AN OVERVIEW OF ESTATE PLANNING AND SUCCESSION IN NIGERIA
What Is Succession?
Succession is the orderly passage of power, assets, or other property from one entity to another. Legal rules documents govern succession with regard to the assets of estates after a person dies. Corporate and government structures also typically create rules of succession to ensure the orderly transfer of power under a variety of circumstances.
The Oxford Advanced Learner’s Dictionary defines succession in the context of this topic to mean the act of taking over an official position or title.
Succession therefore can be loosely defined to mean inheritance, the right to inherit, the order in which inheritance is bequeathed, and the condition precedent under which one can succeed another. The law of succession, therefore, is all about the transfer or devolution of property on the death of an owner to another, his heir. The law is the rule by which such devolution occurs.
The law governing succession in Nigeria is generally headed under two broad headings, namely: Testate and Intestate Successions. While Testate Succession is primarily governed by Wills and the applicable Wills Law, Intestate Succession on the other hand is that condition where a man dies without leaving behind a valid Will.
Succession in Estate Planning
In estate planning, wills and trusts provide control over the succession of a person’s assets after they die.
For estates where the deceased has no will, legislative rules govern who receives the assets of an estate through a process called intestate succession. Unrelated individuals or organizations rarely receive property via these rules, even if the deceased made informal requests that they benefit from the estate. Under intestate succession laws, some states will seize the assets of individuals who die without surviving relatives.
In simple terms, estate planning entails preparing for the transfer of a person’s assets and wealth in the event the latter becomes incapacitated or dies.
Estate planning entails much more than preparing a will. An estate plan covers the transfer of assets some of which could take effect once such asset is created and after the death of the owner.
The Benefits of Estate Planning
A vast majority of people believe they do not require estate planning and that it is only for the wealthy. Estate planning is for everyone, not just the wealthy and it is a plan a person makes for the management and administration of their property during their lifetime and after their death.
When a person dies without an estate plan, the courts will be forced to make crucial decisions for the deceased such as the distribution of the deceased properties, the appointment of guardians (for the deceased minor children) and personal representatives, dissolution of business, etc. This process is very expensive and can lead to disputes among the members of the deceased’s family.
Estate planning entails the preparation of a will or codicil, setting up trusts, bequeathing gifts to persons or entities, and/or granting authority to do certain acts by way of a power of attorney. Below are the benefits of Estate planning:
• Assets are distributed according to the Testator’s wishes and adequate arrangements are made for minors.
• If properly managed, the value of the estate can be maximized for the benefit of the beneficiaries.
• Transfer of estate is done effectively.
• Reduces tax liability on assets.
Forms of Estate Planning
1. Wills and Codicils
This form of estate planning is governed by the Wills Law (Chapter W2) Laws of Lagos State, 2015.
A will or testament is a legal document that expresses a person’s (Testator) wishes as to how their property (estate) is to be distributed after their death and which person (Executor) is to manage the property until its final distribution.
A Codicil is an addendum to a will, that is, it is an addition or supplement that explains, amends, or nullifies part of an already executed will. Similar to a Will, the codicil is ambulatory, meaning it takes effect only after the death of the testator and is executed in the same manner as the Will.
This form of estate planning is governed by the Trustee Investments Act (CAP T22) Laws of the Federation of Nigeria 2004.
A trust is a legal (document) arrangement through which an individual (or an institution such as a bank or a law firm), called a “Trustee”, holds legal title to property of another individual known as a “Settlor” or “Grantor” for a third party called a “Beneficiary”.
A trust is created by a Settlor, who transfers some or all of his or her property to a Trustee. The trustee holds that property for the Trust’s beneficiaries. Trusts have existed since Roman times and have become one of the most important innovations in property law. Full title and property rights are transferred to the trustees to act in the interests of the beneficiary as set out in the trust deed.
There are two major types of Trust, namely:
1. Testamentary Trust; and
2. Living Trust.
There are two forms of Trust, namely:
1. Revocable Trust; and
2. Irrevocable Trust.
3. Deed of Gift
A Deed of Gift is a gratuitous arrangement that voluntarily transfers the ownership of a property from the owner (called the Donor) to another (called the Donee) without any consideration or compensation from the Donee. Examples of gifts that can be transferred are real properties such as land or building and personal properties of the Grantor.
DIFFERENCES BETWEEN THE TYPES OF ESTATE PLANNING
Everyone has heard the terms “Will”, “Deed of Gift” and “Trust,” but not everyone knows the differences between them. They are useful estate planning devices that serve different purposes. This discuss will be highlighting their individual differences;
- A Will and a Trust are that a Will goes into effect only after Testator dies while a Trust takes effect as soon as you create it.
- A Will is a document that directs who will receive the Testator’s property at the Testator’s death and it appoints a legal representative to carry out the Testator’s wishes while a Trust can be used to begin distributing property before death, at death, or afterward.
- A Will passes through probate. That means a court oversees the administration of the Will and ensures the Will is valid and the property gets distributed the way the deceased wanted while a Trust passes outside of probate, so a court does not need to oversee the process, which can save time and money.
- Unlike a Will, which becomes part of the public record, a Trust can remain private.
- A Deed of Gift is a signed document that voluntarily and without recompense transfers ownership of real, personal, or intellectual property from one person (or institution) to another. It should include any possible conditions specifying access, use, preservation, etc. Full title and ownership rights are transferred to the beneficiary of the gift while a Trust is a relationship whereby property is held by one party for the benefit of another.
- A ‘Will’ is always revocable during the lifetime of the testator, even though it is registered or not while a deed of gift is irrevocable once given. A Deed of Gift is drawn during the lifetime of the donor. If the donor dies before the gift deed is accepted then, the gift deed becomes void. For a valid acceptance, the donee is the person who accepts the gift. A minor may be a donee. But if the gift is onerous, the obligation cannot be enforced against him while he is a minor. But when he attains adulthood, he must either accept the burden or return the gift. A gift may be accepted by or on behalf of a donee.
It is important to note that not every form of Estate planning is suitable for everyone. Each form of estate planning has its distinct and unique features and people. If an individual desires a speedy and cost-effective process of property transfer, it’s important to consider the various forms of estate planning that will help the individual achieve their desired purpose. For example, executing a deed of gift or setting up trusts depending on the individual’s preference, can be preferred to making a will because of the lengthy process of obtaining probate.
Choosing the appropriate estate plan can ensure simple, tax-efficient, and organized transfer of assets to beneficiaries, it removes uncertainties and prevents disputes.
Author: Anita Oshogwe