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    Probate Book Bwana Nditi

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    _ F We . SUCCESSION A mT TRUSTS IN TANZANIA Theory, Law and Practice SUCCESSION AND TRUSTS IN TANZANIA: THEORY, LAW AND PRACTICE NNN Nditi Junior) lawAfrica Pubhshed by Top Plaza, 3 Floor Kindaruma Road, (Off Ngong Road) PO. Box 4260-00100 GPO Nairobi, Kenya Wireless: +254 20 249 5067 Cell: +254 708 898 189 Fax: +254 20 249 5067 Enual: sales@lawafrica.com ‘Website: www.lawafrica.com © NNN Nditi (Junior) 2017; LawAfrica ISBN: 9966-53-047-9 lawAfrica ists in thi ced or transmitted in any fra 2 Copyright subsists in this work. No part of this work may be reprodu ; et Copyright ae erie sytem of any nacre wadhok the prior publics wine i Thauthorized reproduction of this work ‘will constisate a copyright infringes! rendet liable under both criminal and civil law. i use of copyright material including petision to produce or phe, Pll cknewidgemen of te autos OST P the wo eT Application for permission fo ‘phe publihed works shall be made and source aust be given. sera been made to ensure that the information publishes in Wiis every fl bm pritrs abe no pony fran a ot EP uthor, the editors, i : fn person a2 result of reliance upon the information contained hectin. Seamed cases CHapren 1 Estare PLanninc Entate planning is a relatively new concept in Tanzania. It basically encompanes bath law of succession and trusts. However, by and large, it touches on other legal issues relating to economic law such as property law, social security law, insurance law, tax faw and business law. ln this chapter we are going to discuss the concept of exrate planning in general; its relationship with the law of succession, law of trusts and other related legal subjects, as well as, its applicability in Tanzania Generat Concert oF EsTATE PLANNING Meaning of Estate Literally, the term estate means net worth of a person at any point in time, alive or dead.’ However, the term estate has special meaning in legal context. Generally, it refers to property.’ The term property has no universally agreeable definition.‘ In Henderson v Secretary of State for Social Security’ the term property was defined as: “A legal estate or an equitable interest in land”. k From the legal point of view, the word property bas ewo meaning, namely, first, an object of ownership and second, the right of ownership" Property as object of ‘ownership includes land, cars, shares in company or patents.” Property as right refers to the right of ownership over the property, for example, lease-' Therefore, property is not aterm of art but it takes its meaning from its context and collection in the document or Parliamentary Acts.*It is a concept that refers to the rights, obligations, privileges and the restrictions that govern the relations of persons and things of value.” In the context of succession, the estate of a deceased persan consists of all properties, whether real or personal, owned by the person at the time of death.!' It means that, estate includes property that is owned by a deceased person prior t __diseribution of that property in accordance with the terms of a will” or where there ‘sno will, through intestacy rules!*. However, there are some properties which do not form part of the deceased estate after death, for instance, properties fall under joint _ tenancy lke land; properties pass through donation morts aust or nomination." PMN, Mein unio ‘ Succession and Trusts in Tarzania: Theory, Law and Practice Meaning of Estate Planning Estate plating is a very comprehensive and dynamic concept which by it very ature connotes a process, Therefore, eate planning can be defined as: Proces of anticipating and arranging for dsposil of an evate ther inter ve; y trum; investatent through business planning of power of attorney in, cme the estate owner is unable to care for oneself of through a will, for the: benefit of the family members or ‘other individuals in case estate ownee dies.” This definition implies that, estate planning covers not only a will and trusts but ako financial tax, medical and busines plinning it cise one becomes unable to care for oneself or pases away Since estate planning isa process it should be reviewed atleast periodically and whenever a life event occurs, Te should be noted that, in sorae instances, estate planning may take a form of an automatic planning through either social security schemes or insurance system, particulary life asurance schemes, Social security schemes and life assurance scheme tre referred to as automatic estate planing because they plan to protect people against contingencies of lie through their contribution (monetary contribution) i cave they happen, Ir means, therefore, contsibution made by the insured person te the social security schemes or life assurance schemes actwally eonnates the process of estte planning, Jurisprudential Basis for Estate Planning > understand the jorisprudcntial basis for estate planning as a legal concept, it is essary to answer the following questions affirmatively, namely, first why do people and second, what things most people fear the most in life These questions give dential basis for the existence and development of estate planning as 3 legal are different answers to this question as there are different people with varied ‘wiews all over the world. Nonetheless, whatever the answer may be given, ultimately ‘working is normally intended to earn income in order to care for oneself and the dependants like old parents, childzen and in some cases other members of the fail ‘In the coure of working people accumulate 2 lor of asets. But the question “Fermains as to how those asscts are uscful to the estate owner? Estate planning comes in,to help the estate owner to make the best plan of the estate for his/her benefitand the benefits of his/her dependants when alive or after death. 1S ‘The Site Bar of Calforni “Do I Need Exate Panning?” salable 2 warwcalfowca.508 1 te 7 ten y(sunion) MINN. Nel Estate Planning qphat things people fear the most in life Generally,chere are two things most people fear the most in life, namely, incapacitation and death Incapacitation for purpose of this Chapter, ineapacitation refers to the situation that a person i no Jonger able to earn income due to a number of factors like old age, unemployment, vad piysical ot mental disabilities caused by accident or diseases like cancer, HIV and [AIDs or mental diseases.'* No one can fight against these factors nor eseape from them. They can happen to anybody rich or poor at any point in life-To be safe should these things happen, an estate owner is advised to plan his/her estate to be useful for ‘his/her benefit and the benefit of his/her beloved ones. Death Why do most people fear deuth? Fear of death is something which comes naturally to any person. This is so because, according to the Holy Books, human beings were created to live eternal. Death came to human beings as a punishment from God. ‘The Holy Bible says: ‘The Lord said tw Adam... because you listened to-your wife and ate from the tree about which T commanded you, you must not eat of it, Cursed is the ground because of you through painful toil you will eat oft all the days of your life. It will produce thorns and thistles for you. And you will eat the plants of the field. By the sweat of your brow you will eat your food until you return to the ground. Since from it you were taken, for dust ‘you are and to dust you will return,” [Emphasis added) The Holy Quar’an says: ‘Every soul shall taste death and you shall only be paid full your reward on the resurrection day; then whoever is removed far from the fire and is made to enter the garden, he indeed has attained the object; and the life of this world is nothing but a provision of Vanities. (Emphasis added] Ne matter how much people fear death; no one can fight against it nor escape from it, hence, every human being shall die. That being the case then, estate planning comes Hato help the estate owner to make the best plan for his/her assets to devolve to his! beloved ones after death, oe Paine isa very important task to every human being because no On cs « future, Many people are anxious about themselves or of those who are saree to them, in cae they die or are incapacitated due to illness, physical or met onder, and ld age, Since life is uncertain, people are advised to plan their este for their benefit and the benefit of their dearest ones while still alive or after death. arp EBeBS. esate planning is all abour what dhe ste ower WEES do with Properties either before or after death” Pr : | eet ee SNL Succession and Trunta in Tanzania. Theory, Litw and Practicg ns ta be made by the estate owner.” fq a another, those deci have impact on the estate and the belowed one ?py the needs of the estate owner, estate planning tries to anewer the following: questions concerning the properties of the estate owner:" (How and by whom asets will be managed for your benefit during your if you ever become unable to manage them yourself? fi) How and by whom your personal care will be managed and how heal ge decisions will be made during your lifetime if you become unable fey yourself? . (ii) When