Estate Planning is more important now more than ever. Without proper planning, you could lose a large share of what you have spent your whole lifetime accumulating. In Nigeria, a lot of stories revolve around families who lost their breadwinner and those families now struggle with nothing or less for survival. All these happen because the families didn’t understand or know enough about the concept of estate planning. A lot of people think estate planning only involves the writing of a Will, but estate planning is a much broader subject that involves finance, tax, medical and business planning.
Estate Planning is a process that involves individuals and in some cases, charitable organisations of your choice.
The understanding of estate administration in Nigeria has been broken down below so you can guide yourself and be sure to know what to do when the need arises.
1. Assess your need for an Estate Plan
When considering estate planning, the first step is to determine if you need an Estate Plan. This can be done by assessing your current financial condition and financial status, which will involve calculating your net worth. Depending on your financial status, we believe calculating your net worth should be pretty easy though you might need the help of a professional.
2. Find a qualified Estate Planner
As part of your estate Plan, you will need to decide who should be in charge of carrying out your wishes. Estate planning itself is a complicated process that requires professional guidance. This is because the legal implications of one wrong word or paragraph or one missing signature can be very costly.
You will need help from a competent professional, preferably an Estate Planning/Trust Company with experience and capability, who will take you through all of the choices you need to make in creating a good Estate Plan.
Selecting the right person or company is almost as important as deciding who gets what and when they get it, that is why at Leadway Capital and Trusts Limited, you can count on us to always provide you with the best services.
3. Create a Foundational Estate Plan
The Estate Planner of your choice should help you create a foundational Estate Plan.
A foundational Estate Plan involves a quick calculation of your net worth by adding up rough estimates of the values of all of your assets – including bank and investment accounts, personal property (jewelry, collectibles, cars, boats), retirement plans, death benefit of life insurance, business interests, monies owed to you, oil and mineral rights, and real estate – and then subtracting from this total all of your liabilities – including credit card debt, car and other personal loans, and mortgages.
The foundational plan is all about protecting you and your loved ones from unnecessary expense and delay. It also means keeping control of your assets and rights for as long as possible and naming those who will be responsible for caring for you in times of need.
4. Assess your need for an advanced plan
When you have created and put in place a foundational Estate Plan, the next step will be to determine if you need an advanced Estate Plan. An advanced Estate Plan primarily focuses on reducing transfer taxes and income taxes.
Whether you implement an advanced Estate Planning or not, you should explore all your options with your Trust Company and then make your decision based on what you believe will work not only for you but also for your family.
5. Determine if you need a Will or a Trust
Once you have contacted a competent Estate Planning professional, the next step is for you to determine if you require a Will or a Trust.
With the help of your Estate Planning professional, you should be able to weigh the pros and cons of your decisions.
6. If you are opting for a Trust, Fund your Trust
If you have gotten this far, and have decided to use a Trust rather than a Will, you will need to get your assets titled into the name of your Trust and update the beneficiaries of your life insurance policies and retirement accounts to align with the provisions of your Trust.
If you do not do this, then all the hard work that you have put into the first five processes will amount to nothing. Funding your account should not take you eternity. We recommend a minimum of eight weeks and a maximum of six months for you to fund your Trust.
7. Review and update your Estate Plan
This is because things change daily, completing steps one to six does not imply that you have finished your Estate Plan. In effect, the Estate Plan that you have created today will only be effective for the now.
8. If you are opting for a Will, Which assets are you bequeathing?
When transferring certain types of assets, you may need to answer some questions like:
If you own a business, should your shares be passed only to those family members who are active in the business? Should you compensate the others with assets of comparable value? If you own rental properties, should all beneficiaries receive them? When and how should you transfer wealth?
Three factors will naturally determine when and how your beneficiaries should receive your asset. These are:
• The age and maturity of the beneficiaries. You must also give only what you own
• The size of your estate versus your need for cash flow during your lifetime.
• The tax implications
9. Transferring Property After Death
With a well-drafted Estate Plan, assets such as shares, real estate and business interests will be transferred by your Executor and Trustee according to the terms of your Will and Living Trust.
10. Not believing the myth that Estate Planning is only for the wealthy
Stop assuming that Estate Planning is only for the wealthy. Anyone who has asset(s) and is concerned about how the asset(s) will end up when he becomes incapable or when he is no longer alive needs an Estate Plan. If you do a proper analysis of your financial status, you will be surprised that your Estate is larger than you had in mind.
At the end, estate management is for both the young and old and should be taken seriously as it determines ones future and also it determines the way passed down assets will be treated by the trustee.