Orji: Planning Necessary for Family Wealth Preservation

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Vetiva Capital

The Managing Director, Vetiva Trustees Limited, a wholly owned subsidiary of Vetiva Capital Management Limited, Mrs. Theresa Orji, speaks on legacy planning, an aspect of family wealth planning, which underscores every successful financial and estate plan. Goddy Egene presents the excerpts:

What is legacy planning (LP) and how is it different from estate planning?

For its 170th anniversary in 2016, Town & Country ran an editorial that it described as a “highly subjective guide to (170) people, places and things that are built to last a lifetime”. On this list were trust funds, anonymous giving, family houses, family foundations and my personal favorite, a good lawyer. These are essential aspects of every estate plan (EP) and are also the result of legacy planning (LP). Having expended your energies in accumulating your wealth and building your estate, it is critical that you apply yourself to deliberate LP as a necessity to ensuring the effective transfer of your estate to the next generation. At Vetiva Trustees, we believe that every successful financial plan must involve an efficient and effective estate plan.

This means developing strategies (whether financial or social) from a family’s vision and values that would aid the transmission of family wealth across generations. We can say that LP encompasses EP in that while EP focuses on “who gets what” when the family patriarch or matriarch dies, LP answers the underlying question of “why”, by getting the testator/settlor to take a closer look at the family’s vision, values, strengths, and weaknesses; and these would typically drive the structure of his/her EP. LP also provides a holistic approach to put plans in place to not only transfer assets to desired heirs or beneficiaries but to do so in the way one wants to be remembered.

What does LP typically involve?

LP covers the process of the determining the most suitable EP route for each family. To arrive at the structure that would work best for your family there are some inherent questions that must be answered by each patriarch or matriarch and which will be most valuable in determining the structure of your estate. This would involve taking a real close look at your understanding and definition of personal wealth, family wealth, your vision for the trajectory of family heritage and the family’s place in the larger society. Decisions such as the appropriate EP to suit your family situation (i.e., type of trust, family office structure, requirement of a Will, etc.)are the result of a well-defined LP.

According to a recent survey, eight out of 10 Nigerians over the age of 45 do not have a will and seven out of 10 will not make one before they pass. Also, the consensus is that most people in this part of the world believe that EP (particularly writing a Will) is tantamount to a death pronouncement. What are your thoughts on this?

It is an unfortunate situation that further compounds the bereavement process for those you leave behind with no clear instructions as to your estate or no buy-in from family members to the estate plan as it might lead to irreconcilable differences that would result in divisions across family lines, untold hardship for those you left behind (probably at the mercy of customary law) and court battles amongst the family members (some of which span several decades and generations and amount to huge expenses and exploitation which add to the grief of your loved ones). It has also been said that most people who write wills live longer and personally, I believe there is no reason not to have one since death is inevitable. As Steve Jobs put it in his commencement speech to the Stanford University graduates of 2005: “…death is the destination we all share. No one has ever escaped it. And that is as it should be, because death is very likely the single best invention of Life. It is Life’s change agent.”

When is the right time to commence LP?

As soon as you can take decisions regarding your assets (either accumulated or inherited), it is advisable to speak with a wealth advisor. It is also important to note that your legacy plan will need fine-tuning and re-tuning over the years as the best plans should be flexible enough to apply to changing circumstances of your family situation. However, its foundations will need to be firm, being rooted in the family vision and values, and being the “North Star” to guide your latter generations.

What additional benefits are there to LP?

Legacy Planning gives a holistic approach to financial and estate planning. At Vetiva, we believe that wealth management should reflect the three fundamentals of financial security namely wealth accumulation, wealth preservation and wealth transmission. While your financial plan covers the accumulation and preservation of your wealth, your estate plan covers its preservation and transmission and the strategies that lead to the specific structure of each aspect is what comprises your LP.

What other solutions does Vetiva Trustees have for leaving a legacy?

One may also desire to make a long-lasting impact on society in an area of community development through setting up a private foundation or establishing an endowment fund to encourage the younger generation or less economically empowered members of the society in a particular profession or passion or other vocation. Endowments for example, have been veritable tools for building society, corporate social responsibility, impact investing and simple giving back through the ages. In the short term, however, it may be a considerable challenge juggling their need to focus on building their estates with achieving this aspiration, that most of these patriarchs and matriarchs never get round to it. In addition, focusing on the long term, what we find in many cases is a situation where such well-meaning individuals formally or haphazardly engage in philanthropic activities or corporate social responsibility initiatives when they feel financially buoyant and put a halt to it when liquidity is challenged, failing to realize that this well-meant activity could result in reputational damage if not handled professionally. In fact, the creation of a charitable legacy requires a well thought out structure and funding strategy to ensure sustainability and long-lasting impact. This is where our philanthropic advisory services and solutions becomes relevant, which is ancillary to our primary trust business. At Vetiva Trustees, we take on various services in this regard, right from the point of assisting in the formulation and articulation of a foundation’s or endowment’s objectives, assisting in undertaking the registration of the legal structure as well as other regulatory compliance activities, to the actual management and administration of the philanthropic structure in a sustainable manner, whilst ensuring that cash management is efficiently supervised with due regard to short and long term goals.

Tell us a bit more about what you do at Vetiva Trustees
Vetiva Trustees is a corporate trustee business with an unwavering commitment to consistently deliver exceptional Trust advisory services and bespoke solutions to our clients in a sophisticated and innovative manner, being part of the Vetiva brand whose essence is passionately professional. At Vetiva Trustees, we are dedicated to ensuring compliance with corporate governance and compliance issues, adhering strictly to a proven risk management framework, as it relates to our business, our clients, and the trust assets under our management, while making it our mission to ensure value is added towards achieving the objectives of our varied clientele. We have a very competent team of young professionals who are experts in estate planning advisory, philanthropic advisory services, succession planning advisory services, security & debenture trusts, note and bond trusteeship, escrow agency services, employee benefit schemes, housing trust schemes, along with a full range of corporate, public and private trust services. Vetiva Trustees can assist you to make a comprehensive legacy plan to provide for the people you love, protect your assets and so you can be remembered the way that you want.