WHAT HAPPENS TO YOUR WEALTH WHEN YOU ARE GONE?

SOFT FINANCE

Synthesising views and insights from experts, Ayo Arowolo writes that building wealth is not complete unless it accommodates the mechanisms for making it outlast the wealth creator.

Fredrick Rotimi Alade (FRA) Williams and Ganiyu Oyesola Fawehinmi, both of blessed memory, could be described as legal behemoths in their lifetimes. Back then, whenever either of them stepped into any courtroom in any part of the country, their domineering, and larger-than-life personalities, ensured that everyone paid attention. Undoubtedly, both men made significant impacts in their respective areas of legal practice.
Fawehinmi was a fearless human rights fighter who devoted his entire legal career and a large portion of his resources to fighting the causes of the common man. FRA Williams, nicknamed Timi the Law, was described as a man of monumental stature, both in physique and in his accomplishments as a legal practitioner. It was said that when FRA, the first lawyer to be appointed a Senior Advocate of Nigeria (SAN), stepped into a court to argue a case, he could invent a complex network of robust citations to back his defence, most of which were usually incontrovertible.

Interestingly too, both personalities were men of immense means who amassed enormous personal wealth while their respective careers lasted. On his part, the late Fawehinmi acquired a large chunk of his wealth from the proceeds of his extensive law publications. In the end, FRA’s estate was put at roughly $3 million, while that of Fawehinmi was put at about $1.5 million.

Williams died in 2005 at the age of 84. Fawehinmi passed on in September 2009 at the age of 71.

THEIR ESTATES AFTER DEATH

Although both men enjoyed thriving legal practices and were decidedly wealthy individuals at the time they passed on to greater glory, a Google search today on both names would produce wildly different results. A search on the name FRA Williams would astound the curious one. Strange items such as, “War lingers on in FRA Williams’ family;” “The Billions Chief FRA Williams left;” “Children at war;” “The Williams Sons Fight over Fredrick N26bn Estate”, “The Williams Family Feud;” “Till Death Do Us Part;” and “The FRA Williams Battle Lingers,” among others.

Conversely, a simple search on the late Gani Fawehinmi would produce copious entries on his illustrious legal and human rights career. No controversy has trailed the estate of the late human rights activist and legal luminary since he passed through a transition about 13 years ago.

How did the late Fawehinmi manage to isolate his estate from controversies while that of FRA Williams continues to swim in the waters of disputations?

Experts, versed in post-humous estate matters, who spoke with me put the matter in perspective. They explained that the main distinguishing factor between the estates of the two erstwhile legal luminaries was the choice of legal arrangement put in place before each of them passed on.

The major differentiator, according to them, was that while the late FRA Williams adopted the use of a Will for his estate, the late Fawehinmi appointed a trustee to manage his estate, while he was alive, which persisted even in death.

Prince Yemisi Shyllon, a legal practitioner and philanthropist explained that “the reason Rotimi Williams’ Will did not work was that he depended a lot on his first son, Ladi Williams. When he wrote his Will, he made Ladi Williams more or less the sole executor, and Ladi Williams ran the estate completely independent of his brothers.”

On the contrary, Fawehinmi appointed First Trustees as the sole executor and trustee of his estate and this was read on Thursday, 22 April 2010 in the presence of his widows, children and relatives. Besides making provisions for his widows, children and relatives, Fawehinmi also left part of his vast estate for the benefit of the poor. (Punch, Friday, April 23, 2010)

BETWEEN A WILL AND A LIVING TRUST

Prince Shyllon explained that “both the Living Trust and a Will are legal documents created to guide how you want your estate to be managed. The Will comes into effect when you are dead while the Living Trust is operational when you are alive and also goes into effect when you are dead.

“Living Trust means that ownership of an asset is put into a Living Trust via declarations of trust and with regulations and guidelines, documented in the trust deed, which allows you to control your assets when you are alive but you cannot control them when you are dead.”

“And that is the major difference between a Living Trust and a Will,” he added. “It is called living because once you are alive; you can continue to do whatever you like with your assets while you have declared who your trustee is. You transfer the ownership and the management to your trustee. And when you are dead, the trustee takes over the management and runs it according to the guidelines you mutually agreed on when you were alive. The company that now manages it is called a trustee.”

MAJOR ADVANTAGES

Experts on estates explained that Living Trusts do not go to the probate before being distributed to beneficiaries. They said probate can be very expensive, and public and everything is done in the open but a Living Trust does not have to go through probate.

The trustees can distribute to the beneficiaries while avoiding excessive taxes and the lengthy process of probate.

In the Living Trust, the grantee names the trustee who holds the assets on behalf of the grantor, according to the rules and direction of the grantor for the benefit of the trust beneficiaries.

TYPES OF LIVING TRUSTS

Shyllon explained further: “There is the revocable Living Trust and irrevocable Living Trust. Remember I said the ownership of the assets remains with the trustee, but you can name yourself the trustee in a Living Trust so that you can continue to use your assets as you like until you are dead.

“In a revocable trust, you can cancel, you can change, you can alter the rules and even the content of the trust any time before death. You can add new beneficiaries, remove old ones, add more assets, change the Trust guidelines, and sell the Trust assets while you are alive. But after death, the trust now becomes irrevocable.

“With an irrevocable trust, you cannot do any of the things we have highlighted above. It will go through probate. That is why many people avoid irrevocable trust.”

A major advantage of irrevocable trust is that you can avoid some estate tax. Once it is irrevocable, the assets are removed from some tax bounds, and it is for those whose estates are above the federal tax exemptions.