and under what circumstances it makes semse 1 distribute your gen during your lifetime? ial 5 process, there are a bot of des (iv) How and to whom your assets will be distributed after your death? lac The above questions envisage three things to be considered when making Planning, i.e fisly, how your assets are going to be helpful to you when you are incapacitated due to old age or health problems; secondly, how your assets will governed during your lifetime for your bencfit and benefit of those who are dearea to you; thirdly, hew your assets are going to be distributed to your: dearest ones aft death. When answering the above questions, the decision to be made will obviously confined to the following legal concepts; succession or investment in the forma Proprietorship (Sole Trader); Partnership or Company. In some cases, social securi schemes and insurance systems are relevant as important estate planning | hig Teshould be noted that, the work of estate planning is primarily the day of| estate owner, because he/she is the one who knows what is the best use of his estate.” However, it is advised that, the whole process of estate planning handled under the assistance of competent professionals such as lawyers, a business consultants, tax consultants tc. The reason behind is that, estate involves a lot of complex matters and procedures which would be by the professionals.2° : Subject Matter of Estate Planning ‘What are the NINN, Nat (union) Estate Planning ? value of assets after deducting debts is equal to the fair market value of such assets," The value of the estate is important because it helps not only to know whether the asset is solvent or insolvent after death, but also tax liability, if any.” Need for Estate Planning Estate planning is important to every person who owns property because no one knows what will happen in the farure, Whether the estate is large or small, either way, estate planning is still necessary.” If the estate is small, one should facus on who should receive the property, manage the property, pay debrs and distribute the property after death.” Ifthe estave is large, one may decide to establish either inservivw of testamentary trust, investment or plan for distribution of estate after death through will® Also, estate planning helps the estate owner to know and whenever possible, minimise tax liability through tax planning."Tax planning is defined as: an art of arranging transactions with the knowledge of tax principles tw achieve a tax effective and lawful routing of business activities domestically or internationally." In other words, tax planning is a ‘tax-driven proactive arrangement of person's affairs to minimise his/her tax results’ In IRC v Duke of Véstminster* Lord Tomlin stated that: ‘Every man is entitled if he can ta order his affairs so chat the tax attaching under the appropriate Acts js less than it otherwise would be. [fhe succeeds in ordering them so as ‘to secure this result, hen however unappreciative the Commissioners af Inland Levene or his fellow taxpayers may be of his ingenuity he cannot be called wo pay increased tax. ‘In this world nothing can be said to be certain, except death and taxes’” Through estate planning the estate owner may evaluate and if possible minimise tax Liability, when he/she is still alive or after death. When the estate owner plans for his/her estate while he/she is still alive or after death, he/she should bear in mind that, usually his/her properties or investment entities attract taxes. For example, if the estate owner wants to invest the estate through trust, partnership or company, such legal entitics are in one way or another subject to tax. Such tax liability to those investment entities extends even when the estate owner dies either testate or intestate. Section 92(1) of the Value Added Tax Act™ provides that: 8.92 (0) Where, afer the death ofa table person or the sequestration of 2 taxable petite ie NNN. Net (Junin 8 Succession and Trusts in Tanzania: Theory, Law.and Practice person's estate — (a) an economic activity previously carried on by the taxable person is carried o by or on behalf of the executor or trustee of the person’s estate; or (b) anything is done in connection with the termi the estate of the taxable person, a8 represented by the execut med to be taxable person in respect of the economic activity tion of the economic activity, Jor oF trustee, shall, for the purposes of this Act, be dee Moreover, in some jurisdictions like the US and UK the deceased estate is subject to cither estate tax or inheritance tax or both.” In other jurisdictions like Canada the deceased estate is subject to capital gains tax.” Through the estate planning, estate owner is in a position to know and whenever circumstances allow minimise tax liability. Failure to plan the estate, in most cases, the deceased estate will be subject to high tax, Moreaver, ance the estate owner dies his/her estate will be distributed according to intestate rules, whereby, the state laws will be applied in distributing the estate.“! ‘This means that, estate planning is all about the estate owner's goals and wishes to see his/her estate is used and distributed according to his/her wishes." Estate PLANNING IN TANZANIA, Indeed, estate planning is a rehtively new concept to many people in Tanzania. To appreciate this, let us ascertain the development of the concept of estate planning in = socio-political and economic development in Tanzania post independence to date. orical Development of Estate Planning Mainland (formerly Tanganyika) got her independence on 9 December 961. In April, 1964 Tanganyika and Zanzibar united to form the United Republic of ‘The concept of estate planning in relation to socio-political and economic nt of Tanzania can be explained under three phases, namely: Phase I: from 966; Phase I: from 1967 to mid 1980s and Phase ITI: from mid 1980s to date. I: From 1961 to 1966 s was the period immediately after independence of Tanzania Mainland. During Dshis era the independent government tried to build socio-politi ; foundation wild socio-political and economic that could enable the government to bring about the welfare af the stat SS fs, Chaprer 12 © them ew 2 hw oO vee inthe les ee ‘Biomomny of Pic Enierprives, Upprala Ctfier Center Al, New York 2977-2 oc mp NN, NA (union) Extate Planning here was a visit In 196 from a firm of American consiltants from the USAID to advise the government on industrial devel Mainland. The rs made the following goverment should encourage the development of private ¢ eel eommercial development. Secondly, the governinene oe Ss sn development corporations, with three basic functions: to give loans to the ae _ soul scale busines enterprises to give lange loans to high rk private entrees on soft terms for investment in areas important to the country’s development, and to enter into joint vencures with foreign private partners in projects geared towards profits” Consequently, in 1962 the Industrial Development Corporation was introduced, followed by the Tanganyika Development Finance Company." The former wa set up by a special statute and was ewned by the government while the latter was to be owned jointly with the British and the Germans and was to operate under the Companies Ordinance. Of a mission Ment in Tanzama nendatioms. Firstly, the ‘The above achievements made possible for Tanzanians to participate in the economy of the country. As a result, thase who were able to compete in the market managed to own properties. In turn it was possible for people to plan for their estate. However, majority of the people after independence were illiterate and poor. They could not successfully participate in the market, Instead the economy was mainly dominated by few British and Asian businessmen, Arabs and Indians.” Therefore, during this era, the economy of the country was basically market-oriented with private sector capitalist domination, * Consequently, the concept of estate planning to most indigenous people was almost non-existant. Phase II: From 1967 to Mid 1980's In 1967 the Government adopted a policy paper, known as the Arusha Declaration. During this era, there was dramatic change in socio-political and economic development of the country." This was due to the introduction of a new mode of life, Le. socialism (Ujarmaa) through the Arusha Declaration.“ The Declaration committed the party, i.e,. the Tanganyika African National Union (TANU) and the government ‘e the policies of Socialism and Self-Reliance.