What do you want to be known for 100 years from today?

“Death smiles at all of us; only the brave smile back”

Are you prepared for life after death? The term “put your affairs in order” is often assigned to terminally ill patients whom Doctors have assessed have a predictably limited stay on earth (usually a matter of months or even weeks). But with diligent planning and intentionality, it is possible to smile back at death.  Estate planning “refers to the preparation of tasks that manage an individual's financial situation in the event of their incapacitation or death. This planning includes the bequest of assets to heirs and the settlement of estate taxes and debts, along with other considerations like the guardianship of minor children”. In this article, William Lutaaya covers the sensitive topic of estate planning.

Planning for the future involves more than just financial investments; it’s about securing your legacy and ensuring the well-being of your loved ones. Have you defined your success and legacy? Do you have a written will or trust? Is your marital status well-documented? Have you identified all your beneficiaries? Do you have an inventory of all your assets? Is your next of kin updated on all your records? These are crucial questions everyone, regardless of age, should ask themselves. Contemplating these issues does not make you morbid; it's a practical approach to the inevitable reality of death. Often, by the time we consider these questions—if we ever do—it is already too late.

As individuals, we all have a vision for our family and our estate. We know what we want to achieve, how we want to achieve it, and when. Unfortunately, this vision often dies with us if we fail to leave explicit instructions for those in charge after we're gone. The lack of clear guidance can lead to confusion and conflict among those left behind. Life is unpredictable, and we owe it to ourselves and our loved ones to ensure that they do not have to make difficult decisions that might go against our wishes. This is where proper planning becomes essential.

The Importance of Estate Planning

For those fortunate enough to have retirement benefits with pension schemes like NSSF, there is a framework under the survivor's benefit to ensure that one's benefits fall into the right hands after death. This benefit is usually paid to a beneficiary appointed according to the letter of administration. However, the challenge lies in the fact that these benefits are paid in a lump sum, and the Fund's role is limited to making the payment. How the funds are utilized depends on the family of the deceased member, which can sometimes lead to mismanagement and disregard for the deceased's intentions.

To address this gap, institutions such as the Fund need to consider how we can protect the interests of members even after they are gone. One potential solution is for the Fund to act as a trustee or partner with existing trust companies. By doing so, the Fund can help ensure that the benefits are managed according to the deceased member's wishes, providing a safeguard for their vision and legacy.

By proactively addressing these questions and making use of available instruments like wills, trusts, and partnerships with trust companies, we can secure our legacy and protect our loved ones. This planning ensures that our vision for our estate and family is honoured, and our loved ones are not left in a position of uncertainty and potential conflict.

Understanding a Trust Fund

A trust company is a legal entity that acts as a fiduciary, agent, or trustee on behalf of a person or business. Its primary purpose is to administer, manage, and eventually transfer assets to a designated beneficiary.

A trust is essentially a practical tool for securing a stable and well-planned future for your family. By setting up a trust, you're putting your assets—whether they're money, property, or family heirlooms—into a safe space where they can be managed according to your wishes, even after you're no longer around.

Imagine it like this: you’re crafting a detailed plan for a garden that you won't be able to tend yourself. You decide which plants go where, how often they should be watered, and what kind of care they need to thrive. Then, you entrust someone reliable—like a seasoned gardener—to look after this garden. In the case of a trust, the garden is your wealth and assets, the plan is your set of instructions on how these should be handled, and the gardener is the trustee, the person you appoint to follow your instructions.

This arrangement ensures that your assets are used in the best way to benefit your loved ones, whether that's ensuring that your children’s education is paid for, providing for a family member with special needs, or keeping a cherished family home within the family. Setting up a trust means you're not just leaving behind assets, but a legacy—a lasting foundation that helps your family thrive. This is a powerful way to provide for your loved ones and ensure your wishes are honoured, offering peace of mind that the future you envision for your family can become a reality.

Trusts are essential financial instruments used in estate planning to hold property, or other assets for another person. Creating a trust allows you to set specific terms for how your assets are gathered and distributed during your lifetime or beyond.

While trusts often have an individual assigned as the trustee, a trust company can also fulfil this role. A trust company does not own the assets it manages; instead, it assumes a legal obligation to take care of these assets on behalf of other parties. Trusts are managed for profit, typically generated from the interest on the assets they manage.

Trusts offer a variety of services, including:

• Wealth Management Services: This includes investment management and wealth preservation to ensure that a client's future generations have the necessary funds when needed.
• Financial Planning: Trust companies can build financial plans for their clients, often for additional fees, depending on the level of service required.
• Asset Management Services: These services include bill payment, check writing and other operational tasks.
• Brokerage Services: Trust companies offer a wide array of investment options for their clients.

Essentially, a trust as a corporate parent, carrying out your instructions and acting as a posthumous guardian for your assets and beneficiaries. By putting your assets in a trust, you ensure that your wishes are respected, and your assets are managed responsibly, providing peace of mind for you and security for your loved ones.

