ARM’s Guide to Estate Planning

What is Estate Planning?

The word Estate in Estate Planning refers not to real estate, but to the whole basket of financial assets an individual acquires during a lifetime.

Estate Planning is the entire process of accumulating and preserving those assets and then transferring them to a spouse, ex-spouses or children or other beneficiaries.

estate planning

You should think of your finances as a sequence of three phases:

  • The first phase is the accumulation of wealth by investing wisely and diversely.
  • The second is the preservation and consolidation of that wealth by tax and portfolio planning.
  • The third is the transfer of your assets to your family.

Estate Planning particularly refers to this last phase, that is distributing your assets before/after death with the maximum efficiency, least hassle and minimum tax.

What are its benefits?

  • The principal benefit of good Estate Planning is to make sure that the maximum possible proportion of your estate is passed on to your beneficiaries – those who inherit from you – by minimising both taxes and the involvement of probate courts.
  • Good Estate Planning also ensures that you designate guardians for minor children and plan for disability or incapacity to work.

What different types of Estate Planning are available?

The various Estate Planning tools include:

  • Wills (see our separate Advice section);
  • Trusts
  • Holding Companies
  • Various forms of property ownership
  • Gifting
  • Powers of attorney

Two of the tools listed above are discussed in further detail below. It should be noted that typically Estate Planning often hinges on Trusts.

What is a Trust?

The concept of trust is an ancient and ingenious one. The English Crusaders of the 12th and 13th centuries developed a trust law that enabled them to temporarily entrust their land to managers whilst they went abroad.

Today, a Trust is an arrangement whereby assets of the person who owns them are managed by another person / persons or organisation for the benefit of a recipient.

A Trust is created by a Settlor who entrusts some or all of his assets to a person/people of his choice called Trustees.The Trustees hold and manage the property for the benefit of one or more individuals (or organisations) specified by the Settlor who are known as the Beneficiaries. The Settlor can also be a beneficiary of a trust.

A simple way of summarising this is that Settlors give or transfer assets; Trustees manage and maximise those assets and Beneficiaries receive those assets.

The Trustees owe a financial and moral responsibility to the Beneficiaries and can indeed be held personally liable for any shortcomings in the Trust. The relationship between the Trustee and the Settlor/Beneficiary is a fiduciary one i.e. the trustees owe a duty of care to the Settlor/beneficiaries.

The Trust and Trustees are governed by the terms of the trust document, written as a legal deed by a lawyer on behalf of, and in consultation with, the Settlor.

What are the benefits of trusts?

  • Confidentiality; the trust assets are held in the name of the trustees. Therefore, the identities of the Settlor and beneficiaries are not public information.
  • Trusts protect personal assets against litigation, unfavourable government policies or those who might squander those assets.
  • It ensures the smooth transfer of assets from one generation to the next.
  • It minimises taxation when you have investments in more than one tax jurisdiction.

What is a Holding Company?

A Holding Company is a company registered for the purpose of holding all of ones assets such as real estate, shares and fixed income securities.

What are the benefits of a Holding Company?

  • By holding all your assets in a single Holding Company you can simplify your Estate Planning. This structure allows you to transfer all of your assets, by transferring the shares of the Holding Company, to your beneficiaries rather than having to transfer them individually.
  • A Holding Company enables you transfer your assets while still alive without going through probate. However, this route should not be taken without understanding the tax implications of owning a company.

Is Estate Planning for me?

Anyone and everyone can benefit from proper Estate Planning.

It is especially important for those that have children and for those that are at a mature phase of life.

How do I start?

ARM Trustees, a wholly owned subsidiary of ARM, can assist you in setting up your Estate Plan. For more information, contact an ARM Wealth Advisor about Estate Planning or buy online.

ARM’s Guide to Retirement Planning

 

What is Retirement Planning?

Retirement can be one of the happiest periods of our lives if we plan for it properly.

We are freed from the burdens of daily work; able to pursue hobbies and interests; to travel; to spend more time with our families and friends. That’s the ideal vision of what some term the “golden years”.

Yet this dream can prove elusive if we don’t plan properly. Far too many people end up living off meagre resources in retirement, trapped in the tension between finally having enough time and not having enough resources.

What are the benefits of Retirement Planning?

The earlier you plan for retirement, the more time your investments have to grow and out-pace inflation, thereby increasing your buying power and wealth in the future.

Inflation is the enemy of happy retirement and many people turn away from facing up to its withering effects. Unless you are really mathematically pin-sharp, you will almost certainly underestimate it’s effect.

