In this edition we discuss vital matters applicable to everyone: planning for the impossible, mitigating risks and safeguarding our loved ones.
EXPLORING THE LATEST TRENDS AND DEVELOPMENTS IN PROPERTY & CORPORATE LAW
ISSUE #7
THE LEGACY EDITION Safeguarding family wealth
CONTENTS
Introduction By Vijay Parikh, Managing Partner
03
Back to basics By Jonathan Dorman, Partner & Head of Private Client
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#TRENDS: Mitigating Your IHT liability By Arti Thakrar, Senior Associate Solicitor Wills, Trust & Probate
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Interview with Suzanne Zack: Insights into fine art collecting and the art market
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Exploring Estate Planning Practices Across Jurisdictions: A Comparative Analysis By Bhavini Kalaria, Partner Dispute Resolution International, Sameer Tapia, Founder & Senior Partner at ALMT Legal Associates & Solicitors, David Gatheru, Advocate at Murugu Rigoro & Co Advocates The Four Corners Legal Corner Podcast Going behind the 'why' of wills, featuring Jonathan Dorman, Geoff Dennis and Sarju Kotecha of Harold Benjamin Solicitors
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Probate Pitfalls: Lessons Learned from Real Life Cases By Sarju Kotecha Solicitor and Legal Director Dispute Resolution, International
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Transferring the Family Home By Geoff Dennis Solicitor and Legal Director Private Client
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Choosing the Right Legal Structure for Your Cross-Border Family Business By Bhavini Kalaria, Partner Dispute Resolution International
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Events A round up of the past month
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In this issue In this edition we discuss vital matters applicable to everyone: planning for the impossible, mitigating risks and safeguarding our loved ones. From the importance of having a lasting power of attorney and wills in place, to discussing the various complexities associated with transferring the family home, this edition is a must-read. Recent data from HMRC, highlighting an increase in inheritance tax receipts, shines a light once again on the importance of strategic planning to mitigate tax liabilities and preserve wealth across generations. We are thankful to Ivar Sala of Evelyn Partners for his helpful input to this discussion. Further, we are grateful to our other guest contributors for this issue. To Suzanne Zack, known for her appearances on the BBC’s Antiques Roadshow, for her insight into investing in art; and to Sameer Tapia of lead- ing Mumbai-based law firm ALMT Legal, and David Gatheru of Murugu, Rigoro & Co Advocates, Kenya, for their valuable input comparing the treatment of inheritance and wealth across different jurisdictions. We also offer helpful guidance into how family businesses can manage conflicts and their wealth, and discuss the nuances of legal structures for cross border family businesses.
VIJAY PARIKH Managing Partner
vijay.parikh@haroldbenjamin.com
Connect with Vijay
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BY JONATHAN DORMAN Partner, Head of Private Client Back to basics.
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Society today is generally risk-averse. We are cautious about taking risks ourselves or with our children or belongings. Whether it is a health risk being vaccinated, a child seat in a car, smoke/CO2 alarms in the house, we wish to minimize the risks and avoid injury or events that will adversely affect our lives.
You can decide who will be best to manage your Estate and implement your Will.
You can:
take into account specific situations, for ex - ample, a person suffering from a disability, a person underage, a spendthrift beneficiary, a beneficiary in receipt of means-tested bene - fits, or you can postpone an entitlement of a beneficiary to a later age.
appoint guardians for young children.
Yet people in general do not prepare for death or declining physical and mental capacity.
make specific gifts of money or assets to charities and individuals.
We all know we are going to die and none of us knows when. A poll commissioned by Will Aid involving 2,200 people across the country showed that only 29% had an up-to-date Will, with the majority admitting they had not got anything in place. We all hope to get older, yet many do not prepare for that old age by making a Lasting Power of Attorney (LPA) for property and finance or health and welfare. Just as with a Will, no one knows when they will be needed, no one knows if or when a stroke, a fall, a car accident, or early-onset dementia may strike, and make these documents necessary. Unfortunately, if such documents are not in place, it may then be too late. For example, a few years ago, one of my clients (we will call him Mr X) came to see me as his wife had fallen and hit her head resulting in a coma. For tax reasons their investments were in Mrs X’s sole name. Thus, he was not able to access the monies they had jointly relied on to live. Mrs X did recover consciousness but was not able to deal with her affairs for over six months. LPAs are like an insurance policy; once they are in place you know you are prepared, but you hope never to have to use them. Wills Why should you make a Will rather than let the law decide who will inherit your Estate? The law may not divide your Estate as you would and may not recognise people who you would wish to inherit as having any entitlement. In a Will, you can decide who will inherit from you.
try and avoid family disputes.
leave your estate in a tax-efficient manner.
