Estate planning is a crucial process that helps individuals ensure their assets are managed and distributed according to their wishes after they pass away. In Kenya, there are various tools and strategies available to facilitate effective estate planning, all governed by specific laws and procedures.
This article explores the tools of estate planning in Kenya, outlining their features and the relevant legal frameworks that govern them.
Wills
A will is a fundamental estate planning tool that allows individuals to specify how they want their assets to be distributed after their death. It is a legal document that outlines who should inherit their property, money, and other assets.
To create a valid will in Kenya, the following steps are typically required:
Testator's Capacity: The testator (the person creating the will) must be of sound mind and at least 18 years old.
Draft the Will: The testator can draft the will themselves or seek legal assistance from an advocate or a qualified professional.
Signature and Witnesses: The will must be signed by the testator in the presence of at least two witnesses who may be beneficiaries. The witnesses must also sign the will in the presence of the testator.
Storage and Safekeeping: The original will should be stored in a safe and accessible place, such as with a trusted lawyer or in a bank's safe deposit box.
The Law of Succession Act provides the legal framework for creating and executing wills in Kenya.
Trusts
Trusts are estate planning tools that allow individuals to set aside assets for the benefit of specific beneficiaries. Trusts can be used to manage and protect assets for family members, such as minor children while providing instructions on how the assets should be used and distributed.
To establish a trust, you can use the following procedure:
Identify the Trustee: The individual creating the trust, known as the grantor or settlor, designates a trustee to manage the trust assets.
Draft the Trust Deed: A trust deed is a legal document that outlines the terms and conditions of the trust, including the beneficiaries and the trustee's powers and responsibilities.
Transfer Assets: The grantor transfers assets into the trust, effectively removing them from their estate.
Beneficiary Designation: The trust deed should specify the beneficiaries and the conditions for the distribution of the trust assets.
Legal Registration: Certain types of trusts, like charitable trusts, may need to be registered with the relevant government authorities.
Trusts are governed by common law principles and the Trustees (Perpetual Succession) Act of 1981.
Life Insurance Policies
Life insurance is a valuable tool for estate planning, as it provides financial support to beneficiaries upon the policyholder's death. The policy's proceeds can help cover funeral expenses, pay off debts, and provide for the financial needs of surviving family members.
Procedure for Setting Up Life Insurance Policies:
Choose a Policy: Select a life insurance policy that suits your financial goals and beneficiaries' needs.
Designate Beneficiaries: Name the individuals or entities who will receive the insurance proceeds upon your death.
Pay Premiums: Pay the required premiums to keep the policy in force.
The insurance industry in Kenya is regulated by the Insurance Act, Cap 487.
Power of Attorney
A power of attorney (POA) is a legal document that grants another individual (the attorney-in-fact or agent) the authority to make financial and legal decisions on your behalf if you become incapacitated. There are two main types of POAs: general and enduring (also known as durable POAs).
Procedure for Creating a Power of Attorney:
Select an Attorney-in-Fact: Choose a trusted individual to act as your attorney-in-fact.
Draft the POA: Create a power of attorney document outlining the powers and responsibilities of the attorney-in-fact.
Notarize and Execute: Sign the POA document and have it notarized to make it legally binding.
The Land Registration Act addresses the legal aspects of powers of attorney.
Joint Ownership and Beneficiary Designations
Joint ownership and beneficiary designations are tools that allow assets to pass directly to designated beneficiaries upon the owner's death, bypassing the probate process. These tools are often used for bank accounts, investment accounts, and retirement accounts.
Procedure for Joint Ownership and Beneficiary Designations:
Select Joint Owners: For joint ownership, the asset owner designates one or more joint owners with the right of survivorship.
Beneficiary Designation: For beneficiary designations, the owner specifies the beneficiaries who will receive the assets upon their death.
Complete Necessary Forms: Most financial institutions provide forms to designate beneficiaries and establish joint ownership.
Joint ownership and beneficiary designations are subject to the rules and regulations set by the financial institutions and various applicable laws.
Business Succession Planning
For business owners, a crucial part of estate planning is business succession planning. This involves setting up a plan for the orderly transfer of the business to successors, whether family members or employees.
The process typically includes identifying successors, valuing the business, and creating a comprehensive succession plan.
Procedure for Business Succession Planning:
Select Successors: Determine who will take over the business and identify potential successors.
Valuation: Have the business valued to establish a fair purchase price for the successors.
Create a Succession Plan: Develop a detailed succession plan that addresses ownership transfer, management transition, and any financial considerations.
Business succession planning may involve a combination of contract law, employment law, and business-specific regulations.
Probate and Administration of Estates
When someone passes away without a will, or if their estate includes assets not covered by other estate planning tools, their estate may go through the probate process. Probate is a legal process for validating a will (if one exists) and administering the estate's assets.
Procedure for Probate and Administration of Estates:
File a Petition: A petition for probate is filed with the court, which typically includes a copy of the will if one exists.
Notification: Heirs and beneficiaries are notified, and a notice is published in the Kenya Gazette to alert potential creditors.
Asset Inventory: The estate's assets are inventoried and appraised.
Debts and Taxes: Debts and taxes are paid from the estate's assets.
Distribution: Remaining assets are distributed to the beneficiaries in accordance with the will or intestate succession laws.
The administration of estates in Kenya is governed by the Law of Succession Act, Chapter 160 of the Laws of Kenya.
Our Parting Shot
Estate planning is a vital process that helps individuals manage their assets and provide for their loved ones after passing. In Kenya, the various estate planning tools discussed above are available to help individuals achieve their estate planning goals.
Understanding the legal procedures and relevant laws that govern these tools is essential to ensure effective estate planning and asset distribution according to one's wishes. Consulting with legal and financial professionals can be beneficial to this endeavour, and that’s what we pride ourselves on here at MNM Advocates LLP.
If you’d like to know more about how to set up a succession plan for yourself and your family or business, please contact us. We’d love to be of service to you.
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