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WHY ESTATE PLANNING?
Africans, Kenyans in particular, consider death talks a taboo. Too many people do not plan their legacies. They shelve it because they do not think they have acquired enough or are just not old enough. As a result, they die intestate, without having thoughtfully planned for the distribution and disposal of their assets and those left behind will have to bear the burden of picking up the pieces.
We cannot predict our life expectancy. Illnesses and accidents can happen to anyone, irrespective of age. Therefore, one needs to plan on who would make decisions, for them, about their finances and health if they are incapacitated.
Estate planning is the process of setting up, during a person’s life, structures that will help in management and distribution of your assets in the event of your incapacitation or death. The planning includes the bequest of assets to heirs as well as reducing any uncertainties when it comes to the estate.
It can also be simply defined 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.
Assets that make up an estate can include houses, stocks, bonds, cars, art, collectibles, life insurance, pensions, and debt and can be distributed through two main options namely through a WILL or a TRUST
WHAT YOU NEED TO KNOW
Why Estate Planning?
1. Protects your wealth for your family and avoid unnecessary depreciation 3. Protects your family from those who may illegally want a share of your estate in your absence 4. Provides a framework to provide for your surviving spouse and children and all your dependents, including non-relatives 5. Prevents family disputes that arise when people demand a share of your estate 6. Allows you to appoint trusted executors/administrators to your estate, as well as guardians in the case of minors who may not be able to defend themselves 7. Allows you to allocate your estate in proportions of choice to those you would like to reward or give to, like your preferred charitable causes.
What is A WILL?
A WILL is a document that entails legal declarations of how a person’s property should be distributed after their death. It also includes details on the handling and custody of minor children. Once the will is drafted, the testator usually names an executor, the person they want to oversee the probate process, whose responsibility will be to administer the fulfillment of their wishes as expressed in the will.
What is A TRUST?
A TRUST, on the other hand, is a legal arrangement that allows you to set up your assets to be held and managed by another person/entity on behalf of your beneficiaries. The appointed entity is usually responsible for ensuring that your estate will be overseen and executed according to your wishes. It is created while the trustor is alive and can distribute assets while trustor is still alive i.e. for upkeep, education, healthcare, charity etc
WILL or TRUST? Which One Do You Need?
Wills and Trusts perform a similar function however, they have differences in terms of structure, purpose, and functionality. Below are the key differences. 1 Property Transfer only happens after the testator’s death in a will. Assets transfer can take place even when the settlor is still alive in a trust. 2. Ownership is maintained until death in a will. Ownership is transferred to trust immediately it’s set up. 3. The will is subject to the probate process. A trust is not subject to the probate process. 4. A will is displayed in public records. A trust is private and not kept on public records. 5. The testator cannot be a beneficiary of the will they have created. The settlor can be a beneficiary of the trusts they create. 6. The will is accessible to debtors/ creditors. A trust is not accessible to debtors and creditors. It is important to note that setting up a TRUST or a WILL is dependent on your specific needs and goals. A will is suitable if you are only intent on creating an estate plan for distributing assets to your heirs, upon your death. But, if you are purposeful in protecting and growing your family assets, then a trust would be a better fit for your estate plan.
Who Are the Three Important Entities In A Trust?
1. The Settlor- Person or entity transferring the property. 2. The Trustee- Person or entity appointed to hold the properties for the beneficiaries’ gain. 3. The Beneficiary- Third party that receives the benefits of the transferred property. Trusts are created through a trust deed, which ensures that the transfer of property to the beneficiaries fulfills the settlor’s wishes. It’s also important to note that once a settlor transfers property to a trust, the property will be no longer considered as part of the settlor’s estate.
What is The Role of a TRUSTEE in a TRUST?
The trustee is responsible for making sure the beneficiaries meet conditions set and financially managing the trust by overseeing its investments, banking and other administrative matters. A trust can be revocable or irrevocable. Revocable or Living trust is created during your lifetime but assets are transferred to your designated beneficiaries upon your death. The provisions can however be changed or cancelled at any time. Irrevocable trust on the other hand cannot be changed or rescinded. Once it is created the trust belongs to its beneficiaries, even though they must still meet its terms or conditions.
I’m interested in a TRUST. How Do I Start?
The planning includes management of property and assets, passing down assets to heirs, settling taxes and debt, and setting up guardianship for minor children. Here are steps to follow when doing estate planning – 1. List down all your debts and assets. Ensure you include all your physical and financial assets 2. Make multiple copies of your lists for your beneficiaries 3. Ensure that your beneficiaries’ details are up to date 4. Choose your estate administrator 5. Write down your will and set up a trust 6. Seek professional help from your financial planner/ estate advisor 7. Review your plan regularly. At Assurein Insurance, we work closely with ICEA LION Trust Company Limited to help our customers set up TRUSTS, thereby protecting their hard-earned wealth.
What Documentation is Required to Set Up a TRUST?
The following documents will be needed to set up the Trust – 1. Signed grant letter indicating the purpose of the trust and names of the beneficiaries 2. Funds to be held in the Trust Fund 3. Evidence of source of funds/assets 4. Copy of identification documents for settlor and beneficiaries