Given the flexibility and advantages which a Will offers, it seems remarkable that relatively few are putting one in place. Powers of Attorney There are two types of Powers of Attorney: the Ordinary Power of Attorney (OPA) and, since October 2007, Lasting Powers of Attorney (LPA). OPA may be specific for a particular activity or event or cover all activities that an individual can legally do. The problem with an OPA is that it is automatically revoked when someone loses the ability to make their own decisions. This was the reason for the introduction of the Enduring Power of Attorney (EPA), which enabled an individual to appoint persons to deal with their property and affairs and would not be revoked if they became unable to make their own decisions. The EPA has been replaced by LPA although if an EPA was made before October 2007, it is still valid. When LPA were brought in, a further new power was created to deal with health and welfare. This allows you to appoint people to make health and welfare decisions for you,
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but only if you cannot make these decisions for yourself. The Attorney can, for example, decide whether you live at home with care or in a care home, who you can see, what food you eat, and what medication or operations you have. You must give a specific authority if you wish your Attorneys to have power to make life and death decisions. If you do not make a health and welfare LPA, then the decisions about these important matters will be made by social services or the doctor treating you, in consultation with those interested in your welfare. Some years ago, there was a case reported in the papers where a lady had been living with her daughter who had adapted her home so that her mother could live on the ground floor of her house. However, social services decided that mum was better off in a care home and removed her. The daughter visited the care home, and asked mum if she would rather live with her, and mum said yes. The daughter took her home. As a result, the social services brought in the police who removed mother from the daughter’s house with a blanket over her head into a police car. Subsequently a court allowed the mother to return to live with her daughter, but this situation would have been avoidable if the daughter had been appointed by her mother as a health and welfare attorney. If you do not have a property and affairs Lasting Power of Attorney, then no one will be able to deal with your assets, held in your sole name, if you cannot deal with them yourself. "A poll commissioned by Will Aid involving 2,200 people across the country showed that only 29% had an up-to-date Will with the majority admitting they had not got anything in place."
It will be necessary for someone to apply to the court to obtain an order giving them legal authority to deal with your financial affairs. This can be a lengthy procedure, and is usually more expensive than making an LPA. There are higher court fees, and the need for a security bond in addition to any legal fees in applying to the court. The administration of your affairs becomes more bureaucratic as there is a need to produce annual accounts to the court, pay the annual premium on the security bond and to seek the court’s consent to any actions the attorneys wish to take which are outside the authority of the original court order. On a practical level, if you are a sole proprietor of a business, what would happen if you cannot make business decisions or sign papers? What would happen if the family’s investments were in your or your spouse’s or partner’s sole name and you or they cannot deal with them? The bottom line here is that if you are risk- averse, you should make a Will and Lasting Powers of Attorney.
jonathan.dorman@haroldbenjamin.com
Connect with Jonathan
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Mitigating Your IHT liability
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BY ARTI THAKRAR Senior Associate Solicitor Wills, Trust & Probate
Between April 2023 and January 2024, HMRC recorded £6.3 billion in Inheritance Tax (IHT) receipts which is £400 million higher than the same period the previous year – a 6.34% increase. According to a review by Evelyn Partners, the Treasury was on course to receive approximately £7.6 billion in the 2023/24 tax year. This is perhaps due to inflation, the increase in house prices and the freezing of the Nil Rate Band (NRB) and other IHT exemptions/allowances. Arti Thakrar discusses how IHT can be mitigated. We are grateful to Ivar Sala of Evelyn partners for his insight to the article below. IHT is a tax which can be payable in your lifetime and on death. Since 2009 all individuals in the UK have an IHT threshold of £325,000. The first £325,000 is taxed at a rate of 0% with everything above £325,000 potentially subject to IHT at 20% (lifetime IHT rate) or 40% (death rate). If you have assets abroad, they may also be subject to foreign taxes. ‘Arguably, the most enjoyable way of reducing IHT is spending the estate – going on longer holidays, cruises and enjoying the finer things in life. It's called going SKI-ing – Spending the Kids' Inheritance. It may also help to spend more if you think that everything now comes with a 40% discount. The key issue is making sure you have enough to last for your own lifetime,’ notes Ivar Sala, Chartered Financial Planner at Evelyn Partners. Additionally, ‘It is possible to insure against the potential IHT liability for the recipient and also insure the temporary loss of the nil rate to the donor's estate. This type of insurance gives the donor peace of mind as it makes sure this part of their estate planning will be successful.’ However, outside of this, to mitigate the IHT payable, you may be thinking about gifting some of your wealth to ensure your heirs receive more of it. Different gifts may have different tax consequences. If you are married or in a civil partnership and you have left your Estate to your spouse/civil partner, upon your death the Estate may not have to pay IHT (depending on the timing of gifts given during your lifetime). The survivor’s estate will have the benefit of twice the IHT NRB of £325,000 on their death, equalling £650,000.
