Family working through their estate planning options with a lawyer

Estate planning is a crucial process that helps individuals ensure their assets are managed and distributed according to their wishes after their time on earth comes to an end. In Kenya, there are various tools and strategies available to facilitate effective estate planning, all governed by specific laws and procedures.

This article explores the tools of estate planning in Kenya, outlining their features and the relevant legal frameworks that govern them.

1. Wills

A will is a fundamental estate planning tool that allows individuals to specify how they want their assets to be distributed after their death. It is a legal document that outlines who should inherit their property, money, and other assets. To create a valid will in Kenya, the following steps are typically required:

Procedure for Creating a Will:

  • Testator’s Capacity: The testator (the person creating the will) must be of sound mind and at least 18 years old.
  • Draft the Will: The testator can draft the will themselves or seek legal assistance from an advocate or a qualified professional.
  • Signature and Witnesses: The will must be signed by the testator in the presence of at least two witnesses who are not beneficiaries. The witnesses must also sign the will in the presence of the testator. Should the person attesting the will want the witnesses to be beneficiaries, then, it’s necessary to have two extra witnesses who aren’t beneficiaries.
  • Storage and Safekeeping: The original will should be stored in a safe and accessible place, such as with a trusted lawyer or in a bank’s safe deposit box.

Relevant Laws: The Law of Succession Act, Chapter 160 of the Laws of Kenya, provides the legal framework for creating and executing wills in Kenya.

2. Family Trusts

Trusts are estate planning tools that allow individuals to set aside assets for the benefit of specific beneficiaries. Trusts can be used to manage and protect assets for family members, such as minor children, while providing instructions on how the assets should be used and distributed.

Procedure for Establishing a Trust:

  • Identify the Trustee: The individual creating the trust, known as the grantor or settlor, designates a trustee to manage the trust assets.
  • Draft the Trust Deed: A trust deed is a legal document that outlines the terms and conditions of the trust, including the beneficiaries and the trustee’s powers and responsibilities.
  • Transfer Assets: The grantor transfers assets into the trust, effectively removing them from their estate.
  • Beneficiary Designation: The trust deed should specify the beneficiaries and the conditions for distribution of the trust assets.
  • Legal Registration: Trusts first need to be registered at the Ministry of Lands under the Registration of Documents Act, before incorporation by the Business Registration Service.
  • Relevant Laws: Trusts are governed by common law principles and the Trustees (Perpetual Succession) Act, 1981.

3. Life Insurance Policies

Life insurance is a valuable tool for estate planning, as it provides financial support to beneficiaries upon the policyholder’s death. The policy’s proceeds can help cover funeral expenses, pay off debts, and provide for the financial needs of surviving family members.

Procedure for Setting Up Life Insurance Policies:

  • Choose a Policy: Select a life insurance policy that suits your financial goals and beneficiaries’ needs.
  • Designate Beneficiaries: Name the individuals or entities who will receive the insurance proceeds upon your death.
  • Pay Premiums: Pay the required premiums to keep the policy in force.

Relevant Laws: The insurance industry in Kenya is regulated by the Insurance Act, 2021.

4. Power of Attorney

A power of attorney (POA) is a legal document that grants another individual (the attorney-in-fact or agent) the authority to make financial and legal decisions on your behalf if you become incapacitated. There are two main types of POAs: general and enduring (also known as a durable POA).

Procedure for Creating a Power of Attorney:

  • Select an Attorney-in-Fact: Choose a trusted individual to act as your attorney-in-fact.
  • Draft the POA: Create a power of attorney document outlining the powers and responsibilities of the attorney-in-fact.
  • Notarise and Execute: Sign the POA document and have it notarised to make it legally binding.

Relevant Laws: The Registration of Documents Act, Chapter 285 of the Laws of Kenya, addresses the legal aspects of powers of attorney.

5. Administration of Estates

When someone passes away without a will, or if their estate includes assets not covered by other estate planning tools, their estate may go through the administration process.

Probate is a legal process for validating a will (if one exists) and getting the executor to distribute the assets as defined in the will. Administration, on the other hand, is a similar process but in this case, the deceased did not leave a will regarding the estate’s assets.

Procedure for Probate and Administration of Estates:

  • File a Petition: A petition for probate is filed with the court, which typically includes a list of the deceased’s assets, liabilities and beneficiaries as required by the law.
  • Notification: Heirs and beneficiaries are notified of the inheritance, and a notice is published in a publication of wide distribution to alert potential creditors.
  • Asset Inventory: The estate’s assets are inventoried and appraised.
  • Debts and Taxes: Debts and taxes are paid from the estate’s assets.
  • Distribution: Remaining assets are distributed to the beneficiaries in accordance with the will or intestate succession laws.

Relevant Laws: The administration of estates in Kenya is governed by the Law of Succession Act, Chapter 160 of the Laws of Kenya.

Conclusion

Estate planning is a vital process that helps individuals manage their assets and provide for their loved ones after their passing.

In Kenya, various estate planning tools, such as wills, trusts, life insurance policies, powers of attorney, and business succession plans, are available to help individuals achieve their estate planning goals. Understanding the legal procedures and relevant laws that govern these tools is essential to ensure effective estate planning and asset distribution according to one’s wishes.

Consulting with legal and financial professionals can be beneficial to helping you avoid conflict amongst your potential heirs in their bid to finalise your legacy. Get a big head start on solving such potential issues by paying us a visit, or, a call would do. Either way, we’d love to be of service to you.