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Friday letters are usually dedicated to taking questions from our community. Do you have a question for us?
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Question
I am retired with significant assets, and I need guidance on the right steps to take to ensure my wealth is passed on to my children without unnecessary complications. Can you help?
Answer
I received your question about ensuring a smooth transfer of your assets to your heirs here in Nigeria, and I am as always, happy to help. And just before you think this is not for you, let’s correct the notion that talking about will and inheritance is for the wealthy alone.
Inheritances aren’t just for the rich. In fact, according to nerdwallet, only less than half of the total volume of transfers is expected to come from high-net-worth households. With proper planning, the end goal should be to stay consistently building your net worth which includes your investments and assets. This way, you make it possible to have something to transfer to your family. If this is something that interests you, then here are some steps you can take to avoid unnecessary complications:
1. Create a Comprehensive Estate Plan
Start by writing out all of your investments including all your assets and properties. Then outline how you want your assets to be distributed and who should manage your estate. If you think this could be overwhelming for you, you can choose to work with an experienced estate planning lawyer in Nigeria to ensure your plan is legally sound and compliant with local laws.
2. Write a Will
A will is a crucial document that specifies how you want your assets distributed after your death. Make sure it’s clear, detailed, and updated regularly to reflect any changes in your situation or wishes. Under Nigerian law, it’s important to have your will properly witnessed and signed to be valid. You might also want to consider lodging your will with the Probate Registry.
3. Set Up Trusts
It is a legal arrangement where the trustee holds and manages assets on behalf of the beneficiary. As the grantor, trusts can be a valuable tool in estate planning. They allow you to manage your assets during your lifetime and specify how they should be distributed after death. Trusts can also help minimise tax liabilities and avoid probate, which can be a lengthy and costly process in Nigeria.
4. Designate Beneficiaries
Ensure all your financial accounts, such as bank accounts, retirement accounts, and life insurance policies, have designated beneficiaries. This ensures these assets can be transferred directly to your heirs without going through probate. You can do this by completing the necessary forms with your bank or financial institution.
5. Plan for Taxes
Understand the tax implications of transferring your assets. Estate taxes can significantly reduce the value of what your heirs receive. If you are not familiar with the tax terrain, working with a tax advisor familiar with Nigerian tax laws can help you develop strategies to minimise these taxes.
6. Review and Update Your Plan Regularly
Life changes, and so should your estate plan. Make sure you consistently revise and update your plan regularly, especially after major life events in the family.
7. Secure Your Documents
Keep all your estate planning documents in a safe, secure location. Make sure your executor and trusted family member(s) know where to find them. You may also consider using a safe deposit box at a bank or a secure home safe.
8. Consider Digital Assets
Before we call it a day, don’t forget to include your digital assets, like important online accounts, social media profiles, and digital files, in your estate plan. Provide clear instructions on how these should be handled, including access details and management preferences.
9. Prioritise Financial Literacy
Never underestimate the need to educate both yourself and your children about money. Financial literacy is crucial for managing and preserving wealth across generations. Understanding your finances will help you manage your expenses and recognise potential financial decisions. However, it is not enough for you to have this knowledge alone especially if you want what you have spent your life building to be sustained and passed down to even more generations. Teach them the importance of saving, investing, and budgeting. Involve them in family financial discussions to help them understand how to manage money responsibly.
By taking these not-so-baby steps, you can ensure a smooth transfer of your assets to your heirs. At MoneyAfrica, we encourage individuals in different phases of life to take charge of their finances. If you have any questions or concerns about your investments or you would like to discuss your portfolio strategy further, join our community by clicking here.
See you soon!
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