How to Plan for your Future: The Basics of Estate Planning in Kenya

Estate planning – it's a topic many avoid, but it's absolutely crucial for ensuring your assets are handled according to your wishes after you're gone. In Kenya, we have several tools and strategies to help you achieve this. Let's explore them in plain English.

1. Wills: Your Final Instructions

A will is the foundation of any estate plan. It's a legal document outlining how you want your property, money, and other assets distributed after your passing. Here's the Kenyan context:

• Capacity Matters:  You must be mentally competent and at least 18 years old to create a valid will.

• Drafting:  You can draft a will yourself, but legal assistance is highly recommended to ensure it's legally sound. The wording, structure, choice of beneficiaries, and even the choice of people left out can cause the entire will to be invalidated, thereby rendering your wishes void.

• Signing and Witnessing:  You must sign the will in the presence of two witnesses (who shouldn't be beneficiaries), and they must also sign in your presence.

• Safekeeping:  Best practice is to store the original will in a secure location, like a lawyer's office or a bank safe deposit box. We usually recommend both.

Why you need a lawyer:  Drafting a will might seem straightforward, but legal intricacies can easily trip you up. A lawyer ensures your will complies with all legal requirements, avoiding future challenges or disputes. We can advise on specific clauses, tax implications, and potential challenges to the will, giving you peace of mind that your wishes will be honored.

2. Trusts: Managing Assets for Beneficiaries

A trust is a legal arrangement where you transfer assets to a trustee, who manages them for the benefit of specific beneficiaries. Trusts are useful for protecting assets or managing funds for individuals who may need assistance. Important considerations regarding a trust include:

• Choosing a Trustee:  Select a trustworthy and responsible individual or institution.

• The Trust Deed:  This legal document outlines the terms and conditions of the trust, including beneficiary details and the trustee's powers.

• Transferring Assets:  You transfer ownership of the assets into the trust.

• Beneficiary Designation:  The trust deed specifies who the beneficiaries are and how they will receive the assets.

• Registration (Sometimes): Some trusts require registration with the government.

Why you need a lawyer: Setting up a trust involves complex legal and tax considerations. A lawyer can guide you through the different types of trusts, help you choose the most suitable structure, and draft a comprehensive trust deed that protects your assets and fulfills your objectives. We can also advise on tax implications and ensure compliance with relevant regulations.

3. Life Insurance: Financial Security for Loved Ones

Life insurance provides financial support to your beneficiaries upon your passing. The proceeds can cover funeral expenses, debts, and provide for family members' needs.

• Policy Selection:  Choose a policy that aligns with your financial goals and beneficiaries' needs.

• Beneficiary Designation:  Clearly name who will receive the insurance payout.

• Premium Payments:  Ensure timely premium payments to keep the policy active.

Why you need a lawyer: While choosing a life insurance policy and designating beneficiaries might seem simple, a lawyer can help you understand the different types of policies, their terms and conditions, and any potential tax implications. They can also advise on how life insurance fits into your overall estate plan and ensure it works seamlessly with other tools like wills and trusts.

4. Power of Attorney: Planning for Incapacity

A power of attorney (POA) authorizes someone (your agent) to make financial and legal decisions on your behalf if you become incapacitated.

• Choosing an Agent:  Select a trustworthy individual to act as your agent.

• Drafting the POA:  The POA document outlines the agent's powers and responsibilities.

• Notarization:  The POA must be notarized to be legally valid.

Why you need a lawyer: A POA grants significant power to your agent. A lawyer can help you understand the different types of POAs (general, enduring, etc.) and draft a document that clearly defines the scope of your agent's authority, preventing potential abuse or misuse of your assets. They can also advise on the legal implications of a POA and ensure it aligns with your overall estate plan.

5. Joint Ownership and Beneficiary Designations: Simplified Asset Transfer

Joint ownership (e.g., joint bank accounts, joint property, etc.) allows assets to pass directly to the surviving owner upon the other owner's death. Beneficiary designations (often used for retirement accounts, SACCOs, etc.) allow you to specify who receives those assets directly.

• Joint Owners:  Select joint owners carefully.

• Beneficiaries:  Clearly designate your beneficiaries.

• Necessary Forms:  Financial institutions provide forms for these designations.

Why you need a lawyer: While joint ownership and beneficiary designations seem straightforward, they can have unintended consequences. A lawyer can advise on the legal and tax implications of these arrangements, especially in complex family situations. We can also help ensure these designations align with your overall estate plan and avoid potential conflicts or disputes among beneficiaries.

6. Business Succession Planning: Ensuring Business Continuity

If you own a business, succession planning is crucial. It ensures a smooth transfer of ownership and management.

• Successor Selection:  Identify who will take over the business.

• Business Valuation:  Determine the fair market value of the business.

• Succession Plan Development:  Create a detailed plan addressing ownership transfer, management transition, and financial considerations.

Why you need a lawyer: Business succession planning involves numerous legal and financial complexities. A lawyer can help you structure the succession plan, addressing issues like ownership transfer, tax implications, and potential disputes among family members or business partners. They can also ensure compliance with relevant laws and regulations, protecting the business's continuity and your legacy.

7. Probate and Estate Administration: The Legal Process

Probate is the legal process of validating a will (if one exists) and administering the estate's assets. Where there is no will, your family would go through the process to prove their right to administer the property, and their various entitlements. The general process is as follows:

• Filing a Petition: A petition is filed with the court.

• Notification: Heirs and beneficiaries are notified.

• Asset Inventory: The estate's assets are inventoried and valued.

• Debt and Tax Payment:  Outstanding debts and taxes are paid.

• Distribution: Assets are distributed according to the will or, if no will exists, according to intestacy laws.

Why you need a lawyer: Probate can be a complex and time-consuming legal process. A lawyer can guide you through the process, ensuring all legal requirements are met and protecting the estate's interests. We can also help resolve any disputes among beneficiaries or creditors and ensure the assets are distributed according to the will or, if no will exists, according to the law.

Final Thoughts:

Estate planning is not just for the wealthy. It's for everyone. It's about protecting your loved ones and ensuring your wishes are carried out. We can help you create a plan that meets your specific needs. Please contact us today to help you plan for your estate - it's one of the most important things you can do for yourself and your family. Reach us now at achieng@aga-advocates.com.

Important Note: This article provides general information and does not constitute legal advice to you. For legal guidance regarding your specific situation, please contact us.