Coronation Asset Management has said in the globalised world, individual ownership, liquid and illiquid assets and fixed property are seldom arranged in one jurisdiction.
Often, when people die, heirs are left to unravel a complex web of ownership in jurisdictions and territories with laws, customs and legislation different from Nigeria.
In a report, Coronation Asset Management said estate planning allows the financial services ecosystem to be accessed and deployed in one’s intentions after death.
Estate planning also prevents one’s beneficiaries inheriting confusion and costs after such person’s dimise.
It said: “At its most simple, an estate plan could merely be a standard will. A Will is important as, without a Will, a deceased’s assets are distributed according to the compulsory succession rules of the country in which the assets reside. In Nigeria, this means that the assets are divided equally amongst the legitimate male and female heirs of the deceased.
“In many other countries, for example, a spouse is automatically entitled to a quarter of the estate, and children may not be disinherited. Without a Will, clearly stating the deceased intentions, a deceased wishes may well not be respected after death, especially if these intentions are in disagreement with compulsory succession laws,” it said.
It said an estate Plan can be different things for various circumstances. Depending on need, for example, an Estate Plan could involve a Will, a Trust, or a combination of a Will and a Trust. An Estate Plan could even involve forming a Foundation to administer various Trusts and Wills across different territories.
“Just as compulsory succession laws differ between countries, so do asset and inheritance taxes. This is where a comprehensive and planned view of a deceased’s entire asset and intention universe becomes relevant. In Nigeria, for example, assets in a Trust can avoid inheritance tax. If, however, a separate Will also exists, this will attract inheritance taxes to these assets as they will then be required to go through a probate process. In this instance, preparing an Estate Plan well before death would avoid the situation of a Will defeating the purpose of a Trust.,” it said.
Also, from an insurance perspective, a deceased’s policies can only be paid out once a Will has gone through the probate process. Since this can be a very protracted process, the intended beneficiaries of the deceased’s policies might have to wait years before receiving their pay outs. Trusts, on the other hand, listing named beneficiaries can receive insurance payouts.
“In this instance, having an Estate Plan recognising the deceased’s various insurance policies and making provision for a Trust to receive these policies, ensures that the intended beneficiaries of the deceased’s policies are paid out immediately.”
According to the report, acting as viable and effective tools for transferring assets, Trusts – in Nigeria – also equip estate planning processes with important protective features. Trusts, for example, are confidential, not subject to probate processes, and their detail and content cannot be easily contested in court.
“Since Trusts can be set up well ahead of death, Trusts can invest, by buying bonds or joining mutual funds, for example. In short, Trusts can operate as fully independent legal entities. This is important after death. Since a Trust doesn’t die, a properly constructed Trust can continue to carry out the intentions of a deceased, uninterrupted – if not subject to a Will or probate process, that is,” it said.