Estate planning is the process of organising and managing an individual’s assets and financial affairs in preparation for the distribution of those assets upon their death or incapacitation. It involves deciding how an individual’s wealth, property, and liabilities will be handled, who will inherit their assets, and how taxes or legal matters will be managed. Key components of estate planning include drafting wills, creating trusts, appointing guardians for minor children, establishing powers of attorney, and minimising taxes on the estate. The goal is to ensure the efficient transfer of assets according to the individual’s wishes while minimising legal complications and financial burdens for beneficiaries.
Estate planning is a crucial part of ensuring that your wishes are carried out after having passed on. Estate planning is what every individual who cares for his family’s welfare when he dies should be interested in. To avoid intestacy, individuals are encouraged, during their lifetime, to set up a plan that ensures that their intentions speak even after their demise.
A key figure in the estate planning process, just like in other trusts, is the trustee. The trustee, depending on the content of your estate plan, performs the functions of trustee as well as executor. Irrespective of the type of trust you are setting up (family trust, charity, or other purposes), the trustee is crucial in ensuring that assets bequeathed to individuals by a Settlor in the estate plan go to the beneficiaries named in the trust. However, for the trustee to be able to effectively and efficiently carry out its responsibilities, as enshrined in the trust, the settlor must provide accurate and detailed information about his/her assets. The trustee becomes ineffectual when the settlor fails or refuses to provide adequate information that would enable the trustee to perform its duties either as trustee or as executor. In the process, the settlor ultimately hurts himself and the beneficiaries and undermines the goals and objectives for setting up the trust in the first place.
This write-up is therefore intended to highlight some of the challenges faced by the trustees while trying to obtain information from settlers wishing to set up a trust or estate plan.
As earlier stated, Trustees rely on information provided to them by the settlor to carry out their duties, and therefore if the trustee does not have a full understanding of what assets are part of the trust or the specific details as to bank account numbers, property titles, or business interests, it becomes much harder to manage the trust assets effectively. Incomplete or incorrect information provided by the settlor can result in assets being overlooked, mismanaged, or even lost. Incorrect or inadequate information relating to the assets of the Settlor, not only creates confusion for the beneficiaries but can also lead to legal disputes or delays in distributing the trust assets.
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For instance, a situation where the settlor fails to provide full information about a piece of land he owns in a remote area means that, after his demise, neither the trustee nor any of the beneficiaries may be aware of the existence of that piece of land, making it impossible or difficult for the trustee to manage or pass on the same as part of the estate. Should the trustee discover this asset after the demise of the settlor, it might face legal hurdles in proving ownership or handling it as part of the trust, particularly if that asset does not have the necessary documents.
Trustees often face challenges in obtaining and managing trust assets due to hidden or misrepresented assets. Many settlers choose not to disclose all their assets to their trustee, believing it will be private or not important in the long run. This often leads to offshore accounts, joint properties, or business stakes being converted by the countries where they are located. Undisclosed assets can also lead to tax issues, creditors’ complications, or disagreements among beneficiaries. Nondisclosures can result in financial losses for the estate, such as unused or uncollected investment accounts, life insurance, or retirement funds, and may result in assets being claimed by the state if the owners are unaccounted for.
Also, unclear instructions or hidden details can create rifts among family members. If beneficiaries suspect that not all assets have been disclosed in a will or trust instrument prepared by the trustee, these beneficiaries may question the trustee’s actions or accuse it of misconduct, even if the trustee is diligent and transparent in discharging its duties. It also creates a feeling of betrayal or resentment among the settler’s loved ones, who may feel that they were unfairly deprived of their inheritance. In the worst cases, this could spark legal battles that drag on for years, further diminishing the value of the estate.
Settlers are encouraged to be honest and transparent when disclosing assets they intend to put into a trust. Trustees must maintain confidentiality and refrain from disclosing vital information to third parties, except when required by law. Full disclosure of assets helps trustees and beneficiaries understand the trust’s interests and reduces misunderstandings or conflicts. Transparent disclosure of assets in estate plans fosters trust, family cohesion, and harmony, preventing disputes and fostering family harmony. This approach is crucial for ensuring trust and peace in the trust process.
My advice to settlers is that it is the responsibility of their trustee to ensure that their vision for the future is achieved and the plan safeguards their family members when they pass on. However, their vision can only be achieved once they are able to trust their trustee and be transparent in providing accurate information about their affairs and these details are clearly stated in their estate plan. It is therefore essential that the settlor and the trustee have a heart-to-heart conversation, providing full details of all the assets as well as any specific instructions the settlor may give. This might include everything from bank accounts and real estate holdings to digital assets like cryptocurrency, online business ventures, or intellectual property. The more meticulous and thorough the settlor is with disclosures, the more confident he can be that the estate will be managed effectively.
We recognise that there is always that concern that revealing too much, especially about one’s financial situation could lead to privacy concerns or potential exploitation. This is where choosing the right trustee becomes so important. Trustees are bound by legal and ethical duty to act in the best interests of the beneficiaries and to protect the privacy and security of the estate. When selecting a trustee, it’s vital that the settlor choose a trust company that is trustworthy, experienced, and capable of handling the complexities of managing their assets.
My last word!
Estate planning is a complex process that requires careful attention to detail. Trusting your trustee with full and accurate information about your assets is key to ensuring that your estate is managed efficiently and that your beneficiaries receive assets that have been bequeathed or plans made for them. Without this transparency, the risk of mismanagement, potential legal disputes, and family tensions increases significantly. Therefore, when planning your estate, take the time to gather all necessary details and work closely with your trustee to ensure that they have adequate information they require to manage your assets effectively.
Bunkaya Bitrus Gana, is the Managing Director, Greenwich Trustees Limited. He can be reached on 08033335436 or [email protected]
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