Edition 16-Succession, Wills, Family Trusts, and Estate Planning.
Following our recent publication, (WKA Newsletter Edition #10 ‘Divorce by Mutual Consent in Kenya – Marriage (Amendment) Bill, 2023’) we received a flurry of questions from you, our esteemed readers. Among them was, ‘Can I avoid drawing a will and still maintain control over my estate upon my demise?’ We found it important to address this pertinent issue.
Death is inevitable and it is therefore important for one to make plans, especially with regard to property (estate). It is imprudent for a person to live without making arrangements of how his/her property will devolve upon death. The importance of making such plans is to ensure that the dependents and next of kin are well provided for, and the wishes of the deceased are respected.
The Law of Succession Act provides the rules for writing a valid and enforceable will, as well as the applicable rules for the succession of an intestate’s estate. However, the Kenyan courts have declared wills to be invalid or revoked on numerous occasions, rendering the deceased person an intestate. The main disadvantage of dying intestate is that the deceased is unable to maintain control over his/her property upon death. This exposes the next of kin to the rules of intestacy which are arbitrary and may also lead to disputes over the estate among family members.
Nevertheless, the law has provided other means of ensuring people maintain control over their estates upon death, without writing a will (which may be revoked or invalidated) or dying intestate. This is through survivorship, nomination, family trusts and donatio mortis causa (gifts in contemplation of death).
1. SURVIVORSHIP
In re Estate of Johnson Njogu Gichohi (Deceased) [2018] EKLR, the court observed as follows: “I am in agreement with the holding by Achode J. – Mwangi Gakuri –v- Bernard Kigotho Maina & Another, H. C NBI. Succ. Cause No. 2335/2011 where she stated:
“Property is capable of passing upon death other than by will. It may pass by survivorship…….. This applies in cases of joint tenancies that is, where property is jointly owned. Where a co-owner of property is a beneficial joint tenant of the property, their interest will automatically pass to the surviving tenant upon their death by virtue of the principle of survivorship…… The principle of survivorship operates to remove jointly owned property from the operation of the law of Succession upon the death of one of the joint tenants.”
To this end, Section 91(4) of the Land Registration Act, CAP 300 provides that in an instrument where land, lease or charge is owned jointly, no proprietor is entitled to any separate share on the land and consequently, a disposition may be made only by all the joint proprietors and upon the death of a joint proprietor, his interest shall vest in the surviving proprietor jointly. Further, Section 43 of the Law of Succession Act provides that to determine survivorship in the event of two or more persons dying simultaneously, it shall be presumed that the deaths occurred in order of seniority with the younger person surviving the older person. In cases of spouses, it
shall be presumed that they died simultaneously.
2. NOMINATION
A nomination is a direction by a person (nominator) to another who is holding an investment on the nominator’s behalf (trustee) to pay the funds on the nominator’s death to a third party(nominee).
In Kenya, nominations are made mainly for savings and investments in cooperative societies and provident pension schemes. A nominator gives a direction during his/her lifetime, but it takes effect upon death and is not subject to the law of succession. Therefore, the subject of direction cannot pass under a will.
A nomination can be revoked by:
i. A later nomination;
ii. The subsequent marriage of the nominator;
iii. The death of the nominee prior to the death of the nominator.
However, a nomination cannot be revoked by a subsequent will or codicil.
3. FAMILY TRUSTS
A Family Trust is created by a Settlor through registration or incorporation of a Trust Deed, which provides instructions to a Trustee to manage the assets in the trust account according to the trust deed for the benefit of the Beneficiary. In some cases, the settlor may engage a TrustEnforcer to monitor the trustee and ensure compliance with the settlor’s wishes.
Section 3D of the Trustees (Perpetual Succession) Act, 2021 Cap 164, (“The Trustees Act”) provides that a family trust is considered a trust, whether living or testamentary, partly charitable or non-charitable, that is registered or incorporated by any person(s), whether jointly or as an individual for the purposes of planning or managing their personal estate.
A living (inter vivos) trust is one created by the grantor during his/ her lifetime, while a testamentary trust is a trust created by the grantor’s will.
According to the Trustees Act, a family trust shall be—
a) made in contemplation of beneficiaries, whether such intended beneficiaries are directly related to the settlor or not, or are living or not;
b) made for the purpose of preservation or creation of wealth for generations; and
c) a non-trading entity.
Section 3F of the Act provides that a trust shall be valid and enforceable in accordance with the terms of the trust. However, a trust may be declared invalid if:
a) it is created for a purpose or purports to do anything illegal in Kenya;
b) it has no identifiable ascertainable beneficiary;
c) it is established by duress, fraud, misrepresentation, or in breach of a fiduciary duty;
d) the terms are so uncertain as to render performance impossible; or
e) if the settlor had no legal capacity to create the trust.
The advantages of family trusts include:
a. Trusts avoid probate;
b. The Settlor is able to benefit persons who are not related to him/her;
c.Family trusts protect the settlor’s assets against claims from creditors; liquidation and bankruptcy proceedings;
c.Under a trust structure, assets can continually benefit multiple family members for generations;
d.Family trusts are a valuable tool for planning an estate, and arguably better than a will. In this regard, offshore Trusts have gained popularity as an avenue for estate and tax planning;
e. Trusts safeguard irresponsible beneficiaries by imposing restrictions on their access to the
estate; and
f. Under a trust structure, the trustee is held liable for any breach of trust and in the absence of any defenses, is required to compensate the beneficiaries for the loss.
4. DONATIO MORTIS CAUSA (GIFTS IN CONTEMPLATION OF DEATH)
In the case of Cain v Moon {1896} 2 QB 283, Lord Russell outlined the conditions for a valid donatio mortis causa as follows:
i. It must be a gift in contemplation of death because of a present illness or imminent danger. Section 31(e) of the Law of Succession Act provides that a gift would be valid if the person making the gift dies of a different cause, having survived the illness or danger. However, Section 31(c) provides that this requirement cannot be satisfied where the donor contemplates their own death by suicide.
ii. The gift must be conditional upon the donor’s death. If the donor does not die, the gift will not take effect and the donor will be entitled to recover possession of the property from the donee.
iii. The gift must be delivered to the donee. Section 31 (c) of the Law of Succession Act provides that the gift is valid if there is delivery to the intended beneficiary of possession of property or of documents or other evidence of title of the property.
iv. The gift must be capable of making the subject matter of donation mortis causa. Section 31(b) of the Law of Succession Act provides that a gift in contemplation of death would be valid if a person gives movable property that he could otherwise dispose off by will.
v. The donee must survive the donor. Section 31 (f) of the Law of Succession Act provides that the gift would be valid if the done survives the donor. However, if the intended donee predeceases the donor, his/her estate would not have a cause of action against the estate of the donor.
We at WKA Advocates have a dedicated Real Estate and Succession Planning department. If you have any questions or require assistance in avoiding probate, drawing up your family trust and will, kindly feel free to contact us by email at info@wka.co.ke.
We have worked on numerous family trust deeds to ensure there is maintenance of generational wealth in compliance with the Trustees (Perpetual Succession) Act,
2021 Cap 164.
We hope this information is helpful in understanding the ways through which you can avoid probate in Kenya and still maintain control over your estate upon death. Please note that the contents of this newsletter are intended to provide a general guide to the subject matter. It should not be relied upon without legal advice on its contents.
Should you require further information or legal assistance on Compliance or any other legal issue,kindly feel free to contact us at info@wka.co.ke, www.wka.co.ke, +254 798 03 580, Nairobi Hub: Parklands, Valley View Business Park, 6th Floor, City Park Drive, Off Limuru Road