Multi-decade court battles and sibling rivalries still dominate the succession landscape today, as heirs to billions of shillings worth of property fight for control. More often than not, it is a battle for large tracts of land.
The more than three-decade-long legal battle over the estate of former cabinet minister Mbiyu Koinange, who died in September 1981, was one such case. Other high-profile succession disputes involve the families of former cabinet ministers Njenga Karume and John Michuki.
As a result, succession has been publicly framed as a matter for the rich.
Some middle- and lower-class Kenyans have been left with no concrete plans for the distribution of their estates after their departure, and have consequently left no mark on the family legacy.
James Gathage, an engineer and consultant on family business growth and succession, notes that the picture should be different, with families embracing succession as a means of preserving and growing wealth for future generations, regardless of the monetary value of the properties.
“Families need to look at what keeps them together, where their income comes from, and whether the income is shared or individual. As families, we tend to not discuss family business but would rather talk about plans on where to go on vacation. In the event of death, we end up seeing squabbles erupt. Who is going to take over your small plot in Nanyuki? Who will take over your family home?” he said.
While the founder or first generation starts the wealth cycle and accumulates it, it is estimated that between 70 and 90 per cent of the wealth left behind is used up by the second and third generations.
Sustaining intergenerational wealth therefore requires the development of sound asset growth strategies, maintaining unity within the family and focusing on developing talent within the unit to aid in wealth preservation.
However, Kenya is lagging behind in achieving optimal generational wealth, if recent studies are anything to go by.
According to PwC's Family Business of 2018, just over half of Kenyan family businesses reported having a succession plan in place that could be considered robust, formalised and communicated.
PwC argues that thinking about the legacy of a family business boils down to discussions about succession in leadership, boards and even ownership.
The low prevalence of succession planning among Kenyan family businesses is despite the fact that succession was ranked as a key challenge among other headwinds such as talent attraction, input costs, competition, regulation and the economic environment.
Impact of culture
The lack of discussion about succession planning among Kenyan families often stems from cultures where such conversations are revered and death is considered taboo.
“People just don’t want to discuss succession in our traditional setting, mostly because of the respect we give to older family members, such as parents. People in some communities, especially men, tend to think they’ll never die, and so they rather not have discussions on succession,” Mr Gathage adds.
However, Kenya's legal system has evolved to bring succession planning closer to home, with the Trustees (Perpetual Succession) (Amendment) Act of 2021, for example, leading to the creation of new categories of trusts, including family trusts.
A trust provides a fiduciary relationship where a settlor -- the person who creates the trust -- gives another party, the trustee, the right to hold property or assets for a third party known as a beneficiary.
Setting up trusts gives people the opportunity to prepare for succession while still controlling their assets, with the ability to make changes to the trust or even close it.
At the end of May this year, the Business Registration Service (BRS) took over the registration of trusts from the Ministry of Lands, bringing the service closer to individuals and households.
However, the uptake of family trusts remains subdued due to a lack of understanding of the service in the marketplace.
Trusts are seen as an alternative to wills, which are legal declarations by an individual of their wishes or intentions regarding the disposition of their property after their death.
A lack of awareness of the options available for succession planning among the general public and even among professionals has meant that the registration of family trusts, for example, has been slow to take off.
Elitist product
“It's a whole animal getting started on succession planning, even for professionals in the field. Apart from culture and civil education, succession planning has been coached as an elitist product and therefore becomes so difficult to undertake. Knowledge in legal circles is also limited. If you look up trust lawyers, the pool of legal people doing it is quite limited. If those are the few specialists, imagine the many drafting the wrong trust deeds?” says Mary Kisoo, the Managing Partner at MGA Law Advocates LLP.
In addition to being different from wills, family trusts come with several tax benefits, including exemption from stamp duty on property purchased in the name of the trust, exemption from capital gains tax for the person transferring the property to the trust and exemption from income tax for beneficiaries receiving a payout not exceeding Sh10 million.
Not billions
Liaison Group, a regional financial services provider that also acts as corporate trustee of family trusts, notes that it has faced similar hurdles in extending the reach of succession planning options.
Kennedy Keli, general manager at Liaison Financial Services, says it will take more civic education and a change in mindset if Kenyans are to leave behind plans to control assets after they are gone.
“The biggest barrier has been accessing information—people don’t know where to start. At the same time, people think succession planning has to relate to billions of shillings in assets. A change in mindset is also required. Some parents feel that setting up their children for the future through a trust will see the children ‘wanting to get rid of them’. We are not brutally honest with ourselves and would rather kick the can down the road,” he says.