** The relevant guiding principle was laid down as fallows in the Declaration: ‘The way to build socialism is to ensure that the major means of production are under the control and ewnership of the peasants and the workers themselves through their ‘Government and Co-operatives. i a. ae 4 Bdpats 2 them ES ‘Sew =~ thd. 216 32th Be a Stem 5 Bia ie Poe 225 MACNN ann Theory, Law and Practios Truett nv Tanzania Succession and larat Je Arusha Dec was the nationalization of ay The coneeaience of oe vate sectors owned and maniaged by enterprises becat Tene ee Ra guile ‘die porruiwrk maiinatinad cl eeag with the Fe es copie nik aid wasblahed'W take capomlie ae Nv. Sr coasniece (NBCK is Which wcked Viele eos ecaroodiess aes: teacke Conennuon (NIC); coublished unter the Connpaclas Ordinance and prohibited other insurance companics from transacting business in the country, ft satonakzed major Food Procesing Firms (FPF) and vested thei anet in an exntng statutory corporation the National Agricultural Board (NAB). It alo, nationale see largest firms engaged in export, import and industrial business and vested their ncn in a new state corporation, the State Trading Corporation (STC).” ‘The nationalization policy went hand-in-hand with the Second Five-Year Plan, isued in 1969, after the expiry of the First Five-Year Plan which started 1964. The Second Five-Year Plan. was used as the instrument for the implementation of the Arusha Declaration Policy, whereby, the plan formulated a new strategy of development. It stated that: ‘The private sector cannot be relied upom to provide the main thrust in directly productive investment. The Arusha Declaration specifically places an increased responsibility on the Public sector to engage in directly productive investment, both in industry and large seale agriculture, During the Second Plan. the institutional foundations for socialit development must be consolidated, succinctly explains the situation as follows: wow atime in Tanzania when accession in private busines: was equated with an He in. A successful businessman was viewed as a traitor to the Ujamaa cause ~ ical Judas Iscariot. This was due to the misguided concept, advocated by party ms who sought praise as Ujamaa front-liners, hat socialism was synonymous 10 2 2 Lup FDA Par et Get Deore ee thee ‘Transition to Pree Market robe ht eich lta ee the Rule of Law and Human Foal NNN. Net (Junior) Estata Ptanning This soca and political ideology discouraged ownership of po hence, it tapnated the idea oF estate planning during thie ws, erty by individuals Phase Hl: From Mid 1980s to Date e middle of 1980s, the Government of the United Ry ul B leadenkip ofthe Polder All Hen Miley reed ttc ee scrcges on economic development ofthe country were not alequnet/ zo changing market and technological conditions inthe region and werden ty Asa resalt, the Government started embarking on different measures to adopt new socio-economic reforms," In 1986 the Government embarked on two broad Programmes, i.¢,a broad-based Economic Recovery Programme supported by the International Monetary Fund (MP) and the World Bank (WB) and an Economic and Social Action Progeamme, which was reinforced in 1989, Under the said Programmes, the Government worked co dsm the system of sate contmls and promiote private sector expansion including liberalization of trade and the exchange system, eliminating price controls and most state monopolies and opening the financial sector ta private sector participation. ‘These changes led to the economic liberalization, which necessitated the privatization of public corparations and the invitation and encouragement of investment from outside. ‘The idea of liberalization of the economy reached at its peak in 1990, when the National Assembly of the United Republic of Tanzania passed the Nacional Investment Bil The intention of the Bill was to provide a conducive environment for investors \0 invest in different economic sectors."” Three institutions were entrusted with the ‘sk of proposing those incentive opportunities for investors." ‘These institutions ecw Ministry of Finance, Economic Afiirs and Planning; Tanzania Industrial Stmdics and Consulting Organization (TISCO}; and Technical Assistance Group of the Commonwealth Fund for Technical Cooperation, London. The combined ‘fforts made by the three institutions made the National Investment (Promotion and Protection) Act, 1990.” Tr response to the socio-economic reforms that emerged in the carly 1990s, the Govetament of Tanzania Mainland and ‘Tanzania Zanzibar, impliedly disregarded the Principles of socialism and embraced a new economic reform under what was called eanabst Declaration of 1991. "The Declaration authorised the party members (CCM) *Pirdcpate in private economic activities; earn more than one salary; buy shares SS afe6e FREFFERERE f ete NN ne a piccenson and Thats i Tanvaria, Theory, Law and Practice es and take up dinectorshups in private Declaratros went contrary (0 the Arusha Declaration.” pnpanies and build houses to lt." Genteral ye which were expresly forbidden mera nme and the Zanzibar’s Declaration n pte of evonomic reforms ¥ : ee the Constirunon of the United Republic of Tanzania” sekne the the meplemewaron of woctahat principles. The Preamble of the Constitution jw that sow therefore, this Constitution is enacted by the constituent asembty of the Unieed Republic of Tanzania, on behalf of the People, for the purpove of building such 3 and ensuring that Tanzania is governed by a Government that adheres to the priacpicy of democracy and socialism and shall be a secular state. [Emphasis Added] Moreover, article 3-(1) of the Constitution provides that; ‘The United Republic is « democatic, ecadar and socialist state which adheres to multi-party democracy. [Emphasis Added] Since the Constitution declared Tanzania a socialist state, in the were still reluctant to own private properties because of fear ideology in 1970’,"* However, the reform programmes introduc the late 1980s and early 19905, slowly started reshaping catty 1990s people inflicted by socials, cd by the Government means through which ‘owned property without any fear of being persecuted by the Government.” ventured to the introduction of a mew economic system, i.e, mixed economy, the private sector started to emerge and people were free to participate inthe tn ‘shile de government intervention into the economy of the couny al This wend of economy ruised he spirit of estate planning among he ‘ult few rich people and medium income earners sarted to ene! net promoted the conceps of esate planning. to reflect the needs of the people in the Ocialism despaired and people started striving © : and for their families, hence the need for «ste ® important to many people naw a days, estate plannin, while he/sh Or devolution is all about what the estate owner wishes! is still alive, especially when incapacitated dt of his/her estate after death to people heli of estate planning can be broadly explained and A {e LepilProfesion: Should We Resin By Soe SAriats. Mal General Confeceace and the $* Anne NMI. Net (Junior) Estate Planning sro ways firstly estate planning before estate owner dics and secondly, exe affer estate owner dies EstaTE PLANNING Berore Estate Owner's Deatu ‘ptking of estate phnning before estate owner's death, refers to the planning process that the estate owner may consider fit to undertake while he is still alive with the intention of preparing himself/herself against incapacitation in life,”* To do this the estate owner should prepare a plan to overcome contingencies of life in case they happen.” This can be done by considering the three questions" sated below, thus: i) How and by whom assets will be managed for your benefit during your lifetime if you ever become unable to manage them yourself? (ij) How and by whom your personal care will be managed and how health care decisions will be made during your lifetime if you become unable to care for yoursel® fai) When and under what circumstances it makes sense to distribute your assets during your lifetinie? In responding to the above questions, when planning the estate before the estate owner’ death, there are number of things to be taken into consideration, such as, investment of the estate; how will the estate be advantageous to the estate owner ‘when he/che is incapacitated physically or mentally; and what point in fe will be appropriate to distribute the estate before death. Considering the abave points, at this juncture we are going to discuss three aspects, namely, investment of the assets of the ‘estate owner as the means of estate planning; estate planning for medical disabilities and distribution of estate when the estate owner is still alive. InvesTMENT oF THE ASSETS Tnvesement of the estate owner's assets can be looked at into three ways depending on the needs of the estate owner, namely, trust, business planning and in some cases social ‘Security or insurance system, Trust can be used as one of the important investment hicles for protecting family property. Moreover, it can be used as the means of Senérating and preserving the family assets depending on the nature of the trust the Ssite owner wishes to establish, Apart from trust, other investment plans which may ‘sed for estate planning are; Proprietorship (Sole trader), Partnership, Company, 4odial sseutity schemes and insurance system. ‘Trust as Estate Planning oe 2 complex legal concept which connotes tripartite relationship." Such Beg een? # among the Donor/Secor; Trustee(s) and Beneficiary." Trust can either | pub nt SE Public tras" However, in some cases 2 combination of private and rust form a special trust called hybrid erust.