For example, 20 years of 15% inflation per annum increases the cost of everything 16 times! What costs 1,000 today could easily cost you approximately 16,000 in retirement.

Suddenly that cosy little nest egg doesn’t look so ample!

The good news is that the longer you invest for your retirement the more compound growth increases the value of your money. Put simply, if you invest 1,000 for a year and earn 10% interest you turn it into 1,100. The next year your 10% interest earns more because it’s now 10% of 1,100 not 1,000. This “snowballing” effect gets bigger and better as time marches on.

What are the key aspects of Retirement Planning?

  • You need to work out at what age you are planning to retire.
  • You then need to work out how much your household expenditure will be in retirement as a percentage of your current household expenditure such as household bills, travel and medical care. Bear in mind that you will have less expenditure because your children will be independent and you may have paid off your loans such as mortgage etc.
  • You also then work out your likely income in retirement from your Retirement Savings Account (RSA) or Employer / Employee Savings/Pension scheme or other investments and assets.
  • You must then determine the effect of inflation on household costs to get a true picture of those costs at retirement age.
  • You compare those future costs with the likely returns on your assets before retirement and after retirement. The latter may be lower because when you retire you tend not to have investments that have high risk (and hence, high return).
  • You can then work out a target for the savings and investments required to meet your needs; determine what the shortfall is (after factoring in expected retirement benefits); and, work out an investment plan to meet the shortfall.

Is it for me?

The temptation is to think that Retirement Planning is for people who are middle-aged or over 40 years.

This assumption is wrong. If you start thinking about your retirement from the age of, say, 25, perhaps even before you marry or have children, the better your retirement will be. However, if you are starting later, you can still benefit from retirement planning, although the benefits are immense when you start early.

How do I start?

We have devised a Retirement Calculator that you can use right now to plan your retirement.

You can also contact an ARM Wealth or Pension Advisor to work with you to develop a plan of action.

ARM’s Guide to Estate Planning

What is Estate Planning?

The word Estate in Estate Planning refers not to real estate, but to the whole basket of financial assets an individual acquires during a lifetime.

Estate Planning is the entire process of accumulating and preserving those assets and then transferring them to a spouse, ex-spouses or children or other beneficiaries.

estate planning

You should think of your finances as a sequence of three phases:

  • The first phase is the accumulation of wealth by investing wisely and diversely.
  • The second is the preservation and consolidation of that wealth by tax and portfolio planning.
  • The third is the transfer of your assets to your family.

Estate Planning particularly refers to this last phase, that is distributing your assets before/after death with the maximum efficiency, least hassle and minimum tax.

What are its benefits?

  • The principal benefit of good Estate Planning is to make sure that the maximum possible proportion of your estate is passed on to your beneficiaries – those who inherit from you – by minimising both taxes and the involvement of probate courts.
  • Good Estate Planning also ensures that you designate guardians for minor children and plan for disability or incapacity to work.

What different types of Estate Planning are available?

The various Estate Planning tools include:

  • Wills (see our separate Advice section);
  • Trusts
  • Holding Companies
  • Various forms of property ownership
  • Gifting
  • Powers of attorney

Two of the tools listed above are discussed in further detail below. It should be noted that typically Estate Planning often hinges on Trusts.

What is a Trust?

The concept of trust is an ancient and ingenious one. The English Crusaders of the 12th and 13th centuries developed a trust law that enabled them to temporarily entrust their land to managers whilst they went abroad.

Today, a Trust is an arrangement whereby assets of the person who owns them are managed by another person / persons or organisation for the benefit of a recipient.

A Trust is created by a Settlor who entrusts some or all of his assets to a person/people of his choice called Trustees.The Trustees hold and manage the property for the benefit of one or more individuals (or organisations) specified by the Settlor who are known as the Beneficiaries. The Settlor can also be a beneficiary of a trust.

A simple way of summarising this is that Settlors give or transfer assets; Trustees manage and maximise those assets and Beneficiaries receive those assets.

The Trustees owe a financial and moral responsibility to the Beneficiaries and can indeed be held personally liable for any shortcomings in the Trust. The relationship between the Trustee and the Settlor/Beneficiary is a fiduciary one i.e. the trustees owe a duty of care to the Settlor/beneficiaries.

The Trust and Trustees are governed by the terms of the trust document, written as a legal deed by a lawyer on behalf of, and in consultation with, the Settlor.

What are the benefits of trusts?

