ESTATE AND SUCCESSION PLANNING

Introduction

Kenya, like most countries, is coming to grips with the solemnity of the coronavirus 2019 (COVID-19) pandemic.

It is worth noting that the COVID-19 pandemic is a blatant reminder of the vulnerability of human life, and the downtime created by the self-isolation and social distancing policies presents individuals with a unique opportunity to consider their estate plans and discuss them with their families. All individuals, not just the elderly or ill, should take this time to implement an estate plan as it will make life simpler for remaining family members if the proper steps are taken now. These arrangements are made through:

  • A valid will
  • Setting up a trust

Wills

A will is simply a testamentary document that has no legal effect until the maker dies.  While the maker of a will is alive, it neither limits his rights of ownership nor confers any benefits to anyone.  Before the testator’s death, the document is a mere declaration of intention with no legal effect whatsoever.

Before a will can take effect, it must first be proved to be a valid testamentary disposition.  The process of proving the formal validity of a will is referred to as propounding the will. Here it is necessary to consider the form of the will and determine whether the formal requirements have been complied with; whether the maker of the will had capacity to make the will and whether the will was made voluntarily without any duress, undue influence or by mistake. It may also be necessary to consider whether the testator in fact revoked the document alleged to be a will before his death.

 A will has five essential characteristics/elements being:

  1. The wishes expressed are intended to take effect upon death
  2. The will only takes effect on death
  • A will can only operate as a declaration of intention
  1. A will is ambulatory
  2. A will is always revocable

Advantages of Making a Will

Majority of people die without having made a will for various reasons key being: traditional superstitions, reluctance to contemplate their own death, belief that a will is pointless in their case, and ignorance as to the possibilities open to them. However, there are advantages to be attained from making a will;

  1. Maintaining control over property: The making of a will enables the testator to maintain control over property. This is especially important for a person with a spouse and children. For example, if a wife makes a will leaving the entire estate to her husband, she loses control over the ultimate destination of the property on the death of her husband if she dies first.  She simply has to hope that he will dispose of what was originally her estate to the children of the marriage rather than marrying someone else after her death and leaving the combined estate to his second wife.  She could achieve control by giving her husband simply a life interest in her estate with the remainder passing on his death to the children.  A life interest only entitles the husband the income for the estate.
  2. Avoiding the rules of intestacy: The decision to make, change or revoke a will gives the testator an opportunity to consider his own affairs and to decide with a sober mind who should inherit what from his estate, instead of leaving this important decision to be made by other people upon his death. The making of a will avoids the rules of intestacy. The intestacy provisions ensure that the next of kin of the deceased benefit from his estate, but the shares of the estate which the next of kin receive are arbitrary and they are often unsuitable in the circumstances since often than not they are usually contested. A will is a personal document and it is preferable to use it as a last beneficial act rather than to allow the impersonal provisions of intestacy to take effect.
  3. Enabling the deceased to appoint personal representatives of his own choice: The making of a will entitles the testator to appoint personal representatives of his own choice to administer his estate. Since these are personally appointed by the testator he would be reasonably sure that his estate will be well administered after his death by persons in whom he has confidence and who probably are already acquainted with the estate during his lifetime. If a person dies intestate the persons who administer the estate (personal representatives) are appointed by the court and the deceased will have no choice in the matter.
  4. Administrative convenience: Administrators of estates derive their authority to administer the estate from the grant of letters of administration while the executors derive their authority from the will. As they derive their authority from the will executors can begin to administer the estate from the date of the deceased’s death.  The estate of an intestate cannot be administered until after the grant of letters has been obtained.  The dependents of an intestate are therefore exposed to inconvenience. As such, through a will a testator ensures that their estate may be dealt with immediately upon his death. 
  5. Full disclosure of the deceased’s property: The making of a will enables the testator to make a full disclosure of all the property they own or die possessed of, which is not possible in case of intestacy where a lot of the undisclosed property or assets may be lost.
  6. Avoiding disputes over the estate: In the first place, by providing how and to whom property is to pass upon the testator’s death making a will avoids squabbles between heirs and survivors over the estate.
  7. Benefiting persons outside the immediate family: The rules of intestacy only make provision for the deceased’s next of kin and dependants. It is only by making a will that a testator can benefit persons outside the immediate family circle.
  8. Appointment of testamentary guardians: A will enables a parent who has minor children, if they so wish, to appoint a guardian or guardians to take parental responsibility for the children should he or she die while the children are minors. This is important where the parent is single.
  9. Providing directions regarding disposal of deceased’s body: A will may also be used to give directions regarding the disposal of the dead person’s body. This could be in terms of the precise method by which their body is to be disposed of (i.e. burial where and how, cremation etc.) or they may wish that their body or a part of it be donated to medical education, research or treatment of patients. However, it is worth noting that such provisions or directions have no binding legal effect as the law recognizes no property in the dead body of a human being.  This would mean that the testator cannot by will dispose of his dead body.  Such provisions amount to a mere request to executors to comply with the testator’s wishes.

