Estate wrangles and succession disputes can be emotionally and financially draining for any family. Not only do they cost a lot of money in terms of litigation and lawyers fees, but also take a long time to resolve.
The worst bit is that they often break the relationship between family members because of the adversarial nature of Kenyan court processes that result in a winner and a loser. This means the impact of litigation on relationships is negative.
To prevent and manage estate disputes, there are a number of estate planning tools that can be used. A proprietor who is alive can plan and govern how his or her estate shall be managed after he or she is deceased.
The planning tools depend on the unique circumstances of the estate and the individual objectives of the proprietor.
The most commonly used tool is drawing up a will that sets out one's wishes on how they would want their estate to be run.
Practice has, however, shown that this option can still be challenged in court. By their nature, wills are more suitable when one wants to bequeath an asset to a named beneficiary. They might not be the best when one wants to structure the management and administration of an asset in the long term. These objectives are best met by trusts.
There are many types of trusts and a lawyer should be able to advise on the best type to use in managing one's estate.
The thing with trust is there are persons known as trustees who manage and execute your assets and estate on behalf of your beneficiaries. It is especially suitable where your beneficiaries lack the capacity to manage the estate on their own behalf due to limitations such as age or education levels.
The first type of trust is an asset-holding trust which is formed with the main objective of owning assets. This type is beneficial in that it prevents disputes that may arise from third-party claims.
It offers this insulation because the trust can be incorporated as a limited liability company, which then owns the assets. The doctrine of separation means that at law the trust company assumes a legal personality, meaning it is actually a person. The company and its members thus have separate legal identities.
I would strongly advise for the incorporation of a trust company due to this reason. The second reason is that a company has the capacity to hold property in its own name.
This means that your property will not belong to any single beneficiary but will be owned by the trust company and your beneficiaries get to reap benefits without necessarily owning. This minimises the chances of favouritism and discrimination.
A company exists in perpetuity unless it is wound up. Through a trust company, you can be able to plan for generations to come. The trust company will always exist and continue to own the assets for many years.
To start the process, you need to take an inventory of what assets you own and transfer those to the trust company.
You can then issue shares to your beneficiaries either while you are still alive or upon death. The shareholders' agreement should have suitable lock-in clauses to guide the estate.
Ms Mputhia is the founder of C Mputhia Advocates | [email protected]