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Personal Finance

Ensuring your dependants enjoy your hard work

happy family
A happy family. FILE PHOTO | NMG 

It came as a surprise to many when the Unclaimed Financial Assets Authority (UFAA) recently revealed that more than Sh10 billion remains unclaimed.

However, for those of us in the financial sector, we were not taken by surprise by this. The estimated total unclaimed assets stand at Sh241 billion, which is almost three per cent of Kenya’s gross domestic product. This is a colossal sum of money that could be changing the lives of thousands of Kenyans. Sadly, most of them are not aware of the existence of money and shares, among other investments left by their loved ones.

According to the UFAA, if an owner of a property does not take any action during a certain duration by law, say 24 months, to indicate his/her ownership, interest, or awareness, then that property will be regarded as unclaimed and should be transferred to the agency.

The modern rationale for such an arrangement is that the State can best preserve and protect the interest of the rightful owner and possibly reunite the owner with his/her property.

Unclaimed assets are, in most cases, arising from insurance companies, saccos, banks, pension schemes and other financial institutions that deal with public funds.

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The main reason why someone’s assets can be categorised as unclaimed is when one dies and the dependants have no idea that there was an asset left by that person in a financial institution.

Then there is a group of people who would want to keep their investments and savings undisclosed. We have cases where people buy assets like land and keep their titles in their office locks without informing the family members and in case of death, they easily lose the said assets.

Most financial institutions have means of the customers declaring their next of kin when they sign for services, for example, insurers, pension schemes and saccos have the nomination of beneficiary forms to be completed by members on signing up for service.

However, statistics show that less than 70 percent of the customers complete these forms and less than 30 percent revise them regularly when circumstances change.

Change of circumstance could be on getting married, change of address, and death of the nominee, among others.

The other problem is that even among customers who provide the information, some provide scanty contact details for the beneficiaries, so in the event of death, it becomes difficult to trace them.

Another common reason is that customers nominate minors as beneficiaries with no reference to a guardian in the event the customer dies while the nominees are still minors. The children will grow up not knowing that assets that they are entitled to exist.

Similarly, until quite recently, most financial institutions were enrolling customers through hard copy documents. With the growth of numbers, it becomes quite challenging to track documents for customers who have died and pull out next of kin contacts.

In cases of institutions like insurance companies and saccos, because of the large numbers, they may just have to set up a whole department to trace beneficiaries for deceased customers.

This may be quite a cost an investor may want to avoid.

Another important issue that many people may not be aware of is that assets under saccos, insurance companies and pension schemes where there is an express provision in the law for the nomination of beneficiaries do not form part of an estate of the deceased.

This means that one cannot bequeath those assets under a will.

Talking of the will, a section of fellow Kenyans need to change their cultural beliefs when it comes to this important document. Some people openly confess that they do not write a will because it goes against their cultural beliefs.

Bizarrely, some believe that writing a will is like signing a death warrant while others say that it is inviting death. This has resulted in deaths leaving unclaimed assets.

A will is very important and a critical part of estate planning.

Thankfully, more people are now using this tool for ease of transferring their assets to the beneficiaries.

Although estate planning is broader than merely having or not having a will, the starting point is getting advice on your planning from lawyers, accountants, investment advisers and actuaries.

All assets that are in banks and other financial institutions need to be put in one’s will.

A good will should include the setting up of a trust and the appointment of trustees to ensure the assets are managed in the best interest of the beneficiaries.

So, the sole responsibility of ensuring that you or your dependants fully enjoy your hard-earned returns fully lies with you.

Ensure your dependants are fully captured in your next of kin forms, ensure you update it whenever there are any life changes and also ensure that your dependents are aware of what you own and where it is.

Finally, a will is a must.

The writer is Group CEO, Octagon Africa Financial Services Limited.

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