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In addition, if, upon your spouse/civil partner’s death, they leave their main residence to a ‘lineal descendant’, such as children, they may have available a further IHT NRB called the ‘Residence Nil Rate Band’ (RNRB). This is worth £175,000 for you and your spouse/ civil partner, thus a further £350,000. Therefore, upon second death this could result in £1 million being free of IHT. The full RNRB is only available if the survivor’s estate is below £2 million and therefore lifetime gifts may be prudent to reduce the survivor’s estate. A gift (also known as a transfer of value) is one where the value of the estate of the person making the gift is less after than it was before. This seems obvious but it is the difference between the value of the estate before and after the gift which is taken into account for IHT purposes.
It is also important that the donor not take any form of benefit from assets given away as this could prevent the seven-year clock running. Further, as Ivar Sala explains, a ‘key problem with making large gifts is making
sure you have enough for your own requirements after the gifts. Financial
modelling tools can help provide valuable insights to help avoid any potential detriment to financial security as a result of making gifts.’
After safeguarding your own security, making gifts is a way of mitigating IHT.
Normal expenditure out of income The law allows immediate exemption to regular gifts if, taking one year with another, it can be shown the transfers meet certain requirements. As such you could pay your grandchildren’s school fees out of excess income or pay towards a life policy to pay the IHT on death. To produce excess income ‘Individuals with large investment portfolios can make changes to the investment strategy with the aim of increasing the income or dividend yield to potentially produce more income for Gifting purposes,’ explains Ivar Sala. The exemption is instant and absolute but in general, gifts out of income must be cash. When trying to give gifts out of such income, it is beneficial to prepare and retain documents establishing that you have surplus income and that you have the intention to make regular gifts.
However, there are some IHT exemptions and reliefs available when gifting the following:
Normal gifts out of income; Family maintenance; Annual exemption of £3,000; Small gifts of up to £250; Gifts in consideration of marriage; Gifts to Civil Partner/Spouse; Business Property Relief/Agricultural Property Relief
If you decide to make a gift to an individual which is not covered by one of the above exemptions and reliefs, this would be classed as a potentially exempt transfer (PET). PETs may not be subject to IHT if the person making the gift survives seven years from the date of the gift. If they do not survive seven years, then the gift becomes subject to tax and forms part of the estate. If the total lifetime chargeable gifts are within the NRB then the gifts would eat up the NRB first leaving less available for the estate. If the amount given away exceeds the NRB, IHT will be payable on the gift by the recipient. The tax may be reduced on a sliding scale. This is known as ‘taper relief’ and the recipient of the gift will start saving the tax payable after three years rather than waiting for seven years. There are no limits on the number or value of PETs you can make.
"To mitigate the IHT payable, you may be
thinking about gifting some of your wealth to ensure your heirs receive more of your wealth however, different gifts may have different tax consequences."
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Unlike the other exemptions discussed above, which are available in respect of lifetime gifts, this exemption is available both in respect of gifts made in the lifetime and upon death. Business Property Relief/Agricultural Property Relief If you are a business and/or farm owner, there are specific reliefs on gifts of business/ agricultural property up to 100%. This is considered one of the most valuable reliefs when gifting assets to the next generation. Please note, there may be other tax consequences which need to be considered. Gifts into trust We are also able to consider placing assets into certain types of trusts so that the growth of that particular asset will grow outside of the estate. Unlike gifts to individuals, gifts into trust are (with some exceptions) subject to an immediate charge to IHT if the gift to the trust exceeds your available NRB. If you do not survive seven years from making the gift, an additional 20% will become payable. As Ivar Sala notes ‘Often the best approach is doing a bit of everything. Estate planning is a complex area and there is a wide range of solutions for clients in different circumstances. However, if this is left too late, then the options start reducing, for example, as health starts to deteriorate.’ This overview of IHT on lifetime giving has dealt only with the possible IHT reliefs available. You should be aware that making gifts may have consequences relating to other taxes such as Capital Gains Tax, Stamp Duty Land Tax, Income Tax etc. Therefore, tax advice should be sought before making any gifts. There are many legalities and tax rules which need to be abided by to ensure this works correctly for you and in the manner which you would like.
There are no limits to the gifts out of your income and this can be a very useful exemption for those with surplus income. Maintenance to the family Any gifts made for maintenance of a spouse, child or dependant relative are disregarded for IHT. It must also be noted that the maintenance of family ‘disregard’ is not restricted to income so payments of capital may also be disregarded. Again this exception is subject to the gifts ticking the right boxes.
