HB - The Legal Corner Magazine #Issue 7

"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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