Estate planning in Kenya

 

Estate planning in Kenya involves several key components and strategies to ensure that your assets are distributed according to your wishes after your death or in case of incapacitation. Here's an overview based on current practices and legal frameworks:

What is Estate Planning?

Estate planning is the process of anticipating and arranging for the disposal of an estate. It includes making decisions about who will receive your assets, how your responsibilities will be handled, and how to minimize uncertainties or taxes during the administration of your estate.

Key Components of Estate Planning in Kenya:

1. Wills:
   • A will is a legal document that specifies how your assets should be distributed upon your death. It is crucial for ensuring that your estate goes to the intended beneficiaries. In Kenya, anyone of sound mind over the age of 18 can write a will, which must be witnessed by two individuals who are not beneficiaries.
     
     
2. Trusts:
   • Trusts can be an effective tool for estate planning, allowing for more control over how assets are managed and distributed. They can be used for tax efficiency, asset protection, and to manage estates for minors or those who might not be able to manage finances. There are various types of trusts, including revocable, irrevocable, and family trusts.
3. Power of Attorney:
   • This is important for managing your affairs if you become incapacitated. It allows you to appoint someone to handle your financial or health decisions. There are specific legalities around its creation and use in Kenya.
4. Beneficiary Designations:
   • For assets like insurance policies, pensions, or SACCO proceeds, naming beneficiaries in nomination forms is essential. This ensures these assets go directly to the named individuals without going through probate.
5. Succession Laws:
   • The Law of Succession Act governs the distribution of estates, whether testate (with a will) or intestate (without a will). This law outlines who inherits in case there's no will, the priority of heirs, and procedures for estate administration.
     
     

Practical Steps:

• Drafting a Will: Engage with a lawyer to draft a will that reflects your wishes accurately, ensuring it is legally binding and reduces potential for disputes.
• Setting Up Trusts: Consult with legal and financial advisors to create trusts that align with your estate planning goals, especially for complex family structures or to protect assets for future generations.
• Regular Updates: Estate planning documents should be reviewed and updated periodically, particularly after major life events like marriage, divorce, or the birth of a child.
• Understanding Tax Implications: Consider the tax implications of your estate plan, as certain structures like trusts might offer tax benefits.

Challenges and Considerations:

• Cultural factors might influence estate planning, with some reluctance to discuss death openly. However, having an estate plan can prevent disputes and ensure your intentions are clear.
• The legal process in Kenya can be complex, requiring knowledge of property laws, succession laws, and taxes. Professional legal advice is often necessary to navigate these complexities.
• For those with international assets or beneficiaries, additional considerations around cross-border estate planning are necessary.

Estate planning in Kenya is not just for the wealthy; everyone has an estate, even if it's modest. Proper planning can prevent the government or distant relatives from deciding the fate of your assets, thus securing your legacy and protecting your loved ones.

CRUCIAL CLAUSES THAT MUST BE INCLUDED IN A LEASE AGREEMENT

They Include:

1.      NAMES OF THE PARTIES

• These are the names of the people who are entering into a contract together.

2.      CONTRACT PERIOD

• The period shall be the time of which the contract commences and ends.

3.      TERMINATION

• Termination of a contract could be due to breach or lapse of contract period.

4.      BREACH OF CONTRACT

• A breach of is the violation of a contractual obligation (dishonouring the contract terms)

5.      RENTAL AND ITS ADJUSTMENTS THEREOF

• Parties to the agreement shall agree on the amount the tenant shall pay as rental monthly as well as agree to the rules for its adjustment.

6.      USE RIGHTS, RESPONSIBILITIES AND POSESSION OF THE PROPERTY

• This describes the extent to which a tenant may use and enjoy the property as well as detailing how the landlord may not disturb the occupancy and enjoyment of such property by the tenant.

7.      MAINTENANCE AND REPAIRS

• This clause shall describe who is responsible for the maintenance of the property depending on the type of maintenance required.

8.      DISPUTE RESOLUTION

•  Parties to a contract shall set out to describe in detail as to how they will resolve any disputes if and when they arise.

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SECURITIES REGISTERABLE AT THE COMPANIES REGISTRY - KENYA LAW

Introduction

The principal or commonly prepared securities that require registration at the Companies registry are the Debenture and Chattels Mortgage.

1.    Debenture

The Companies Act (Cap 486) of the laws of Kenya provides the legal regime for the registration of debentures and the issuance of a Certificate as evidence of the said registration. 

The issuing of a debenture by a company is done pursuant to powers conferred to the company by its Memorandum and Articles of Association. In practice in addition to the said powers a resolution by the Board of Directors of the company allowing creation of the debenture will be prepared and executed by the directors of the company.

The procedure for registering a debenture is as follows: -

a.     Conducting of a search on the company file at the Companies Registry to ascertain the existence of the company together with information that is pertinent to the creation of a debenture such as establishing that the provisions of the Memorandum and Articles of Association of the company empower it to create a debenture.

b.     Drawing up of the Instrument of debenture

c.     Execution of the debenture. The Companies Act provides for execution of the debenture by appending of the company seal which is to be witnessed by the signatures of two directors of the company or one director of the company and its company secretary. Execution of the debenture by the financier is not a mandatory requirement

d.     Assessment of Debenture to stamp duty and payment of assessed stamp duty. Assessment of a debenture to determine the stamp duty payable to the Kenya Revenue Authority is done at the Companies Registry. Presently stamp duty payable has been lowered from 0.2% to 0.1% of the sum secured. This change came into effect following the budget speech read in June 2010.  In order to assess a document to stamp duty there is need to have the Personal Identification Numbers (PINs) of the parties to the transaction (in the case of a debenture the PIN of the lender and the borrower). A PIN is issued by the Kenya Revenue Authority. After assessment of payable duty payment of the tax is made at specified banks which remit details of the payment to the Companies Registry to facilitate the stamping of the debenture instrument.

e.     Lodging of the debenture with the Registrar of Companies for stamping.  The Instrument of Debenture is then presented at the registry where an endorsement is made on its first page signifying the payment of duty. 

f.      Lodging the debenture at the Companies Registry for registration upon making payment, usually a standard fee.

g.     Issuance of a certificate as evidence of the creation of a debenture.

 

2.    Chattels Mortgage

The creation of Chattels Mortgage is governed by the Chattels Transfer Act (Cap 28) of the Laws of Kenya. The creation of Chattels Mortgages in Kenya is largely restricted to securities owned by individuals. In this regard, companies are considered to be adequately served by securities arising from debentures and other forms of Charges provided for in the Companies Act.  

Registration procedure for a Chattel Mortgage:

a.     Where the chattels over which a chattels mortgage is created are registered at a public registry such as is the case with motor vehicles then prior to the preparation of a Chattels Mortgage a search relating to the asset is conducted at the relevant registry to ascertain its existence and other pertinent matters that may affect the security. 

b.     Drawing up and execution of the Chattels Mortgage instrument.

c.     Assessment of the Chattels Mortgage to stamp duty and payment of assessed stamp duty. Presently stamp duty payable has been lowered from 0.2% to 0.1% of sum secured. 

d.     Lodging of the Chattels Mortgage with the Registrar of Companies for stamping.

e.     Lodging of the Chattels Mortgage at the Companies registry for registration upon payment of a standard fee.