When planning your estate, you have two primary options: trusts and wills. While both have their merits, trusts offer several distinct advantages that often make them the better choice.

So, why Choose a Trust Over a Will?

Trusts are not limited by a specific net worth, making them accessible to many people. With the assistance of a trustee, you can oversee the day-to-day affairs of the trust until it is granted to the beneficiary. This means that even if you become incapacitated or pass away, your legacy remains intact and managed according to your intentions.

Legal processes involving wills can be expensive, time-consuming, and emotionally draining. Trusts, however, are generally more difficult to contest in court, reducing the likelihood of legal disputes. This ensures that your wishes are honoured without unnecessary complications.

One of the key advantages of a trust is privacy. The information in a trust is not available to the public, maintaining confidentiality and ensuring that only those who are supposed to access the information can do so. This protects your wishes and the privacy of your beneficiaries.

Trusts allow for a high level of detail and specificity. You can outline exact terms and conditions for how your assets should be managed and distributed, providing clear guidance that is difficult to misinterpret. This level of detail often gives trusts an advantage over wills.

Trust funds are highly flexible and customizable. They can be tailored to meet your specific needs and circumstances, ensuring that your assets are distributed precisely according to your wishes. This flexibility helps avoid legal back-and-forth and ensures that your intentions are carried out smoothly.

Trusts play a crucial role in society. They are used by families for estate planning, by public charities for managing funds, and even for commercial purposes. Trusts serve as a vital social tool, ensuring that assets are managed and disbursed in a way that aligns with the creator’s intentions.

The Legal Framework of Trusts in Uganda

In Uganda, the creation, management, and administration of trusts are governed by various pieces of legislation, including the Trustees Act (Cap 164), Trustees (Incorporation) Act (Cap 165), Public Trustees Act (Cap 162), Trust Corporation (Probate and Administration Act, Cap 163), Succession Act, and Mental Health Act. Trusts in Uganda can be either public (charitable) or private, and most of the laws related to trusts are based on common law and principles of equity, as noted by the Uganda Law Reform Commission.

The existing legal framework governing trusts in Uganda faces several challenges. The laws related to trusts are dispersed across various pieces of legislation, creating confusion, especially for individuals without a legal background. Many people have only a rudimentary understanding of their rights and duties under a trust, complicating implementation. Additionally, the current framework is not responsive to global trends in trust business management. With globalization, there is an increasing need for laws that facilitate cross-border business activities.

Furthermore, the rules governing the creation, administration, and management of trusts, as well as the appointment of trustees, lack clarity and certainty. This is largely due to the scattered nature of the legislation. To address these issues, it is necessary to simplify and codify the general principles of trust law, harmonize the various pieces of legislation to provide more certainty and clarity, and ensure the legal framework is responsive to global trends and modern-day trust management needs.

Reforming the laws related to trusts in Uganda is crucial for several reasons. A unified and codified legal framework will provide clearer guidelines on the rights and duties of parties to a trust, making the administration and management of trusts more efficient and sensible. Additionally, a modernized legal framework will align Uganda's trust laws with those of other common law jurisdictions, making it easier to conduct cross-border trust business. This will enhance the clarity, efficiency, and global responsiveness of trust management, better catering to the needs of modern-day trusts.

In concluding our exploration of estate planning and the importance of trusts, let’s be reminded of the profound impact that comprehensive, proactive planning can have on preserving one's legacy and ensuring the well-being of loved ones. Trusts offer not just a legal structure for managing assets but also peace of mind, knowing that your legacy is protected, and your intentions will be honored. The distinct advantages of trusts, such as privacy, specificity, flexibility, and reduced legal conflict, underscore their superiority in estate planning. This highlights the urgent need for every individual, irrespective of the size of their estate, to consider establishing a trust as part of their strategic planning.

However, for trusts to fully serve their intended purpose in Uganda, there is a pressing need for legislative reform. The current laws governing trusts are scattered and outdated, failing to meet the dynamic demands of modern estate planning and global financial practices. Therefore, this is also a call to action for the government of Uganda to prioritize the modernization of trust laws. By reforming and harmonizing these laws, the government will enhance the functionality of trusts, making it easier for citizens to manage and safeguard their assets effectively. A clearer, more coherent legal framework will facilitate the administration of trusts, thereby protecting the legacy of many and promoting financial security across generations.

Let this be a dual call to action: for individuals to take charge of their estate planning through trusts, and for the Ugandan government to facilitate this process by enacting modern, comprehensive trust legislation. Now is the time to act—secure your assets, safeguard your future, and encourage legislative change. By doing so, we can ensure that the intentions and well-being of individuals are respected and that their legacies endure, supported by a robust legal system that keeps pace with the needs of its citizens.

William LUTAAYA, Research and Insights Specialist