Annual Exemption You have an exempt amount for IHT
purposes which is currently £3,000 and is an annual exemption available for lifetime gifts. It is applied in a strict time order against the gifts in a tax year and £3,000 is the total you may make for the entire tax year. You are able to carry forward unused allowance from the previous tax year but the rules require that the current year’s annual exempt amount must be used first. Small gifts - £250 This exemption is £250 per recipient per tax year. This cannot be used in conjunction with the £3,000 annual exemption mentioned above but there is no limit to the number of individual donees who can benefit. Gifts on marriage/civil partnership These are gifts made in consideration of marriage or registration of a civil partnership and therefore must be made on or before but never after the event. The exemption is limited, and the amount is dependent on the relationship that you have with the person who is getting married. For example, you can give away £5,000 if you’re a parent of either party to the marriage. Parents can therefore give up to £10,000 free of IHT on the occasion of their child’s marriage/civil partnership. Gifts to Civil Partner/Spouse A gift is generally exempt if it is between registered legal partners (spouses or civil partners). The exemption does not apply, however, if the giving spouse is domiciled in England and the recipient is domiciled in another jurisdiction.
arti.thakrar@haroldbenjamin.com
Connect with Arti
Connect with Ivar
Connect with Evelyn Partners
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Suzanne has over 30 years’ experience working as a specialist in the fine art world. Formerly head of departments at international fine art auctioneers Phillips, and more recently at Chiswick Auctions, Suzanne has developed an extensive knowledge of British and European artists from the 18th, 19th and early 20th centuries. She now works as an independent consultant for private and corporate clients . Suzanne is also a member of the specialist team on the BBC Antiques Roadshow. Suzanne, with a career spanning over three decades in the art world, could you outline the main considerations for newcomers interested in purchasing and potentially investing in art? Firstly, trust your own instincts; select art that you feel a personal connection to, something that will bring you pleasure and add to the aesthetic that you want to create in your living space. Secondly, establish a budget before embarking on your art- collecting journey – it's essential for guiding your purchases. Based on your budget you will find that there is a wide difference in price between original oil paintings, works on paper and prints. Interview with Suzanne Zack. Insights into fine art collecting and the art market
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Thirdly, attending art fairs, gallery exhibi- tions and auction previews is invaluable; they offer a panoramic view of various artists and styles, allowing you to refine your tastes within a relaxed setting. Fourthly, research is key. Once an artwork captures your attention, delve into the artist's background and market standing, especially if they are contemporary. You may be able to contact
the artist directly and look at their website and perhaps meet them.
Your expertise in the fine art sector is highly regarded. Could you share a bit about your professional background and its influence on your current advisory role? Of course. My academic journey began with a BA Hons in The History of Fine & Decorative Arts from Leeds University. This paved the way to my initial role at Phillips Fine Art Auctioneers in New Bond Street, where I was appointed Head of the Watercolours, Drawings and Portrait Miniatures Departments. Being Head of Sale for these departments brought a wide range of responsibilities, including sourcing, researching, valuing, and cataloguing all works. Transitioning beyond Phillips, I continued to evolve within the art industry, applying my accumulated knowledge and expertise in various capacities. This
"...unless you have a huge budget and can afford to buy works by the great masters you should buy only what you really like."
period was marked by notable discoveries, including uncovering
forgotten works by eminent artists such as John Constable, during my work with other auction houses. The excitement of finding lost or forgotten treasures is the greatest thrill of my work. I love the sto- ries that connect the artwork to the past and tracing the provenance of a piece as far back as the artist who painted it is the highlight of the researching journey. My involvement with the BBC's Antiques Roadshow as a pictures expert over the past six years has further enriched my ex- perience. I have had the privilege of assessing myriad artworks, using my
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evaluative skills and deepening my appreciation for a broad range of fine art. Meeting the owners and hearing their stories of how they acquired the works continues to capture the imagination of the public and I always enjoy hearing how much these works mean to their owners. This, combined with my auction house background, forms the cornerstone of my current consultancy, where I guide clients through the intricacies of collecting and valuing fine art, ensuring they find pieces that resonate personally and will continue to be appreciated. For our clients considering the venture into art collecting, what initial steps would you recommend? Beginning your art collecting journey can be as exciting as it is daunting. As mentioned before, I advocate starting by visiting art fairs and auction previews, but also fine art graduate shows, public gallery exhibitions and commercial galleries. This will help to educate your eye as you will see a diverse array of artworks available. These venues are ideal for discovering what truly appeals to your taste. It is also very helpful to speak to experts such as dealers and auction house specialists who can guide you and inform you in more detail to complement your own research and gain deeper insights into the artists’ work. Embrace your personal taste and follow your instincts as you know what you like.
and, when possible, view the artwork in person prior to making a bid. While the initial cost may be attractive, be mindful of the additional expenses associated with bringing an artwork to gallery-ready condition.
What advice would you give clients who want to buy art an investment?