  • Confidentiality; the trust assets are held in the name of the trustees. Therefore, the identities of the Settlor and beneficiaries are not public information.
  • Trusts protect personal assets against litigation, unfavourable government policies or those who might squander those assets.
  • It ensures the smooth transfer of assets from one generation to the next.
  • It minimises taxation when you have investments in more than one tax jurisdiction.

What is a Holding Company?

A Holding Company is a company registered for the purpose of holding all of ones assets such as real estate, shares and fixed income securities.

What are the benefits of a Holding Company?

  • By holding all your assets in a single Holding Company you can simplify your Estate Planning. This structure allows you to transfer all of your assets, by transferring the shares of the Holding Company, to your beneficiaries rather than having to transfer them individually.
  • A Holding Company enables you transfer your assets while still alive without going through probate. However, this route should not be taken without understanding the tax implications of owning a company.

Is Estate Planning for me?

Anyone and everyone can benefit from proper Estate Planning.

It is especially important for those that have children and for those that are at a mature phase of life.

How do I start?

ARM Trustees, a wholly owned subsidiary of ARM, can assist you in setting up your Estate Plan. For more information, contact an ARM Wealth Advisor about Estate Planning.

ARM’s Guide to Wills and Estate Planning

What are Wills?

A Will is a written and signed document, recording and specifying how a person wants his/her property and possessions distributed, and to whom, after his/her death.

Many people don’t make a Will. Often, its because as human beings we have psychological difficulty confronting our own mortality. Whilst this is understandable, it is a psychological barrier that we have to overcome in order to protect our own wishes and the future security of our families.

A second reason for not preparing a Will is a misperception that Wills are not for people like me. Wills are often considered to be only for the elderly or wealthy. This is not the case. Wills are fundamental to everyone.

Anybody aged 21 or over, of a sound mind, of whatever level of wealth can make a Will.

It is important to understand certain terms surrounding Wills:

  • To die testate means creating a Will before your death.
  • Dying without a Will is described in legal terms as dying intestate or an intestacy i.e. dying without a testament to your wishes.
  • Equally, if you make a Will but it does not deal clearly with all your property and assets, it is a partial intestacy.
  • A bequest or legacy is a gift of personal property made in your Will.
  • An executor is a person whom you choose and trust to administer your estate after you have died, in accordance with the wishes you have recorded in your Will.

In the situation of either total or partial intestacy, your possessions will be distributed after your death in accordance with a cumbersome and complicated set of rules prescribed under Nigerian law. This not only takes a long time, prolonging grief, but it also often leads to an unfair distribution of your worldly goods. This is particularly true if you have two or more surviving spouses or an estate too small in financial value to satisfy the needs of all your beneficiaries.

What are its benefits?

  • It ensures that your assets are distributed according to your wishes. There are many families warring in court because of the absence or incompleteness of a Will. This leads not only to terrible grief but also to the squandering of those assets you’ve worked hard all your life to build through large legal fees.
  • It protects your spouse, children, business and loved ones in specific ways.

Is it for me?

You should make a Will once you have either a spouse or children, at whatever age that occurs.

You should make a Will regardless of your level of wealth. Indeed those who have limited assets need to make a Will just as much as those who are better off in order to ensure that their assets are maximised for their beneficiaries.

What tips can ARM offer?

  • You might want to appoint an Executor who is not family or a close friend, but a professional person such as a lawyer, doctor or accountant whom you trust. They can be more objective and would bring skills to the administration of the estate.
  • You can appoint more than one Executor but don’t appoint too many, or appoint people who are likely to disagree out of vested interests, as it slows down the administration.
  • You can also appoint a Trust Company to act either on their own or in conjunction with relatives. Make sure you negotiate and specify their fees however.
  • A Will can appoint Guardians for minor children if there is no surviving spouse and can set out terms by which they will be educated and looked after.
  • If your estate includes a business, the Will can specify arrangements for that business after you die. Many businesses owned by one shareholder go to ruins after their death.
  • If you own property both in Nigeria and abroad it is often wise to draw up a separate Will for each country where assets are held. This helps to avoid the complications of different inheritance laws applying in different countries. For example where the land is held abroad, the laws of that country may override the laws of the country in which you are domiciled.
  • Once drawn up, the Will should be deposited with a bank, a professional advisor such as your lawyer, Corporate Trustees or at the Probate Registry.
  • The Will only becomes public after death and once it has been read and proved by the Executors.

How do I start?

List all your assets and think carefully about how you want to distribute them. ARM Trust Advisor can assist you to draw up your Will. For Estate Planning, please contact an ARM Wealth Advisor or buy here.