Inheritance, wills and pension beneficiaries in Kenya

Why we did this study

Inheritance has become a common topic of debate in Kenya, especially since the 2010 Constitution set out the laws of inheritance more clearly, moving away from the customary law used before. Before the 1981 Law of Succession came into force, inheritance in Kenya was decided by customary or Muslim law.

Conflicts in families are often about how property is shared and who has a right to inherit. Kenya National Bureau of Statistics figures cited in our report show succession as one of the most common grievances households experience.

Yet very little is known about how people feel about inheritance, or whether they have written down how they want their wealth shared. Our study set out to understand how people feel about leaving an inheritance, their attitudes to wills, who they nominate as beneficiaries, and what knowledge they lack to write a will.

What we found: leaving a legacy

Leaving something behind matters to the people we surveyed. 84% said it is important to leave wealth for their children, and 71% have children who are still in school and depend on them. The main reason given was so that children get a good education, closely followed by leaving them a business.

Confidence in the next generation is fairly high: 70% are confident their children will be able to use inherited wealth, while 30% are not. Leaving an inheritance mattered most to those aged 31 to 40, and to those with assets worth below Kshs 5 million or above Kshs 100 million.

Much of this wealth is in property. Respondents hold up to 47% of their wealth in land and buildings, 20% in pension funds, 16% in Sacco savings and deposits and 11% in cash. Giving beyond the family is less common: 67% have not thought of leaving their wealth to any institution or anyone outside the family.

Expectations of retirement are high. 98% expect their lifestyle to be the same or better once they retire. Asked how they will use their pension, 39% said they will take all the money to invest further and 37% will buy an annuity.

What we found: wills and beneficiaries

More than 80% of the people we surveyed said written wills are important, but only 41% have one. Nominating beneficiaries is the most common way they record their wishes, followed by writing a will and telling family members verbally.

We also looked at the nomination of beneficiaries forms the same members had filled in for their pension funds. 57% have named their spouse, 42% their sons and 41% their daughters. On average, spouses are allocated 58% and sons and daughters 50%.

This goes against a popular view that women are unlikely to nominate their spouses. Women who named a spouse allocated them 50% of the benefit on average, against 61% for men, but the difference is not statistically significant: men and women leave relatively the same to their spouses.

Many people feel unprepared to plan. 46% would like more advice on financial planning, with legal advice the next most requested. Less than 20% are confident they know enough to plan their succession.

One of the reasons why people may not have written a will is due to a knowledge gap.

What this means

For members and their families, the clearest message is the gap between valuing a will and having one. Many respondents see a nomination of beneficiaries as a valid statement of how their assets should be shared. But nominations sit with different financial institutions, and at present there is no way to bring them together into one picture.

For employers and trustees, members are asking for help. They want both financial and legal planning advice, and our findings suggest the way this information and training is given today may not be working. Because the two are separate fields, usually offered by different professionals, giving advice on both together may work better.

Members' retirement plans also raise a question. Most expect the same or a better lifestyle after retiring, so will their pension income be enough as medical costs rise with age and the cost of living goes up? It would also help to know what members invest in when they withdraw all their money from a scheme.

For the wider financial industry, we suggest institutions consider a system that brings each person's nominations of beneficiaries together into one document, to be used as a single point of reference. With so many disputes arising over inheritance, a clear legal system for nominating beneficiaries matters.

What we recommend

• Financial institutions should consider a system that brings all of a person's nominations of beneficiaries into one document, used as a single point of reference.
• Provide information on legal planning and financial planning together, rather than separately.
• Organisations and advisers in legal and financial planning should rethink how they give this information to clients, as current information and training may not be effective.
• With so many disputes over inheritance, there should be a legal system for nominating beneficiaries.
• Ask whether pension income will be adequate, given rising medical costs with age and the general cost of living.
• Further research: whether the land and buildings people hold earn income or lie dormant, and what people invest in if they withdraw all their pension money.