I would always say that unless you have a huge budget and can afford to buy works by the great masters, you should buy only what you really like. It is very hard to predict trends in the art market and know what will appreciate down the line. This is especially true with contemporary art. It can take a long time for an artist to become established and for their work to gain a following in the secondary market, i.e. at auction. You may even find that if you buy a contemporary piece from a gallery it will be worth far less if you try to sell it at auction. Buying a piece of historical art is often less unpredictable, but make sure it is in good condition, with good provenance, as there are fakes on the market. Should our clients desire expert guidance or have specific queries regarding their art collections, how might they contact you? I am readily available to assist with any queries related to fine art valuations covering probate, insurance, and current market prices. I can also assist with general collection management including curation, conservation, framing as well as bidding at auction. My aim is to de- mystify the art world for my clients, helping them to build a collection that resonates on a personal level while considering investment
For enthusiasts of period art, what guidance can you offer to aid their exploration and acquisition?
potential. For those seeking advice or valuation services, I can be reached at
Delving into period art requires a discerning eye and a passion for history. Buying from reputable dealers, although sometimes more expensive than auction, gives you the benefit of their expert eye, having vetted and in many cases conserved and framed artworks. Keep an eye on the auction market, as it frequently presents opportunities to acquire period pieces at reasonable prices. Online auction platforms like The Saleroom and Invaluable provide access to most auctions across the UK and the world. It is crucial to request detailed condition reports
info@suzannezack.com. I provide informed and nuanced advice tailored to each client's unique needs and aspirations. Above all, I want to help my clients enjoy the process and be open to discovering a whole new world of art appreciation.
info@suzannezack.com
Connect with Suzanne
www.suzannezack.com
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A comparitive analysis Exploring es planning pra across jurisd
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state actices dictions
BHAVINI KALARIA Partner, Dispute Resolution
SAMEER TAPIA Founder & Senior Partner ALMT Legal Advocates & Solicitors DAVID GATHERU Advocate Murugu Rigoro & Co Advocates
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Kenya, on the other hand, has a unique approach to will creation, as David Gatheru explains: ’While testators must be adults of sound mind, Kenya offers flexibility in form, allowing oral or written wills.’ He further adds, ‘However, oral wills must adhere to strict conditions, and written wills must be signed in the presence of witnesses. This approach accommodates cultural practices while ensuring the testator's freedom and capacity to execute the will.’ Coercion, undue influence, or mental impairment can render a will invalid in all three jurisdictions, emphasising the importance of the testator's freedom and capacity.
Estate planning is a fundamental aspect of legacy preservation, ensuring that individuals' assets are distributed according to their wishes after death. However, the legal and cultural landscapes shaping estate planning practices vary across jurisdictions. In this article we discuss the nuances of estate planning in England & Wales, India, and Kenya, highlighting differences, commonalities, and the expertise of legal professionals in each jurisdiction. We are thankful to Sameer Tapia (Founder & Senior Partner of Mumbai-based ALMT Legal Advocates & Solicitors) and to our colleague David Gatheru (from international law firm Murugu Rigoro & Co Advocates, based in Nairobi, Kenya) for their expertise.
Exploring Key Features of Inheritance Laws
Inheritance laws vary significantly across jurisdictions, shaping wealth distribution and tax obligations. In the UK, inheritance tax is a significant consideration, triggered when the estate surpasses a specific threshold. Various exemptions and reliefs mitigate the tax burden, emphasizing the balance between tax revenue and familial wealth preservation. On the other hand, India's inheritance laws reflect the religious and cultural diversity in that country. Different religious communities are governed by specific laws, such as the Hindu Succession Act of 1956, Muslim Personal Law, and Indian Succession Act of 1925. Sameer Tapia elaborates, ‘These laws accommo - date and respect the religious customs and traditions of various communities, ensuring that inheritance matters are handled in accordance with their beliefs. For instance, the law accommodates the practice of the Khasi community in Meghalaya whereby inheritance passes through daughters for ancestral property.’
Understanding the Legal Requirements of Creating a Will
In England & Wales, creating a valid will involves stringent legal requirements to ensure authenticity and validity. Testators must be at least 18 years old, of sound mind, and adhere to specific formalities, including writing the will, signing it in the presence of witnesses, and having witnesses sign in the presence of the testator. This process mitigates the risk of disputes among beneficiaries and safeguards the testator's intentions. The requirement that the testator is of sound mind is also present in the Indian context. Sameer Tapia of ALMT Legal explained the legal framework outlined in Section 63 of the Indian Succession Act of 1925. He states, ‘the testator must be of sound mind and at least 18 years old, with the will written, signed, and witnessed to authenticate the document and prevent fraud or coercion.’
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"Tax implications significantly impact estate planning decisions, with each jurisdiction adopting unique tax regimes."
In Kenya, recent amendments to inheritance laws aim to promote fairness, reflecting broader efforts to address gender disparities. The Law of Succession (Amendment) Act 2021 expanded inheritance rights to spouses and children, regardless of their dependency on the deceased. Notably, former spouses, stepchildren, and distant dependents no longer possess the right to inherit under the current legislation. Moreover, specific exemptions from estate duty exist, such as the exemption of the first KSh 2,000,000 of all assets in the estate if the deceased was married, along with exemptions for minors inheriting property. These provisions aim to promote clarity and fairness in inheritance matters, aligning with broader efforts to address gender disparities and ensure equitable distribution of wealth within society.
