How to secure the future of your family and business through estate planning

Estate planning will help you best prepare because it enables you to preserve family wealth. [Courtesy]

Life is full of uncertainty and the current pandemic has, now more than ever, made this fact hit home. With the future unknown, it has become imperative to ensure that your business and your family are well taken care of by fully preparing for any unprecedented or precedented transition. There are three levels of transition you should consider preparing for injury or disability, the unfortunate case of death and retirement.

Therefore, for the sustainability of your business and the financial security of your family, it is important to plan and prepare.

Estate planning will help you best prepare because it enables you to preserve family wealth, provide for a surviving spouse and children, fund your children's or grandchildren’s education and/or leave a legacy behind for a charitable cause. It involves determining how an individual’s assets will be preserved, managed, and distributed.

It also takes into account the management of an individual’s properties and 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-through and updated nomination of beneficiary form. This is the document that will determine how these assets are managed in the event of demise.

Fred Waswa, Group CEO of Octagon Africa. He shares tips on estate planning.

Estate planning is often an uncomfortable discussion, but it is one of the most important things everyone should consider. Fred Waswa, the Group CEO of Octagon Africa shares a guide on estate planning, an area the organization specializes in, that will ensure you are not caught off-guard in the case of a transition:

1. Create governance structures for your business

It is common to find businesses go under after the death of an owner. It is therefore important for business owners, more so Small and Medium Enterprise owners, to formalize their businesses in the case of these three transition scenarios.

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 due to injury or disability, in the event of death or when you do retire. This formalization will ensure your business lives on and moves forward seamlessly.

A will enables you to name your executor, the person you want to handle your affairs and oversee the probate process. [Courtesy]

2. 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 minimizes the likelihood of someone challenging or contesting it. You can use a will 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 in your will to ensure 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.

3. Create a trust fund

A trust is a new concept in Kenya, but it is very important and should be put into consideration by individuals. A trust is a private legal arrangement in which the ownership of someone’s assets is transferred to an arrangement known as a trust this property is then owned by the trusts and in the event of death can be held by trustees for minors or other beneficiaries.

In the unfortunate event of death, your personal assets and property are vested in the fund where they are able to 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 wherein their death benefits and property are consolidated to benefit their children or other dependents known to the trust as beneficiaries.

The greatest 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.

It is important to note that trusts have become the gateway for individuals who have amassed wealth but still have young beneficiaries or those who wish to have greater control over their estate upon their passing or otherwise incapacitation to have a say in how their estate is handled, who benefits and how the property should be divided for years to come.

A power of attorney is a legal document that gives one person the power to act for another person. [Courtesy]

4. A Power of Attorney

It is important that your estate planning takes into consideration incapacitation, as one of the modes of transition. 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 for you if you are incapacitated.

Knowing that you have a properly prepared plan in place that will protect your family and your business gives you and your family peace of mind. Estate planning is one of the most thoughtful and considerate things you can do for your loved ones. 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 and/or your 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. Do not wait any longer, seek expert advice on estate planning today. Put something in place now and revise and review as time goes by because that is exactly the way estate planning should be done. It is a continuous process, and we have to be comfortable with the fact that we will not always be here, and we have to take care of our family and business responsibilities.

Dr Pesa is Fred Waswa, Group Chief Executive Officer, Octagon Africa