™* NIN. Ne (amen Succession and Trusts in Tanzawa: Theory, Law and Practice the estate planning because 1 enables the ewate is/her lifecinne for his/her advatitages ariel acy Trust 1s referred co owner tg LABES Of the st Deed and lules when stil alps co after deach through 2 will.” Moreover, trust can) he used to help societies through stuacitable rust to unprivleged people like widows andl widowers, orphans and diay people Under Islamic law, a person can make such kind of trust through yakf r, appreciate trust as a means of estate planning, let ws naw ascertain or estate during ch rough struments called’T h special advantages Advantages of Trust ‘Trust can be used in. many ways as the estate owner wishes. However, the advantages of the trust can be explained into two ways, namely, at family level and at business level Family level i) Te helps to provide for management of the affairs of the beneficiaries who an mentally or physically handicapped or who are spenddhrift of who are young or ‘old. This can be done by the estate owner stating clearly in the instruments hy beneficiaries who he/she wants to be protected by the trust. (i) Tehelps to prevent the law of succesion operating to vest the deceased property absolutely in his adult children who could them dissipate the property Trust cn be made either inter vive through special instruments or after the death of the deceased. Whatever the way may he adopted, the trust can be used to protct equal benefits ta all deceased beneficiaries, (ii) Tehelps to prevent and generate family properties for marry generation, Tait ean be uted to preserve and generate family property for mote than three to four generations; this is possible because the trust helps to avoid division of the mets into smaller shares, Business leve! We can be used to formulate 2 peniion scheme ike NSSF PPF etc for tied employees. Trust can be used ta create a pension fund, whereby the Board of ‘Trustees manages the money (find) paid by the employer and employee out of the contract of employment.The revised eriplayce then can receive a perce OF is final salary or amp sum that used to purchase an annuity (i) It can be used to formulate collective investment scheme such as Unit = A cust can be used as an ope-ended collective investment vehicle in bse the value of units in the unit trust held for the particular urat-holer inser is directly related to the value of the assets held by the custodian trustee 1 ‘onder of the managing trustee, (ii) We can be wsed to formulate a collective security cust for holder of bos debenture stock. In this case a exes kas the benefit of the borrower PO! fo mpay the loan collectively provided by a group of ences and often bs 2 of the borrower 25 security for repayment. The trustee is not the ageat Seapets ies fa, Cope fia, Chapter 24 dom NNN. Naiti Junior) Estate Plannieg the lender of the borrower, rather an independent professional person When advising the esate owner as to whether there m the need co form the tutor nor, the lawyer must make sure that, the effect of taxation on trust has been carefull ee rained and the extare owner advised accordingly. 2 Business as Estate Planning ‘The estate owner may Wish to use his/her estate to generate more or preserve his/her eaate for his/her benefit and benefits of his/her beloved anes through busines, The best way to achieve this, the estate owner should choose and form the best business entity. As far as the business Jaw is concerned a person can invest through business in the following ways: Proprietorship (Sole trader), Partnership, and Company, Proprietorship (Sole Trader) ‘The law governing Proprietorship or sole trader is the Business Name Registration ‘Act This is the simplest form of business organisation. It is a business belonging to ‘one person only, thus, a sole trader. A sole trader is responsible in matters relating to hhis business and he can sue or be sued in his own name. To decide whether this form ‘of business is suitable to the estate owner, the following advantages and disadvantages must be taken into consideration. Advantages The sole trader receives all profit alone. This is because the sole trader docs not share his business with any other person. (il) eis easy to establish because it involves relatively few legal complianees and formalities om its registration, (i) Te is the most flexible business organisation compared to other forms of busines Tike companies and parmership. For example, the sole trader can easily shift from ‘one business to another. fiv) ‘The sole trader is free to make any decision concerning the business. This is because there is no external influence or control over the business other chan market pressure, The tax payable is relatively low compared to other forms of business Tes dicul eo deal with risks relating to the busiest. This i berate onl * _sole trader is responsible for the business, hence, itis difficult sometimes to gst once a sole trader dies the the only pesson who ‘of continuity of the business. In most cases ness dies with him/her. This is because the sole erader MANN. Pet uric, 6 Succession and Trusts in Tancanca: Theory, Law and Practice yp buinem for hin/her family may choose to cart a propricts xx should be handled with ¢ The estate own gon the b mi of pass 1m from ty bus The Sony ee of business can be easily controlled since this form gencration to generatian. Moreawe the estate owner can be in a good n to pass the business to his/her children at the same time it not only provides far the income to the family but ako preserve family properties through such business entity Partnership The law governing partnership is the Law of Contract Act.” Partnership is formed by special documents called Partnership Deed and Articles of Partnership Section 190 of the Law of Contract Act (supra) defines Partnership as: 5.190. Relationship which subsists between persons carrying on business in common a defined with a view of profit. Persons who have entered into partnership with others are collectively called a "firm" and the name under which their business is carried on is called the “firm name”. From the above definition of partnership, we can deduce that, for a partnership to exist the following elements are assential: (i) There must be a relationship ‘What kind of relationship should exist between or among partners? Section 191 of the Act provides:“the relationship of partnership arises from contract and not from status”. This means that, the relation between or among the partners is contractual _ relationship stipulated in the Partnership Deed and Articles of Partnership. Therefore, "only a person who has capacity to enter into a contract can form a partnership. (ii) Such relationship subsists between persons he law stipulates clearly that, partnership can be formed between or among persons: ‘this means, therefore, thar there must be two or more persons. What is the maximult number of people to form a partnership? The answer is to be found under section 463 ‘of the Companies Act.” It provides: 5.463 — no company, association or partnership consisting of more than twenty person Ball be formed for purpose of carrying on any business that has for its object the sequisition. of gain by the company, association or partnership ar by the individusl members thereof, unless it is registered as a company under this Act of is formed it pursuance of some other Act, or of letters patent: a that, this section shall not prohibit the formation for the purpase of— anrying on practice a5 solicitor or accountant, of a parmership consisting % Persons each of whom it a solicitor or accountant as the case muy be: ) * Sibedln! Seated member of a recognised stack exchange, of a parnesthir consisting of persons each of whom is a member of that stock exchange: By virme of the above provision, the maximum n _ : umber of partners to form partnership should not be more than ewenty. However, for those whe form partoetsP VA [Chapoer 345 RE 2002) 92 No. 12 of 2002 NNN. Net (Junior) Estate Planning rpose of conducting professional services like lawyers, accountants wee who work with the stock exchange may be more than twenty as the case may be. (iii) Carrying on Business ‘The primary aim of a partnership is to carry on business and not charitable work ‘Therefore, 3 partnership is formed for purposes of carrying on business as professionals in continuity manner. (j) Carrying Business in Common « Business through partnership must be carried in common, This means that, for the partnership to exist, partners must have a common purpose and aim. Above all they must trust each other with utmost good faith, because the liability of a partnership is business liability of all partners and the liability of one partner is the liability of all partners. (v) Carrying business with the view of making profit Parmers must strive to carry an business with the aim of making mutual profit, but sharing of loss is not necessary. However, sharing of profit is not a conclusive test of the existence of partnership, although it is prima facie evidence of the existence of partners in the market. ‘Therefore, it is the duty of the estate owner to decide whether he/she is willing to form a partnership as the means of preserving and generating more wealth, In choosing this type of business, the issue of taxation must be taken into consideration, ‘With regard to the nature of this business entity, the estate owner may choose to start firm with the intention of passing on the business to his/her children; hence, preserving the family legacy and it can be used as the source of income to the family members. Company The law governing companies in Tanzania is the Companies Act." Companies are formed through documents called Memorandum and Articles of Association. For a “company to be established it must be incorporated. Afier successful incorporation 2 company becomes a legal person in law.