Influence of Cultural and Familial Norms
Cultural and familial norms play a pivotal role in shaping estate planning decisions, emphasizing the importance of preserving heritage and providing for family members in many places. In England & Wales, individuals prioritise passing down family heirlooms and properties in adherence to tradition, reflecting deeply ingrained cultural values. Similarly, India's diverse religious landscape influences estate planning practices, with customs and traditions guiding wealth distribution and asset management strategies. A key example of this is the Hindu Undivided Family (HUF) concept which underscores the collective ownership and protection of family assets among some Hindus, with tax planning opportunities provided through the recognition of HUFs as separate legal entities. The role of the karta (head of a HUF) in managing family assets emphasizes the significance of familial hierarchy and tradition in estate planning. Cultural and religious norms not only inform legal frameworks but also guide practical aspects of wealth transfer and inheritance, highlighting the intricate interplay between culture and law. Likewise, in Kenya, in some instances, customary laws and practices can shape inheritance patterns, with communal ownership of property prevalent in certain cultures. As David Gethura points out, recent legal reforms have nevertheless aimed to promote inclusivity and fairness, deviating from inheritance patterns which might favour male heirs.
Understanding Key Tax Considerations
Tax implications significantly impact estate planning decisions, with each jurisdiction adopting unique tax regimes. In the UK, inheritance tax and capital gains tax are key considerations, with various allowances and exemptions available to mitigate tax liabilities. David Gatheru, on Kenya's tax considerations, highlights the application of capital gains taxes in this area: ‘Capital gains tax on inherited property now reflects changes in taxation laws.’ He adds, ‘There are, however, exemptions for certain assets and contributions to registered pension schemes that acknowledge cultural values placed on family welfare and financial security.’ By contrast, as Sameer Tapia explains, India does not impose any inheritance or capital gains taxes. There are other nominal costs and considerations associated with inheriting or passing on assets, and stamp duty is payable on the receipt of inherited property, depending on the type and value of the asset.
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involvement and consultation with elders sometimes influencing decision-making.
Common Estate Planning tools
In England & Wales, estate planning is anchored by a trio of essential tools: wills, trusts, and lasting powers of attorney. Across the Indian landscape, estate planning is governed by specific laws such as the Indian Trusts Act of 1882. Trusts provide a structured approach to preserving and transferring wealth across generations. Whether private or public, trusts offer a means for high-net-worth families to safeguard their assets and cater to the needs of beneficiaries, ensuring a seamless transition of wealth aligned with familial aspirations. In Kenyan estate planning, wills again play a pivotal role in expressing individual wishes regarding asset distribution, while trusts, including traditional communal land tenure arrangements, offer avenues for preserving familial wealth and promoting communal support. There are overlaps in the estate planning tools employed across these jurisdictions. Wills stand as a universal means for expressing testamentary wishes, and trusts emerge as a common thread, offering versatility and securing familial legacies.
Exploring Probate and Estate Administration
Probate and estate administration processes ensure the orderly distribution of assets, but procedures vary across jurisdictions. In England & Wales, obtaining a Grant of Probate or Letters of Administration involves several steps, accommodating complexities such as contested wills. This is not unlike the process in India, Mumbai, where the estate administration process follows a distinct set of procedures. As Sameer Tapia explains, ‘Probate, which authenticates the deceased's will, is obtained through a testamentary petition filed in court.’ This is because succession certificates are essential for inheriting movable properties. Typically, there are a number of challenges at each stage. In Kenya, the estate administration process is also initiated by surviving dependants filing a petition in court by to obtain letters of administration. Publication in the Kenya Gazette notifies the public, allowing objections within a specified period. Once granted, the administrator gains authority to manage and distribute assets, subject to court confirmation. The process aims to blend legal requirements with cultural sensitivities, with community
Amending your Will
Individuals in England & Wales can update or amend their wills by drafting a new will or making a codicil (a legal document used to make minor changes to an existing will). However, it's crucial to ensure that any updates comply with legal requirements to avoid potential challenges to the validity of the will. Limitations may arise if the testator lacks testamentary capacity or if there are suspicions of undue influence or coercion. The same type of process is required under the Indian Succession Act of 1925, whereby individuals have the option to update or amend their wills during their lifetime. This can be done by creating a new will or a codicil. To ensure validity, the new will or
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addressing conflicts of law, and ensuring compliance with tax obligations in each jurisdiction. Currency exchange rates, and other barriers can further complicate cross-border estate planning. David Gethura advises that ‘seeking guidance from professionals familiar with both Kenyan and international laws is essential for managing these complexities and ensuring the efficient transfer and administration of assets across borders.’ Overall, while the specific challenges may vary depending on the jurisdictions involved, individuals engaging in cross-border estate planning must carefully consider legal, tax, and regulatory requirements in each jurisdiction to effectively manage their assets and ensure their wishes are carried out according to their estate plans.
codicil must be executed in the same manner as the original will, with proper signatures and witness attestations. Expressly revoking all previous wills and codicils in the new document helps avoid confusion and ensures clarity regarding the testator's intentions. While registration of the new will or codicil is not mandatory, it is advisable to do so to strengthen its legal standing and authenticity. The flexibility of updating or amending wills is also afforded in Kenya and provides individuals with the opportunity to adapt their estate plans to changing circumstances and evolving cultural dynamics. This ensures that estate planning remains responsive to familial needs, allowing for the preservation of cultural heritage and values across generations.
