Personal Finance

How do I entrust wealth to future generations?


Creating wealth is hard enough, but for most people, a succession of wealth is even harder. As we age, it is crucial that we have a plan on how to do this. FILE PHOTO | SHUTTERSTOCK

I have significant savings and several properties. I am 52, happily married, okay forget that part of happily, I have four nieces and nephews. How do I entrust my wealth to future generations?

Creating wealth is hard enough, but for most people, a succession of wealth is even harder. As we age, it is crucial that we have a plan on how to do this.

Whether you want to provide for your family, grandchildren, or even future generations beyond your immediate family, there are a few key steps you can take to ensure that your assets are protected and passed down as you intend.

Here are some tips for entrusting your wealth to future generations.

Start planning early

Starting early is important as it gives you more time to build wealth and adjust your plan as needed.

It is recommended that you start thinking about your estate plan and wealth transfer as soon as you acquire them.

This will give you enough time to explore all your options and make the necessary arrangements.

Read: Right trustees central to generational wealth

Understand your options

There are various ways to entrust your wealth to future generations in Kenya. Some of the common options include setting up a trust, creating a will, or gifting assets while you're still alive.

Each option has its own advantages and disadvantages, so it's essential to research and understand all of them before making a decision.

Consider the tax implications

In Kenya, there are several taxes that can affect your wealth transfer, such as capital gains tax, estate tax, and gift tax.

Understanding how these taxes work and how they will impact your plan is crucial. It's essential to work with a qualified professional who can help you minimise your tax liability.

Work with a professional

Estate planning and wealth transfer can be complicated, so it's advisable to work with an experienced attorney, accountant, or financial planner who is familiar with the Kenyan legal and regulatory environment.

A professional can help you create a plan that aligns with your goals and provides for your heirs.

Educate your heirs

Financial education is not always emphasised in schools or families. It's crucial to educate your heirs about financial responsibility, investment management, and other vital topics so they can handle their inheritance responsibly.

Providing financial education can be a way to ensure your heirs are better equipped to manage their wealth and avoid any potential financial problems.

Consider setting up a trust

A trust is a legal structure that allows you to transfer assets to your heirs while still maintaining some level of control over those assets.

Setting up a trust can be a good way to provide for your heirs while also ensuring that your wealth is managed in a responsible and sustainable way.

It's important to work with a qualified professional to set up the trust, as there are various types of trusts available, each with its own set of rules and regulations.

Communicate with heirs

Communication is key when it comes to entrusting your wealth to future generations. It's essential to communicate with your heirs about your plan and your expectations for their inheritance.

This can help avoid confusion, conflict, and hurt feelings down the line and ensure that everyone is on the same page when it comes to managing your wealth for future generations.

Consider life insurance

Life insurance can be an effective way to provide for your heirs in the event of your unexpected death. The payout from a life insurance policy can help your heirs pay off debts, cover expenses, and have a cash flow to maintain their standard of living.

In Kenya, there are many different types of life insurance policies available, so it's important to research your options and choose a policy that meets your needs and budget.

Read: Plan for succession to protect your wealth

Regularly review your plan

As your financial situation and goals change over time, it's important to review your plan periodically to ensure it still aligns with your objectives.

This may involve adjusting based on changes in tax laws, family circumstances, or other factors. Regular review can help ensure that your plan remains up-to-date and effective.

Ms Owuor is a financial trainer and consultant on retirement solutions; [email protected]