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How to ensure your wealth makes it to the next generation

How does one ensure that wealth is transferred and enjoyed by one’s next generation?

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The chances of wealth being transferred successfully to the next generation, especially in the heat of economic pressure and COVID-19 pandemic, without incurring liabilities are more complicated now than ever before.

This is ironic given today’s world offers many accessible tools and estate planning vehicles such as Wills, Trusts, and Foundations. In breaking down this claim in today’s world, owning valuable assets does not guarantee the value of the assets will be preserved when transferred to the next generation. In worse cases where there is intestate succession, i.e. no Will or mechanism in place to pass on wealth, this function is left to the state to decide.

Even if an estate plan is in place, it would also need to provide adequate asset protection and future growth. One also needs to guard against excessive professional fees charged against an Estate that is fraught with complications on death.

I was asked at an ARM Trustees webinar recently that if your claims are indeed valid, how does one ensure that wealth is transferred and enjoyed by one’s next generation? First, we must be willing to leverage estate planning tools like Wills, Guardianship documentation, Trusts and Foundations, and the utilisation of relevant co-ordinated structures for larger and more complex estates.

An Estate Plan, be it local or international, includes having strategies in place to manage: the effect of inheritance tax, ease of wealth transfer and business succession relating to investments, real-estate, your pension fund, and other assets, which could form a significant portion of your wealth.

An estate plan will help individuals and families with both local and international assets, investments, and business operations give careful consideration and properly document their holdings to ensure the assets are protected and passed on to future generations.

This is effective, legally robust, practical and efficient. Estate planning offers you protection without borders, especially considering potential shifts in Residency and Citizenship, which may impact one’s wealth. Effective management and ownership of a business operation can also be safeguarded by setting up a Succession plan.

In conclusion, families who seek to get started on understanding what is required for an estate plan or indeed would like to set one up should consult a Trustee firm with years of experience in this field and one that offers international solutions.

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SSKOHN

Article was written by Henry Hollingdrake, an Investment Banker and Consultant to ARM Trustees

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Columnists

CIFI: Despite CBN funds, can the creative industry thrive in this environment?

The Nigerian technology ecosystem is at its nascent stage, and beyond money, there is the need to ensure an enabling environment for operators.

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Despite a frail 2020 for the Nigerian economy, there was a bit of silver lining. The Nigerian Information, Communication, and Technology (ICT) sector emerged as the leading segment of the economy aiding the country’s exit from recession by a whisker in Q4 2020.

The development, in effect, justifies to some extent, the earlier decision of the Central Bank of Nigeria (CBN) to create the Creative Industry Financing Initiative (CIFI) to support businesses in the following areas:

  • Fashion
  • Information Technology
  • Movie Production and Distribution
  • Music

The CBN began to contemplate the idea of the CIFI following the influx of private investment into the technology space in 2019. For instance, according to the African Tech Start-ups Funding report for 2019, Nigeria got foreign exchange inflows totalling US$137.9m in the period.

This continued into 2020, considering that despite the pandemic, the sector still attracted an additional US$122m in seed funding. Furthermore, the sector contributed 13.12% of the total real Gross Domestic Product (GDP) of Nigeria which came to N19.53tn as of Q4 2020.

Evaluating the progress made so far with the CIFI, as of Q3 2020, the CBN had reportedly disbursed c. N3.12bn in intervention to 320 beneficiaries. While there are concerns around the tenor of the loan for Software Engineers and accessibility of funds to other technological entrepreneurs, we laud the CIFI and encourage relevant agencies to do more.

The Nigerian technology ecosystem is at its nascent stage, and beyond money, there is the need to ensure an enabling environment for operators. For instance, the recent BVN concerns that rocked the financial technology space and the regulatory uncertainty which is a key risk for telecommunication operators among other concerns, are issues that should be decisively dealt with.


CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange

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Book of States 2020: Vast resources, low industrial development

State governments have been heavily reliant on FAAC distribution to meet recurrent expenditure, thus making no room for capital spending. 

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The Nigerian Investment Promotion Commission (NIPC) in a recent report titled “Book of States 2020” highlighted the investment prospects of the 36 states of the federation including the Federal Capital Territory (FCT) to steer attention to the subnational investment opportunities in Nigeria. We note that the report is an outcome of a partnership between the commission and the Nigeria Governors’ Forum (NGF) to showcase the key investment opportunities for each state.

The report focused on the key areas of physical capital (airports, railway stations and seaports), resources (natural and minerals) and demography (population and labour force) of each state including their Internally Generated Revenues (IGRs), budget spending and household consumption.

While we acknowledge the decrepit infrastructure as a major hindrance to the growth of businesses and economic prosperity of many states, we note the little emphasis placed by the states on financing capital projects to attract private sector investments. Over the years, state governments have been heavily reliant on FAAC distribution to meet recurrent expenditure, thus making no room for capital spending.

The truth is that as long as state governments do not make desperate efforts to develop their internal revenue-generating capacity, the states in the country would continue to operate an inefficient rent collection system where they rely solely on FAAC allocation to meet basic needs such as paying workers’ salaries.

In our view, we believe the efforts to revive the ailing status of many states depend on the effectiveness and soundness of policies made to propel investments. Currently, Nigeria has enormous potentials to improve tourism given its ample amount of resources to attract both local and international tourists. Many countries in the continent such as South Africa, Kenya and Morocco have made great fortunes from tourism.

Over 50% of the states have recorded no foreign direct investments over time due to little or no requisite infrastructure needed to attract capital inflows amid untapped resources in these affected regions. Also, we believe the Federal Government needs to relax its control on some of the state-owned resources to enable the states better exploit these resources.


CSL Stockbrokers Limited, Lagos (CSLS) is a wholly-owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

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