Conclusion
Challenges in Cross-Border Estate Planning
Despite differences in legal frameworks and cultural practices, estate planning across England & Wales, India, and Kenya converges on common principles of preserving wealth, ensuring continuity, and honouring familial legacies. Whether through wills, trusts, or other mechanisms, individuals strive to safeguard assets and provide for future generations, transcending geographical boundaries and cultural divides. In the ever-evolving landscape of estate planning, legal professionals play a crucial role in navigating complexities, safeguarding interests, and upholding individual intentions. By embracing expertise, understanding nuances, and fostering collaboration, individuals can navigate cross-border estate planning challenges with confidence, ensuring their legacies endure for generations to come.
Individuals with assets in multiple jurisdictions face specific challenges, including navigating different legal systems, tax regimes, and inheritance laws. In England & Wales, India, and Kenya, complexities arise in determining applicable laws, coordinating estate administration, and addressing tax implications. Collaboration between legal professionals ensures effective cross-border estate plan- ning strategies tailored to individual needs and circumstances. Specifically, individuals with assets in both India and other jurisdictions face challenges related to property transfer taxes, registration fees, and compliance with foreign exchange regulations, especially for NRIs and OCIs. Creating separate wills for assets in different countries can help align estate planning strategies with each jurisdiction's legal and tax frameworks. Seeking expert legal and financial advice is crucial to navigating these complexities and optimising wealth transfer across borders. Again, in Kenya, individuals with assets in multiple jurisdictions encounter challenges related to differences in inheritance laws, tax regulations, and legal procedures. This includes navigating diverse legal systems,
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In this podcast:
From the motivations behind creating wills and leaving legacies to the significance of heirlooms and family history via a discussion of real-life stories, listeners will get to know more about why people make a will, why it is important and what things to consider when doing so.
We go behind the 'why' of wills. Estate planning, often regarded as a mundane task, holds the key to preserving our legacies, honouring our loved ones' wishes, and fostering harmony among family members. But what happens when good intentions go awry? How do family disputes over wills,
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legacies, and heirlooms shape our understanding of estate planning?
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We discuss this and more alongside a panel of seasoned experts - Jonathan Dorman, head of the Private Client team at Harold Benjamin Solicitors and Legal Directors Geoff Dennis, and Sarju Kotecha.
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Probate Pitfalls Lessons learned from real life cases
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Our clients continued to operate and manage the business, sharing the income and profits equally between themselves and their sister. However, more than a decade later, their sister asserted minority shareholder rights alleging that she had been improperly excluded from management of the company, that our clients had preferred their own interests above hers and the company which lead to a lengthy and bitter legal battle. A long running and unpleasant dispute involving several sets of proceedings in the High Court followed. The case was eventually settled at mediation with an agreement to divide various assets between the siblings. This dispute permanently damaged the familial relationship between the siblings. Avoiding the Dispute: A number of opportunities that could have prevented this dispute, were missed. Firstly, a dispute might have been avoided if the original will recognised the differing interests and needs of the siblings and reflected these differences. After the father passed away, a deed of variation could have been entered into by the siblings to adjust the distribution of assets within the estate (as the mediation eventually did). Lastly, formal agreements regarding management responsibilities and governance of the company could have been established to avoid future
BY SARJU KOTECHA Solicitor and Legal Director Dispute Resolution, International
Probate disputes arise from a variety of factors, ranging from inadequate estate planning to familial conflicts and misunderstandings. These disputes can cause significant emotional strain and financial burden on all parties involved. In this article, we will discuss several real-life probate cases, analysing the circumstances that led to the dis- putes and discussing strategies that could potentially have prevented them.
Example 1: Lack of Succession Planning in a Family Business
We acted for two brothers in a dispute with their sister arising after the death of their fa- ther. At the centre of the dispute was a family business, started by their father, and which, by the time of his death was valued in the tens of millions of pounds. The business operated via a limited company of which the father was the sole shareholder during his lifetime. Our clients joined their father in the business at a young age and became responsible for management in their father’s later years. As employees, they had no shares in the company. Further, they were not appointed as directors. Their sister moved abroad after marriage and had no involvement in the business. In his will, the father left everything equally to all the three siblings.
conflicts. Planning for succession among the next generation may have also pre-emptively addressed potential disputes.
