Why it is better to will wealth to a trust
What you need to know:
- A trust created to manage such an empire with so many inheritors and beneficiaries must be carefully crafted to avoid conflict, as well as misuse of the trust property.
- Apart from being shielded from public scrutiny, a trust is well placed to ensure one’s assets are secured, wisely invested and managed. Trustees who are charged with that responsibility must, therefore, be chosen carefully.
- A trustee must act in the best interests of all beneficiaries and must not take sides. He must also account to the beneficiaries for the assets, income, and expenses of the trust.
The current Njenga Karume inheritance controversy draws attention to the creation of trusts, legal instruments that are rarely used by Kenyans to dispense wealth after death.
A trust is a handy instrument for managing inheritance.
It’s particularly useful if the estate is vast and complex and there are multiple beneficiaries. Such is the case with the Karume estate. It comprises the Jacaranda Group of Hotels, real estate, trading companies and stocks in some of Kenya’s leading corporation. It was estimated to be worth over Sh120 billion at the time when Karume died in February 2012.
The beneficiaries include a wife, four sons, four daughters, grandchildren, a driver, bodyguard and cook.
A trust created to manage such an empire with so many inheritors and beneficiaries must be carefully crafted to avoid conflict, as well as misuse of the trust property.
If well crafted, it has clear advantages over a simple will. It can also be kept private, even when disagreements occur. Unless there is litigation, the details of a trust can remain private and the public would never know how the estate was distributed. There is no law requiring a trust instrument to be made public, or to be registered with any authority. The Karume trust did not have to have been made public in the first place.
YOUNG BENEFICIARIES
Apart from being shielded from public scrutiny, a trust is well placed to ensure one’s assets are secured, wisely invested and managed. Trustees who are charged with that responsibility must, therefore, be chosen carefully.
A trust can provide continuity and stability. For example, when you leave money to a child, such as Emmanuel Karume Njenga who was only four years old when his father died, a trust can be used to manage the inheritance of such a minor until he turns 18 or older. Emmanuel inherited stocks in more than 10 companies amounting to billions of shillings, which require prudent management and investment.
An overriding advantage of a trust that is well written is the ability to avoid disagreements and conflicts among the beneficiaries (This is one area in which the Karume trust does not seem to have succeeded well).
LEGALLY RESPONSIBLE
However, a trust instrument is more than the four corners of the document. It is also the skills, ability and integrity of the trustees who manage the trust. The trustees are legally responsible for the trust property.
They are required by law to manage the trust and carry out the wishes of the person — known as the settlor — who appointed them.
A trustee must act in the best interests of all beneficiaries and must not take sides. He must also account to the beneficiaries for the assets, income, and expenses of the trust. He must avoid conflict of interest. Therefore, choosing the right trustee is very important. Most settlors select as trustees close relatives and friends, or people whose judgment they trust.
That is not always a guarantee they will have the necessary skills or honesty.