“Another advantage of a Living Trust is that you can add the name of your spouse; so you can have a joint Living Trust. But please note this, the account has to be registered in the name of both spouses, not just making the other a signatory.

“Otherwise, she will go through probate, and when the husband is dead, for instance, the wife may not be able to take over the assets. So, the account has to be joint ownership from the beginning,” he said.

A top official in a trustee company who preferred to be anonymous gave an instance she described as the pathetic story of a man who died on account of his inability to pay a N10 million medical bill though he had built a portfolio of stock that stood at N62 million standing in his Living Trust. The wife could not withdraw money because she was only a signatory to the trust instead of being a joint trustee. She said this is a legal mistake many people make, which plunges their loved ones into pain and sorrow after death.

“It should be noted, however, that a Living Trust requires ongoing work for management and maintenance to be effective. Any new property must be in the name of the trust, and no longer in your name, otherwise, the assets will go through probate and as you have said it involves a lot of expenditure.

“It is also possible to back up your Living Trust with a Will, but in that Will, you will empower your trustee to manage your assets when you are dead along with the guidelines you have put in place,” she said.

FURTHER INSIGHTS

A relationship manager in a Lagos-based trustee company said, “a lot of Nigerians know more about a Will than a Trust. Only about 10 per cent of Nigerians ever knows anything about a Trust.”

According to him, a Trust is ordinarily set up by three parties, including the beneficiaries who will enjoy the Trust, the trustee to oversee whatever you want to do in your lifetime and the settlor.

“The reason this is less problematic is that the trustee actually continues what the settlor had been doing in his lifetime. No surprises. Also, more importantly, the beneficiaries are also there from the onset. In the case of a bank account of a testator, when he dies, they will request for certain letter of administration, but under a Living Trust, there is no need for that because the trustee would have become a joint signatory to the account in your lifetime, so everything is seamless. It makes life simpler and more secure for your beneficiaries. They don’t have to undergo any stress.

“In the case of a bank account, you are usually requested to fill in the next of kin. And when he is dead, the bank may not contact the next of kin, so the account may still remain in the bank. But in the case of a Living Trust, you don’t fill out a next-of-kin form, you indicate the beneficiaries. The beneficiaries have the right to lay a claim to whatever you might have put aside for them.”

He further explained, “Living Trust is being guided by the deed of trust, which is a document prepared by the trustee in your own interest for your kind review until you are satisfied with the content and how it will be run in your lifetime. It is the same way it will be run even when you are no longer around. This prevents members of the families who are not among the beneficiaries from showing up to take things that do not belong to them. You have rendered them powerless.

“A Will could be contestable because a lawyer could argue, for instance, that at the time the testator was writing the Will, he or she was under duress, and that can delay the administration of the Will for some time. Trust is not contestable because it was something you were doing while you were alive. So, your trustee just simply continues the operation of it. Your investment, rental income, stocks and so on also falls under the trusteeship

According to him, “the deed of trust enables you to give the trustee the responsibility to act in your capacity in your lifetime and when you are no longer around. It consists of your assets, liabilities and every other thing you want the trustee to do. This attracts a set-up fee and an annual administrative fee. You can do a supplemental Trust Deed. You can adjust your deed as many times as you wish.

“Trusts are legal arrangements that protect assets and direct their use and disposition by their owners’ intentions while Wills take effect upon death, trusts may be used both during life and after the death of their creators.

“The big advantage of a Living Trust over a Will is that it streamlines the property transfer. After you’re gone, the assets in the Trust will be distributed to your heirs without the court’s involvement — which means no probate. Your loved ones will receive their inheritance faster and with less hassle.”

WHICH WAY TO GO?

Generally, in this part of the world, people do not fully understand the concept of a Will. For instance, in the Pentecostal folds, most pastors preach that writing a Will suggests that you are faithless. Shyllon suggests people should be practical and real. He said, “whether you like it or not, you will die one day, and if you did not take charge of your affairs while you are alive, you will throw your loved ones into pain and sorrow. I wrote my Will at the age of 32.” He counsels people to go for knowledge and specifically acquire financial intelligence.

QUOTE

“Whether you like it or not, you will die one day, and if you did not take charge of your affairs while you are alive, you will throw your loved ones into pain and sorrow. I wrote my Will at the age of 32.”

ME AND MY MONEY

YEMISI SHYLLON

CULTIVATE THE HABIT OF SAVING FOR INVESTMENT

While journeying through life and climbing corporate ladders, one can begin to build wealth by deploying one’s active income into multiple passive investments and, in so doing, progressively build wealth by regularly focusing on using one’s savings from active incomes into building passive incomes.

This habit is generally recommended to employees to build wealth through committed regular and consistent savings from their active incomes in their life employment journeys. This calls for setting aside and regularly adhering to some predetermined percentages of active employment incomes for regular savings into building wealth. I consistently decided to use 20 per cent of my active employment income to grow my wealth. This is different from the generally recommended percentage of 10 per cent of active incomes, and as contained in the “Richest Man in Babylon of George Clarkson, who planted this habit in me from 19 years of age.”

Bearing this in mind, wealth-builders must ensure that their spending is kept minimal and as practicable as possible by limiting their tastes, lifestyles and needs to only those things that are necessary. This is a very common habit among successful wealth-builders and the wealthy. A living legend of this habit is Warren Buffet. This 90-year-old very wealthy man is still in the same house he built in 1967, and drives himself in his old but refurbished car while continuing to enjoy and sustain his wealth, having committed 99 per cent of his wealth to charity.