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Example 2: Inappropriate Equality Among Beneficiaries
Clear provisions addressing the use and distribution of specific assets, such as the family home, can prevent misunderstandings and resentment among heirs. In this case, a dispute could have been avoided if if a right of residency was included, with an alternative distribution of the estate taking this into account. After the death of the mother, formal agreements between the brothers could have resolved the matters earlier. Alternatively, dealing with administration of the estate as opposed to delaying might also have avoided the dispute "Estate planning should consider the emotional attachment and practical needs of beneficiaries to avoid conflicts."
In another case, two brothers found themselves at odds over the distribution of their mother’s estate, which had been left to them equally. Our client, a man in his late sixties, had lived with his mother his entire adult life in a house owned by his mother. His brother had married and moved out in is early twenties. The mother’s will left her entire estate equally to her two sons and appointed them both as joint executors. The main asset of the estate was the house in which our client continued to reside. When the mother passed away, it was informally agreed between the brothers that the house was our client’s home and that he ought to be able to continue to live there. No steps were taken to administer the estate. Despite this initial agreement, some 12 years after their mothers’ demise, an allegation was made against our client that he had failed in his duty to administer the estate, sell the property and divide the sale proceeds appropriately. It was also claimed that our client had abused his position as executor with the benefit of 12 years of rent-free occupation, which he should now repay. Court proceedings were threatened, and a mediation took place. Settlement was achieved whereby our client agreed to buy out his brother’s share of the estate allowing him to continue to reside in the property, whilst his brother realised his inheritance. Avoiding the Dispute: Estate planning should consider the emotional attachment and practical needs of beneficiaries to avoid conflicts.
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a settlement was reached, leading to an agreement to the sale of the property and division of the proceeds. Avoiding the Dispute: In any joint ownership arrangement, consideration should have been given to outlining rights to reside and conditions for a potential sale through formal documentation. For instance, what would happen if the son passed away, leaving his wife (our client’s daughter- in-law) as a joint owner? Additionally, any formal agreement could have accounted for situations where our client might need to access her share of the property for funding, such as covering care costs.
"In any joint owership arrangement, consideration should be givento outlining rights to reside and conditions for a potential sale through formal documentation."
Example 3: Joint Ownership and Lack of Formal Agreements
We acted for an elderly, Sikh lady in her mid-80’s of Indian descent. Our client and her husband purchased a large property in 1977. They had two sons and one daughter. Eventually, the younger son and daughter got married and moved out. The eldest (as well as his wife and children) continued to live with our client and her husband for many years. In 2008 there was a discussion about succession with a view to avoid the sort of dispute that arose in the example above. Our client and her husband decided to add their eldest son and his wife to the title of the house, meaning that the property was jointly held with them in their names. In 2012 our client’s husband passed away. In 2019, a dispute arose when our client's eldest son insisted on selling the property, while she wished to remain. Despite living in the home for 40 years, our client's son threatened legal action to force a sale, disregarding her need for care as an elderly individual. This conflict caused a complete breakdown in the familial relationship, compelling our client to move in with her daughter. Eventually,
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Avoiding the Dispute: Despite professional advice during the drafting of the will, the deceased's decision to limit provision for his spouse and entrust control to someone with whom "Probate disputes underscore the importance of thorough estate planning, effective communication and consideration of the family dynamics."
Example 4: Poor Choice of Executors and Inadequate Provision
We acted for a minor child of the deceased in a dispute over her father’s estate. The deceased had adult children from his first marriage and was a partner in a busi - ness. He made a will appointing his sister as executor and trustee together with his business partner. The bulk of his estate was left to our client with only a limited provision for the deceased’s current wife. No provision was made for the adult children from the previous marriage despite obvious financial needs, and one adult child suffering from a disability. The wife and daughter had never got along well and there was a great deal of animosity between them.. Claims were made for a reasonable financial provision by the wife and the adult children from the first marriage under the Inheritance (Provision for Family & Dependants) Act 1975. There were allegations that the sister had breached her fiduciary duties in dealing with the estate and the business partner had done likewise, preferring his own business interests over those of the beneficiaries. Multiple sets of Court proceedings were started by various parties which resulted in legal costs that significantly depleted the estate. Matters eventually were resolved over several mediations in reaching a settlement that made a greater provision for the spouse and a provision for each of the adult children. The bulk of the estate remained with our client but subject to a trust with professional trustees appointed (accountants) to administer the trust.
his wife had a strained relationship inevitably led to disputes. Failure to
acknowledge the intertwined interests of the minor child and her mother was also a critical oversight. The complete exclusion of adult children with financial needs and disabilities posed significant risks, especially given the sizable estate. Considering the estate's complexity and the presence of a minor beneficiary, establishing a trust with professional trustees from the outset could have mitigated potential disputes and ensured efficient estate administration.
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