In
the Daily Nation a writer has vehemently dedicated her days to narrating to us
stories of wealthy individuals who have since passed on and their dependents being overtaken by endless court cases to acquire control
and their properties. Names sampled include
Moses Mbugua Mwangi,
a son of a freedom
fighter who among his other assets were 58,000 acres
in Laikipia County and 300 acres in Kiambu road whose 3 sons instead of calling for memorial services
to eulogize their father, are in a bitter court case with doubts and accusations flying between them.
The former CEO
of Equity Bank the late John Mwangi Kagema whose wife number 4 wishes exhume
him so as to confirm to the world (Kenya Legal System) that her child was sired
by the late. The former CEO passed only last year on Boxing Day.
What about Mr. Kahama,
a man who had the guts to delete his Christian name and replace
the same with the name of his empire. He moved to Nairobi
in 1982 with bakeries and entertainment ventures as his forte. After his demise his wife Eunice and 3
daughters made prayers to the court to divide what property their husband and father had acquired for them
so that they can go their own ways. One of his clubs K1 is estimated
to be worth 500Million on the lower side.
On Wednesday
our writer presents
us with the story of Joseph Musyimi
Ndolo: a major General in the Kenya
Army who passed on in 1984. He had among other investments 9000 acres in
Mwaani Sultan Hamud. Notwithstanding
that his 3 wives were on each other’s neck, after his death which came through
a tragic accident, a land deal that
he was in the process of securing didn’t materialize resulting in more time in
the court for his family trying to
complete what their provider began. But 5 years after Josiah Kuambulu who had duped him in the land deal also passed
away in a road accident. Josiah was also trying to secure a 3000 acre deal which was taken over by the
seller and his family didn’t get a meter of the said property as registration has since hit a brick wall.
On Monday our
esteemed writer presents us with a story of the former Director of Intelligence
who even after his death 11 years ago
no peace can be found to the dependents who might as well rent residential apartments next to the courts as they always seem to spend
most of their time there.
My question to all fathers
is what are you (an investor) doing to ensure that your dependents don’t end up spending
most of the assets bequeathed on lawyers and that your estate and family flourishes despite your demise?
Wealth Vs Ease of parenting
From the above table it can be noted that at the poor level of wealth, parenting is not easy and it is in fact hard. This is due to the fact children barely ate, families didn’t have a place to live and all of which made the parenting difficult.
Past the $75K
mark no more income can result in making parenting easier. With the basic needs
taken care of any extra wealth
to the family results in family concerns. It was noted in the study here that either
the parent will be
unavailable, or that the extra wealth resulted in behavioral changes and
appetites in the children that made parenting
very difficult. And as the wealth increase
the difficulty increased
tremendously.
Let’s try
Warren Buffett’s view: on deciding what to leave your dependents he sees the
sweet spot as “enough money
so that they would feel they could
do anything, but not so much that they could
do nothing.”
Ideas as researched include
being clear when writing your will. In the will if you have a grownup who was not your dependent
and you wish not to include them in your estate, put it expressly. I.e. name them and indicate
that not bequeathing them anything is intentional.
Leave your property in the hands
of a trustee for the short term. Before you go screaming and throwing tantrums, kindly be aware from the
examples mentioned above that these dependents have never handled the investments left for them and leaving
the same to them is tantamount to setting the investment on fire. You may leave your investments with a
professional trustee with conditions on payments and lapse of the trust. This ensures that a professional
manager manages the resources while according the dependents as named on a periodic or event basis the
proceeds minus the trustee fee. Additionally, the making partial regular
payments ensures that the receiver
can handle the income as and when it is received. If a child
who was in university inherits
24Million shillings which is transferred to their account,
how will he/she
know what to do with the amount considering that
the highest amount they ever handled was school fees a measly 50,000/=.
This individual does not have the understanding of money and the discipline such amounts require.
One can consider a Long term/
dynasty trust. A dynasty trust, in general, is a long-term, irrevocable trust that is created
to transfer wealth
from generation to generation, with minimal exposure
to taxes. For these dynasty trusts one can set them up
before or they can take effect after ones death. Some of the models under dynasty trusts include: One a model
to cater for the beneficiary’s medical, school and general maintenance needs. So benefits cannot be
received to buy the new F-Pace Jaguar. Second option include a model set up to cater for the large
expenses that are concerning their needs e.g. Large medical expenses, wedding
expenses, home damages.
This acts as a safety.
The third
option includes making payments for preset accolades e.g. wedding, graduation,
getting children or starting a
business. This becomes a driver for the dependents to pursue expected good
outcomes so as to receive
finances.
Some cultures tend to introduce
their dependents to the business
or investments earlier
on and the provider is able to evaluate
them, whether they are taking
on the principles of the business. Changes
are made to the training of these individuals to ensure
that they have a better understanding and regard for the family business. So upon the demise of the provider
the dependent is not so far off course in managing the company.
As an investor,
I will now proceed to ask you: what do you have as investment to leave to your
dependents? How long do you think you have to live? And what are you doing in planning for your demise?
Meanwhile keep grabbing your Daily Nation and be embroiled in the tales of other investors who did not plan accordingly!
