Saxophone player, jazz enthusiast and avid art collector: Safaricom CEO, Bob Collymore, passes on, but leaves behind a very rich legacy | Photo © Pete Muller/FT
The Complexities of Life
Bob Collymore was not your average CEO.
The Guyanese-born British chief executive led Kenya’s largest mobile operator through a period of rapid growth, turning Safaricom into east Africa’s most profitable business. Under his leadership since 2010, the company’s revolutionary mobile money service, M-Pesa, evolved from a fledgling peer to peer transfer system to become the backbone of the country’s digital economy, used by two in every five Kenyans.
In a current interview with a journalist – following a cancer diagnosis – a jovial Bob said he had no plans of going anywhere and had accepted a one-year extension of his contract at Safaricom to compensate for the nine months he had been away on medical leave. He was scheduled to leave the telco in 2020.
But, with life, you never know what lurks around the corner.
After a long battle with illness, Collymore recently passed away aged 61, leaving behind a blended family of a wife (Wambui Kamiru) and four children – two each from Collymore’s and Kamiru’s previous marriages.
Navigating life (and end-of-life) can be thorny, but estate planning takes away most of the uncertainty. Across the following pages, we will tell you how, especially when a blended family is involved.
Managing The Merger: Blended Family Challenge
“For Unoma and Shina Oluwadara *[1], it was a second marriage and both of them had children from a previous union. Unoma had a son and a daughter, while Layi had two daughters. All four children were adults and independent.
The Oluwadaras’ primary goal was to enjoy a comfortable retirement, while a secondary important goal was to leave a legacy for the four children.
Challenge 1: Both spouses had a significant portion of their assets in retirement accounts, with each spouse’s biological children listed as their respective beneficiaries. If one of the spouses passed away and his or her retirement assets were distributed to his or her biological children, the other spouse would suffer a lower standard of living. That was not a satisfactory option for either Unoma or Shina.
Challenge 2: If each person listed the spouse as the beneficiary of a retirement account, that may have been fine for the surviving spouse, but left no guarantee that the first spouse’s children would ever inherit the assets. After all, those children were only step-children to the second spouse.
How would the Oluwadaras ensure that both their retirement and legacy goals are met, with all the children receiving their due inheritance?
The Solution: What seemed most intuitive was for the couple to name each other as beneficiaries of their retirement plans, and to put a life insurance policy in place on themselves with their biological children as beneficiaries.
The first part of the plan guaranteed that if one passed away, the other would have sufficient assets to live comfortably in retirement, which was the couple’s primary goal. They would also benefit from special tax treatments that some of the retirement accounts offered.
The life insurance element solved the second part of the problem by enabling assets to pass to each spouse’s biological children, income-tax free. With this in place, Unoma and Shina could enjoy a contented retirement without worrying about unintentionally disinheriting their children.
Although beneficiary designations usually supercede a will, the couple was also advised by their Wealth Manager to have a lawyer create the necessary wills to ensure their legacy goals were met.”
[1] Pseudo names
Conclusion
The process of estate planning involves anticipating and arranging the management and disposal of a person’s assets, during the person’s lifetime and after death, while minimising taxes. Some of the most important tools for an estate plan include a Will (takes effect after death, setting forth your wishes regarding the distribution of your property and the care of children); Living Trust (takes immediate effect once the trust owner signs on the dotted line, allowing asset distribution, accompanied by extensive tax relief, and also avoiding probate court); Durable Power of Attorney (designates someone to make key life and financial decisions on your behalf, when you are unable to do so); Healthcare Proxy (designates a trusted person to make critical medical care decisions for you in case of incapacitation); Life Insurance, and Beneficiary Designations.
Digging deep into family dynamics helps a Wealth Advisor understand what the true wishes of an estate plan are, and why – and decide upon the most appropriate tools to deploy.
*Disclosures: This material does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. ARM Investments (ARMI) advises investors to independently evaluate particular investments and strategies, and seek the advice of a financial advisor or wealth manager. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