** Since a company is a legal person it can ‘fue or be sued in its own corporate name,* it has the right to own properties,” it -Shioys perpetual succession and the liability of the member is different from that of a _ Sotnpany* __ Forming a company is one of the most common means of conducting business ca Be used to generate more wealth since it has perpetuity characterinties.The tate may decide so form a company with a view of benefiting family members fom (pis Generation to another. The position of the law as of now is that,a single pesson <2 14 companr: This position is provided for under section 26 of the Companies Ns 12 R200 * Salmon & Ca Lid [18564] AC 22 ‘E Uenetod Cn Lad'y Ban of Limepool & Martins Lab (1249 KB 17S Mone» Nerher Aussie Cas Lad [1925] AC 619 ‘Semone 44 NINN. Net unis ‘Succession and Trusts in Tanzania; Theory. Law and Practice tas amended by Part IIT of the Business Law (Miscellaneous Amendmeng) Ag 12, which provieles thus 5.264 — (1) A limited liability single shareholder company thall be formed by one member (2) The company's list of members shall contain: fa) the name and address of the sole member; and {b) identification and a statement that the company contains only ope member. (3) Where the membership of a limited lishility single sharcholder company increases from one to two or more, the accurrence of that event shall be entered into the company’s tegivter of members with — (a) the name and address of the person who was formerly the sole member (b) a statement that the company ceed to have one member; and (c} adate on which such event occurred. By virtual of che above provision, the estate owne: and may decide later on to add other members of the family as company’s members or shareholders, By doing so, the estate owner can use the opportunity available through the company to preserve or generate more wealth for hisher family. Tike Proprietorship and Partnership, the estate owner may choose to forma pany with the aim of using such business entity to form a legacy which can be d for his/her benefit and benefits of his/her family members; hence, forming a ‘can he referred to as estate planning, can personally form a company v_E {nutshell basing on the nature of the investment entities as explained above, ‘Me exate owner is at liberty to: choose any of the above entities in order to make the best use of his/her estate by either gen | property. Howeve: erating more assets or preserving family e However, when the estate owner chooses any form of the above busines rity the sue of tes shoul be carefully ascertained, Social Security Fst ison Sysco pres © weld by che Soc Sebi Regist ) SSRA ig ity Regula (Regulatory Authority) Act™ greene’ am tegulated by the Social Secstt diate hae Renee namely: NSSF; PF: PSPF. [ apr. are a number social security same eee to is ae NUIF and GEPE Each scheme has more ot les * 98 Act NoRof 1008 Naiti (Junior) WAH Estate Planning Social Security as Estate Planning Wy ie social security an estate planning? As we have seen eather estate planning ppemcess of anticipating and arranging for disposal of an estate cither inter eo of ser death, Social security schemes in Tanzania provide for the protection of their shembers who ate incapacitated dive to the life contingences and in some cases provide eatance to the deceased member’ family upon death.” Social security provides benefits to its members."® These benefits arising from contractual relationship between an insured person, ie, a member of a given social ceeurity scheme, and the insurer," The insurer in the social security context refers to the public programme designed specifically to provide protection against loss of income due to a defined set of contingencies." This means that, once a person becomes a member of a certain social security scheme, the primary aim of the scheme is to support such member and whenever possible his/her close family members, like spouse, children and other members against loss of income due to different contingencies of life like old age, sickness and death." ‘Therefore, social security schemes act as automatic estate planning ta members through contribution made to the scheme especially such members who are unable to help themselves due to old age or sickness or to the family members after death." Also, social security is used as the means of nomination, whereby it enables a member to choose his/her dependants to receive insurance proceeds after his/her death” Nomination Social security schemes allow their members to nominate peaple, in most cases, not more than four family members who are considered as dependants ta the member of such given scheme, Usually, the family members include the spouse, and children. The nominated members are given special privilege during the member's life or after death,™ Social Security Schemes Social security can be referred to as estate planning, especially to lower and middle aes earners, To appreciate how social security is estate planning, let us ascertain the enefits available in some of social security schemes, namely, Parastatal Pension Fund (PPE); National Social Security Fund (NSSF); and the National Health Insurance Fund (NHIF) as our case study, P i ional Sacial Security of Ae — in English-Speoking AGsca regulated under Interac 301 Hho ew MS em 100 thom 15 ew MO fe. Cape 5 oo NNN Net hn Suctc#asion and Trusts in Tanzania: Théory, Law and Practice Parastatal Pension Fund (PPP) The Parastatal Pension Fund is established by the other social security schemes provides a lot of of our study, we are going to diseuss retiremen astatal Pension Act fits to its members, but for rfits and survivor's benef PUrpote at. (i) Retirement Benefits ‘The purpose of the retirement benefit is to help members to live a good life after ‘stirement. The retirement age recognised by the PPF Act is sixty years "Thy, means, once a person retires he/she will have no source of income, hence, the scheme helps such member during his/her retirement period, if qualifying for sich benef In thar regard, we can consider the retirement benefit as help to thase who are incapacitated by old age hence it can be referred to as estate planning, (ii) Survivor's Benefits Once a PPF member dies, the survivors benefits will According to the PPF Act, dependants include widows) or widower, child/children and immediate parents of the deceased member who were wholly or substantially dependent upon the deceased member's income for their livelihod Survivor’ benefit is divided into two, namely, death gratuity and dependents’ benefits. Death graenity is given in two situations, one where a member dics while in Fad wo where the member dics after retirement, In cate a deceased member dies while in the service, his/her personal representative will be given a gratuity of an _ amount not exceeding either his annual pensionable emoluments or his commuted be given to the dependants Bot exceeding the difference between the amo such member by way of pension and amoun Pensionable emoluments or his commuted pe Dependents benefits may be member completed not less than ten years of unt which has already been paid to it not exceeding either his/her annual nsion gratuity. intestate the distribution of the survivor's benefits will be distributed to the dependan's according to the rules Governing intestate rules," The payment of survivor's benefits ceases upon expiry of a period of three yea" from the date of death of the deceased member or upon the recipient's death,!" exce?! where payment of the benefit or any portion thereof being paid to a widow who | remarries within a period of three Years, Payment ceases upon such remarriage of i ‘ase of any dependent child, the payment ccesce upon such child attaining the age majoring! 17 No 14 of 1978 108 Bid. Section 24(1) 109 Ibid, Section 38 M0 bid, Section 403) ML Bid, Section 4044) M2 hil Section 40(a) and (b) NINN. Nd (sunior) Estate Pianning a National Social Security Fund (NSSF) hed by the National Social Security Fund ‘Act! NSSF provides a number of benefits to its members including retiremene benefits, invalidity benefits survivor's benefits, funeral grants, health insurance etc. For purpose of our discussion, let us ascertain some of the above benefits, ty Fund is estab National Social See (a) Retirement Benefits A member qualifies for retirement benefits if he/she attained the retirement age of sixty years or if wich member has contributed not less than 180 monthly contributions." The retirement bencfits payment commences from the month following the month the retirement member satisfies the conditions for retirement benefits.'"