a trust to ensure that your assets are used by many generations to come.

However, until you die, a Will is not a legally binding document hence the need for more extensive estate plans.

It is advisable to regularly review and revise your Will occasionally, especially after a change in circumstances, such as marriage, divorce or the need to have new beneficiaries. There is no better time to write a Will than now.

Create a trust fund

This is a new concept in Kenya, but it is very important.

A trust is a private legal arrangement in which the ownership of someone’s assets is transferred to an entity known as a trust.

Your personal assets and property are vested in the fund where they can be used to cater for the basic needs of your beneficiaries. This ensures that beneficiaries, such as children, are able to meet their goals even in the absence of their parents.

A trust, therefore, protects assets from persons who would misuse the funds and leave beneficiaries in deplorable conditions.

Trusts can be set up by individuals while they are still alive and used to hold or invest their property, or can be set up following the death of an individual where the benefits and property are consolidated to benefit the dependents.

The big difference between a Will and a trust is that trust assets do not have to go through the probate process involving court processes or attorney fees after the trust is established.

Property can seamlessly be passed immediately and directly to the beneficiaries depending on the terms of the trust. It is, however, common for people to include both a Will and a trust in their estate plans.

Power of Attorney

It is important that your estate planning takes into consideration incapacitation.

A power of attorney is a legal document that gives one person the power to act for another person. Unlike a Will, a power of attorney is valid when you are still alive but not in a position to make a clear decision.

If you use a Will as the basic part of your estate plan, you should create the power of attorney which will allow a trusted friend, relative or an assigned third party to manage your financial affairs if you are incapacitated.

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