Trusts

Trusts are simply equitable obligations binding a person (who is called a trustee) to deal with property over which he has control (which is called trust property), for the benefit of persons (who are called beneficiaries or cestuis que trust) of whom he may himself be one and any one of whom may enforce the obligation.

Classification of Trusts

  • Express trust: An express trust is one created by an express declaration of the person in whom the property is vested. This could be under a will or by way of a trust deed or even under a document not under seal or orally. What matters is that there is intention and conduct creating the trust.
  • Implied trust: An implied trust arises from the presumed as opposed to the expressed intention of the owner of the property. So for example if property is transferred to A to be held on certain trust which fail there is a presumption that A hold the property in trust for the owner’s estate.
  • Constructive trust: This is a trust imposed by equity although it is neither the expressed nor the presumed intention of the settlor or the testator or the owner of the property. Equity will impose such a trust when it would an abuse of confidence to allow the holder of the property to use it for his own benefit. Pursuant to Kenyan customary view of land trust; you cannot defeat the first title under LRA. But judges have gone around this especially where the land involved was family land.

Trust may also be further classified as either private, public or charitable trusts.

A trust is said to be private if it is for the benefit of an individual or a class of individuals which the law refers to as a defined but limited group of beneficiaries. By its nature it can be enforced by the individual or individuals. It is private even though there may be some benefit conferred thereby to the public at large.

On the other hand a public trust promotes the public welfare as an object and is public even if it incidentally confers a benefit on an individual or class of individuals. The public trust is only enforceable by the Attorney-General or an officer appoint by him for that purpose or by two or more persons who can show that they have interest in the trust with the express consent of the Attorney-General.

Uses of Trusts

  1. To enable property particularly real property to be held for persons who cannot themselves hold it e.g. even though the legal title to land cannot be vested in an infant or a minor, there is no objection to land being held in trust for the infant or minor;
  2. To enable a person to make provision for dependants privately, the most obvious examples are provisions made by a man for his mistress or illegitimate child; during the lifetime of the man there is no problem but if the man were to provide for the mistress or illegitimate child through his will, these circumstances are likely to leak out because once probate of the will has been obtained the will is a public document and is open to public inspection. On the other hand a trust deed in favour of the mistress or illegitimate child escapes this publicity;
  3. To tie up property so that it can benefit persons in succession; an outright gift may be made to a spouse in the hope that on their death that property will go to the children but there is no guarantee that it will do so. The spouse could get married again and the property could get alienated.  On the other hand a gift to trustees to hold on trust for the spouse for life with the remainder to the children will ensure that the children get the benefit;
  4. To protect family property from Wastrels, a person may feel that an outright gift or money or other property to a surviving spouse or child will lead to its being squandered or wasted, a gift of that money or transfer of that property to trustees to hold upon trust and to pay either the income therefrom or only a limited proportion of the capital to the surviving spouse or child at given intervals will probably prevent this;
  5. To make a gift to take effect in the future in the light of circumstances which have not yet arisen and therefore are not yet known. A person may for instance have 3 young daughters and may by will set up a trust whereby a sum of money is given to trustees for them to distribute among the daughters either as they deem fit or having regard to stated factors and with that discretion the trustees would be able for example in due course to give say one quarter of the fund each to two of the daughters who have married well and the remaining one half to the other daughter who was not so lucky.