* (b) Invalidity Benefits ‘An invalidity benefit is payable to a member who is suffering from permanent invalidity. Permanent invalidity means the permanent loss of two thirds or more of the earning capacity because of physical or mental invalidity, or is under pensionable age orhas made 180 contributions or bas at least 36 monthly contributions paid in respect of him of which twelve or more were paid in the period of 36 months immediately preceding the date of commencement of invalidity." ‘The invalidity benefit is paid to the member for the duration of the permanent invalidity commencing with the month following the date of the invalidity and ends either on pensionable age, if at that time the member is entitled to retirement benefits at the same or higher rate or on death of the invalid," (c) Survivor’s Benefits The dependants of the deceased member are entitled to the survivor's benefits if the deceased at the time of death would have been entitled to invalidity benefit or has amained pensionable age.'"? If at the time of the death, the deceased member was teceiving retirement or invalidity benefit, his/her dependants will be paid a lump sum j equal to the deceased's member's monthly pension times twelve!” | oP to section 34 of the NSSF Act, distribution of the survivor’ benefits among the dependants is without prejudice to any law regulating inheritance or will; the distribution of the pension is as follows: G) A widow ora widower gets 40% of the pension, in case there is more than one widow, the pension will be divided equally among them. (i) In case there is a widow or widower and there is no dependent child, the widow or widower will get the whole pension (100%). Ck tn cg NE Aetna spouted under rwery oe you 8 e sommes Lecter KN nd 09 ‘Succession and} Tretia i Tanzania. Thncry, Liaw an it) In case of depe ident chiki under eyghteen fae a ethan one child, the p recel wmi a taller as the case may be, gets 6 nsion wall be divided equally a (iv) Uf there is no widow or widower, but there are surviving children, receive the whole pension (100%). (v) Incase there is no widow of widower or children of the deceased ; whole pension (100%) for life will go to the relatives of the decea Section 35 of the NSSF Act provides for the duration for survivor's benefit, The Suration for the payment of the survivor's benefits to the dependants of the dece member is based on the following conditions @) In case of a widow or a widower at the date of death of the deceased is under the age of 45 years or above or who is tinder the age of 45 and has the care of dependent children under the age of 15, will be paid the benefit for life « re-marriage, ased ‘until (i) Te case of a widow or widower at the time of death af the deceased under the age of 45 and does not have the care of the children under 15, will be paid benefits for a period of two years from the date of d deceased member. member is the age of leath of the (ii) In case of a child, will be given the benefits until terminates fullime education but not later if the child is an invalid for life, attains the age of eighteen or than the age af twenty one yeats at (@) Funeral Grants Funeral grants are paid as reimbursement to the family members who incurred Sxpenses for the burial of the deceased member." The amount payable as funeral Srant by the NSSF depends on the general economic conditions of given period of time.'? (e) Health Insurance Health insurance benefit is paid to the member, shildren.'** The medical benefits are provided Preventive and curative care, tests, hospitalisation where ne: his/her spouse and his/her fout by accredited hospitals including ‘sential drugs, simple pathology and X-ray, laboratory ded and minor surgery." 121 Abid, Section 38(1) and (2) 12 idem 123 Bid, Sechon 41. 124 Bid Secsiom 42(2) we ) NLN.N. Nit (union) Estate Planning ‘The National Health Insurance Pund (WHIP) The NHIF is established under the National Health Insurance Fund Act.'® Unlike other social security schemes, the NHIF provides for contributions by, and payment of health care to certain Government employees, i.c, it deals with provision of health ‘are to civil servants other than those employed in the local Government, Defence, Police, Prisons and those covered under other schemes.'™ People who are covered by this social security scheme are all civil servants, their spouses; and their children ot dependants not exceeding four.” ‘The general objectives of the NHIF are provided for under the NHIF Act'® which states as follows: fa) To provide government employees of Tanzania with the mechanism to gain financial access to- health services; (&) To prioritize and accelerate the provision of health services to government employees who cannot afford such services at the moment; (c) To establish the National Health Insurance Fund that will administer the scheme at central and local levels; (4) To reduce the financial gap of health services from the government due to continued slimming budget of the gavernment which has [led] to poor delivery ‘of health services in the country; and (©) To increase efficiency in health care services delivery in the country, ‘The NHIF provides the following benefits to its members, namely: (a) the inpatient hospital care fee consisting of a fixed sum determined by the Board; and (b) the ‘outpatient care consisting of drugs and medicine in generic prescription in accordance with the Essential Drugs List unless an explicit exception is granted by the Fund.” What we learn from the above case study is that, social security schemes in ‘Tanzania are acting as anticipators and arrangers of the disposal of their members’ ‘sets (contributions) against contingencies of life, among others, old age, sickness, invalidity and death. Therefore, they provide an automatic estate planning for their ‘members upon successfully qualifying certain conditions. This means, therefore, once ‘Person becomes a member of a given social security scheme he/she enjoys privilege “Protection against contingencies of life at the time of need. a Thats in Tanceme. Theory, Law and Practice ‘Suconsaion and Tr Insurance System «syste ap Tanzania x eegulated by the Tanzania Insurance Regulate, The insurance sy Authority (TIRA). TIRA is established under section 5 of the Insurance Act.’ Ie provides $541) There is exabinhed » body co be known as the Tanzania Insurance Restor Authority The finction of TIRA is provided for under section 5(2) of the Act as follows 55:12) Subject tothe general supervision ofthe Minister, the Authority shall be charged with the responsibilty of coordinating policy and other mattery relating to insurance in the United Republic By virme of the above provision, generally TIA has been vested with the statutory Power of regulating and monitoring the insurance business in Tanzania, Section 3 ef the Act defines insurance business as follows: $.3.“insurance business” meats the business of assuming the obligation of the insures in any class of insurance whether defined in this section of not, which is not declared to be exempt from the provisions of this Act in terms of section 2 and includes assurance and reinsurance and reassurance, From what has been explained above, the term insurance is a wide concept which ‘Sencrally refers to both lf assurance and non-life assurance or general insurance. For @ of this Chapter we are going to discuss life assurance as estate planning, of Life Assurance Act does not define the _ Business. Section 3 of the Act provides that: term life assurance, rather, life insurance insurance busines” means the busines ‘of assuming the obligation of an insur under section 36 as transacting long term business, Slatity the reference to section 36 of the Act in the said provision ‘Patently untenable as section 36 does not deal with Jong term insurance Correct provision ought to be section 51 which defines long term business # rance business of any clas specified in Patt A of the Second Schedule ¢o the Act i eover, life assurance can be further defined as follows Ree esines of effecting connacs ofnsurance upon human life nchoding ny coe whereby the payment ‘of money is assured on death (excepe death by accident e#!] : the happening of any contingency depending on human life, and any coutract Whi fe 0S ence of esntuim fc tera Speen: oc Lance and del ‘deemed to include — ® the granting of disability and double or tiple indemnity accident beni Provided the contact of irsurancez ® the granting of anmsties upon human lie: and ss 130 AG Na. Uh of 2909 Fe NNN. Naiti (Junior) Estate Planning (Othe granting of superannuation allowances and annuities payable out of any fund applicable solely to the relief and maintenance of perions engaged or who have been engaged in any particular profession, trade or employment or of the dependents of such persons, Genenally life assurance may be simply defined, as assurance under which the insurer's liability is dependent on human bife or on the happening of contingency which is in itself dependent on human life, Life assurance covers mainly two elements, namely, saving element and protection element. Saving Element Under this aspect of life assurance, the insured person makes savings to the insurer with expectation of the insurance cover to mature upon death of the insured person, The benefit insurance caver after the death of the insured person goes to the beneficiaries Protection Element | | ‘Under this aspect of life assurance, the insured person is covered by the insurer against any kind of life contingency when the insured person is still alive. k Therefore, life assurance cavers and protects a person's life against life contingences such as sickness, accidents or deaths, and hence; life assurance is one of the means of estate planning, Life Assurance as Estate Planning As we have scen carlier, our lives are subject to risks of incapacitation and death. Like social security schemes, life assurance schemes act as an automatic estate planning covering a person against contingencies of life. Life events such as sickness, accidents or death can instantly change a person's or family’s financial well-being. However, life "assurance can cover all contingencies which may happen to any insured person. Why js life assurance an estate planning? Human life is precious and its value ___ cannot be measured with a sum of money. Taking life assurance is a step to compensate the family members in case the insured person is incapacitated or dies. To appreciate _ thar life assurance is the one of means of estate planning, let us look at products issued by different insurance companies. NINN, Nai (lunioe) 26 ‘Succession and Trusts in Tanzania: Thwory, Law and Practice National Insurance Corporation (NIC) NIC offers the following products to its members (a) Whole Life with profit/without Profit ‘Under this product premiums are payable throughout the lifetime of the life assured and, as such the cheapest from the policy. The policy is eminently suited to meet the requirements of persons who desire to effect policies for the purpose of providing for payment of Estate duty (b) Whole Life with limited payment with profit/without Profit This is the best form of life assurance for family provision since it enables the life assured to pay all premiums during the ordinary, vigorous and most productive years of the life, relieving him from the necessity of making payments later in life when it might become a burden, Premiums are payable for a selected term of years or until death if it occurs within such period, If the life assured survives the premium paying period, the policy continues in full force, provided premiums have been paid. (c) The Endowment Assurance with/without Profit This is the most popular form of life assurance since it does not make provision for the family of the life assured in the event of his early death, but also assures a hump sum at any desired age. The amount assured, if not paid by reason of his earlier death, becomes payable at the end of the endowment term. (d) Education Annuity Policy with/without Profit ‘This policy is designed to cater for the education of children. Under this policy, _ payment of the premium ceases absolutcly on the death of the assured, The benefits become payable at the end of the selected term of years, (e) The Anticipated Endowment Assurance policy “This plan of assurance provides for lump sum benefits at periodical intervals. But in _the event of death at any time within the selected term, the full sum assured is payable “withoue any deduction or adjustment for the amount, that may have been paid earlier way survivance benefit, (0 Term Assurance “This plan of assurance provides that the sum assured shall be made only if the life assured dies within a defined period if the assured survives the period, the assuramt comes to an end, and there is no payment. (g) Super Life Provider “The plan can assist the proposer to arrange for his/her financial support to contit™? after his/her death. The payment schedule is as follows: (i) If death occurs during the first Give years 10096 of initial sum apsured will be Pt «@ ‘On death during the next five years the payment is increased ro 150% of BF initial sum assured. — NAL. Ne uri 2 Succession and Trusts in Tanzania: Theory, Law and Practios Family Protection It is a life policy that provides monthly incame to beneficiaries from the date of death of the insured to date of maturity of the policy or maturity benefit if the policyholde, survives to the maturity. The policy could be for a specific term or attain age set at inception of the policy. Death benefits are vested after a waiting period of 6 months Premium paying term range from 10 to 30 years, Education Annuity (lump sum option) Ieisa life insurance policy with maturity benefits. The maturity benefits is either paid as lump sum or can be used to purchase annuity payable twice annually for a specific term The Sanlam Life Insurance ‘The Sanlam Life Insurance was previously known as Aftican Life Assurance in Tanzania; the Company was rebranded. and changed its name to Sanlam Life Insurance on 12 August 2015." The Company has the widest range of life assurance products in the ‘Tanzanian life market and insures more than three million lives." It provides insurable and poolable benefit products such as life, disability, critical illness savings and group endowment." The follawing are products covered by the Company: Personal Products "Under personal products,” the Company cavers the following: Life Insurance Tr provides a mechanism to save for a future event and to get life cover, which & payable to the nominated dependant(s}."™ It helps the policyholder'’s loved ones take care of their financial needs after death." Life insurance can give the policyholder peace of mind that his/her family can be taken care of their needs and expenses after ee —- the policyholder's death will not place a financial burden on his! Funeral Cover This product provides money for burial needs to immediate and extended fami members." Te gives policyholder loved ones a dignified funeral without worryi® about how the funeral expenses will be paid."*! hc ae aan g , NNN, Nati (Junior) Estate Planning Travel Insurance Cover te protects the policyhokler and his/her loved ones against unforeseen events while travelling." Iemakes sure thy aaravel Ke gives peace of mind thatthe poli sr disability and his/her loved ones will be take sn agcident while he/she is travelling." policyhalder and his/her loved ones are covered while volder will be covered against injury are of, should he/she dies, due to Disability Cover Temakes sure that the policyholder and his/her loved onesare covered againstunforeseen circumstances." It gives peace of mind about pc slicyholder financial security if he/she jg unable to work because ‘of disability.’ If the policyholder becomes disabled because ofillness or injury and can no longer work and earn an income, disability cover gives the policyholder the assurance that he/she can still take care of himself/herself and his/her family’s expenses." Critical [ness Cover ‘This product helps the policyholder and his/her loved ones against unforeseen eursunces.™ It relieves the financial burden of living with a serious illness." In this day and age, having a critical illnes is no longer a death sentence and people can ail live productive lives." However, to recover of to maintain your health can be very expensive, even if you have medical aid."* Critical lness Cover eases the long-term financial burden af managing these expenses." Group Products ‘Under group products," the Company covers the following: Group Life Assurance This group life assurance policy for employers caters for the demise while in service as well as disability benefits ta employees.'* Group Credit Life Assurance This policy covers loans advanced by organizations that offer credit facilities to third Parties."5* FRRRRRRRRREEEE succession and Trusts in Tanzania Theory, Law and Practicg 30 Group Funeral (Last Expense) cy (abso known as a last expense policy) can _ figneral poli A group finera’ pos spouses and children. Group Endowment dowment Scheme is a coupled with a sivings/investment clement Advantages of having Life Insurance icin general belie that life insurance is meant only for those with families. tis mye that Life Insurance Policies like whole-life insurance, joint-life-insurance, pension. life-insurance ete are essential for a family’s financial security, but they are equally important for individuals. Term. Insurance Policies protect one’s financial resource dyninse the uncertaintes of life so that one can protect his/her family’s future. Some o the life insurance advantages are: a Tthelps the estate owner who has not accumulated enough assets for his/her family his/her family against contingencies of life chrough different assurance produ n insurance policy designed to offer lie A Group En 8 tore, protect For example, lif insurance product or family protection product. Insurance quate helps create an instant estate for the sake of the family’ securig. A have already scen, different products are meant to fulfil certain purpose, and most oft products have been designed to protect insured petson or his/her beloved Life assurance provides the option to past equal assets to the children: in the family bnsiness at the time the family business is passed on. Life assurance policies can help to secure the future of children for purposes as the amount of life assurance policy inereases on a minor's: ‘The growth ofa cash-value policy is tax-deferred = you do not pay value accumulation until you withdraw funds from the policy. ‘ 7 138 Seamed th camscannt NNN. Nei (union) Estate Pharcing charitable gift ‘alot of Inaurance products presently provide poos retutns, which could be a beneficul way fr sxving. necessary funds for retirement years Benefits are avilable irsmetately and may be used to help pay expenses ch a nating the need to tell extate amets to cower theve {ness and fineral com, What we learn. from the abave case study is that, like social security schemes, life assurance schemes act as anticipators and arrangers of the disposal of their members ets (contributions) against contingencies of life, among others, old age, sickness, and death. They provide an automatic estate planning for their members upon successfully qualifying certain conditions Estate PLANNING FOR MEpicat DIsabiLiries ‘Medical disabilities refer to the situation that, the estate owner is either physically oor mentally incapacitated. Medical disabilities in relation to estate planning can be expained into too ways, namely, fis, the estate owner physically incapacitated but bia/her mental capacity is still sound and effective; and second, where physical disability Ieadh to the mental incapacitaton of the estate owner. These two circumstances 255 treated separately as far as estate planning is concerned. Estate Planning where Estate Owner Still has Mental Capacity Im asitation where the estate owner is physically incapacitated by disease or accident part his/her mental capacity is soll perfectly sound, he/she can make powss of attorney forsomeone to take care of his/her affairs."* Power of attorney is one of the important astromenss in the process of estate planaing.”® This is so because & We 3 earlier, ho one can foresee the contingents of life such as incapacitation, and hence, making power of attorney is inevitable, Meaning of Power of Attorney ‘The Longman Dictionary of Laur defines power of attorney as: —feis an insarument which authorises 2 person to act for another during the absence of that other, However, as far as the concept of power Of attorney in relation to estate planning is concerned, the estate owner can appoint a person on his/her behalf to take care of his/her affairs regardless is within er outside the country." A. person making the power of attorney is called a donor,(in our case js referred to as estate owner), and the appointed to act on behalf of the donor 1s called an attorney." power of attorney is 4 legal instrument which gras the atrorncy ociky: act as Tegal sepresencative of the estate owner anc to make legal d financial decisions on his/her bebsié, In other words, it ges the atcorney legal with the estate owner's affairs, limited to those metitioned in the MMM Me Succession and Trumts i Tanzania. Theory. Law and Practes ‘log Responsibility of Attorney Once a person is appointed as attorney, he/she is placed in a position of trunt, wherehy the estate owner is the donor/settler while the attorney is the trustee for the benefe the estate owner. At the time the power of attorney becomes effective,™ the attor, will have the following responsibilities:' om a ‘Todo things which the estate owner authorises him/her to do, Usually the dating of the estate owner are stipulated in the document, (i) The attorney is not allowed to delegate his/her duties to another perion unlen authorised by the estate owner. Gi) He/she must keep up to date information concerning the affairs of the estate owner. This includes, keeping proper records of accounts and other financial affairs as well as record of the decisions made concerning the personal affairs of the estate owner who is mentally incapacitated. Joint Attorneys Is it possible to appoint more than one attorney? The answer is in the affirmative ‘The estate owner can appoint joint attorneys or joint and several attorneys te act together. The joint attorneys must always act together. The advantage of appointing int attorneys is that, it helps to avoid fraud or doing something against the estate The disadvantage of this type of appointment is that, the whole power of comes to an end if one attorney dies or becomes mentally incapacitated” joint and several attorneys, refers to the attorney appointed to act together i dently." This type of appointment signifies that, the action of one atiortey 1 valid as if they were the only attorney, but it also means that the power of attorney will ec ue in force if anything happens to one of the attorneys.'” of Attorney in Relation to Estate Planning hhave seen earlier that, one ofthe things which most people fear the mestin HE on, However, the pertinent issue here is what is to be done once the x ‘incapacitated due to old age, sickness or accident. One of the ways = this matter is to appoint an attorney through power of attorney authoring to look after the estate owner's affairs. ‘power of anomey becomes effective a the time it is signed. or it may become ‘within the document, o it may become effective upon the occurrence of disabled. - Nan Wo Estate Planning a his/her day-to-day personal care or healtheare.!" ‘The reason for making power of attorney is to manage the affairs of the esate owner. The affairs of the estate owner are: where the donor is ill or disabled, either temporarily or on long term basis; where the donor is outside the country for a while and where the donot is unable to make decisions for oneself due to mental illness or other reasons like old age."”! ‘Types of Power of Attorney The estate owner may make ordinary power of attorney. Ordinary power of attorney can be categorised into two ways, namely, general power of attorney and specific power of attorney." General Power of Attorney ‘The general power of attorney is unlimited in scope and duration, and permits the attorney to act as legal representative of the estate owner in relation to financial matters until such time is revoked." Ie can be given to the attorney to deal with all financial or other estate owner's affairs." Specific Power of Attorney Ie is ako known as limited power of attorney." Tt imposes limits upon the attorney and may restrict the scope of the attorney's powers to a single type of conduct ot a single transaction, thus, it can be given to the attorney for certain matters only, for ‘example, to operate bank account, to buy and sell property or change investment. !™ If the donor wants to make specific power of attorney, he/she must make sure that the Power of attorney is drawn up very carefully so that the attorney is very clear about authority has to deal with."7 of Power of Attorney Power of attorney can be made once the estate owner becomes ‘so manage his/her own affairs." It is advised that, once the power of ’s terminated, the estate owner should collect and destroy the original and Sf Power of attorney, so a8 to avoid confusion or misrepresentation in the | o DLN.N. Nos (un 3 ‘Succession and Trusts in Tanzania: Theory, Law and Practice Mental Capacity ntion in pt « from either old age, acciden: « Estate Planning where Estate Owner loses fecting them, ¢ People who have lost mental capacity tecting them, they families and properties. Mental prot illness such as dementia, mental health problenss, by ser and the side effets of medical treatment of any other illness or disabi os Mental problems can happen to anybody at amy point a a ; d fior thay special mechanism necds to be put in place so that the rights and properre vrotected, As far as this part is concerned, WE are going ta digciy disabilities at both common law system and in injury, alcohol or drug misuse reasen of those people ate p estate planning to people with mental Tanzania lepal system. Position at Common La Different countries have developed their own ways of protecting the estate of the people who suffer from mental diseases.""' In the UK for instance, protection of the people who suffer from mental disabilities is done by preparing special power of attorney called Lasting Power of Attorney (LPA) before the estate owner loses his! ‘her mental capacity. Before, 1 October 2007, people were allowed to make power of attorney called Enduring Power of Attarney (EPA)."* Lasting Power of Attorney (LPA) In case the estate owner loses his/her mental capacity, the best alternative is to make the LPA.'™ For this rype of power of attorney to be valid, the estate owner must have ‘mental capacity at the time he/she makes the same. ‘This type of power of attorney is not common in Tanzania." It is made where the estate owner wants the attorney to look after him/her for a long period of time.” Usually, this type of power of attomey is made where the estate owner is diagnosed with or thinks that he/she might develop an illness or has become old which might Prevent him/her to make decisions for himself/herself sometimes in the future." ‘Types of LPA There a types of LPA, namely, Property and Financial Adairs LPA and Peco (i) A Property and Financial Affairs LPA ‘This type of power of attorn, decisions about things f accounts; welfare benefits ey gives the attorney the authority to deal with and make = buying and selling of properties; bank and other financed and tax credits; tax affairs; debts and legal proceedings” 180, wat Bes FEEF “The purpore of dacusing this Sorm of power of:

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