“Chaos, panic and disorder: My work here is done!” This is how I signed off last week’s column, as the iconic statement on the tombstone of all the moneyed men and women who create chaos by dying without a will and leaving a very untidy mess of an estate. Or who die with a will in place, but key stakeholders such as Side Dishes are left at the boulevard of broken dreams, holding nothing but a framed, smiling picture of the deceased.

I suggested that subject to appropriate tax advice, setting up companies to hold real estate assets might be a good way to skirt the topic of your death, but would ensure that your loved ones – spouses, spices and children of both – are taken care of since you would make them shareholders of the companies. By so doing, they would then be protected under the ambit of company law rather than the laws of succession. However, your own shares, as the founder would be subject to the law of succession as these would form part of your estate. So a reader wrote to me and asked if I could elaborate a bit more on how companies can help, well, sort out these manenos.

For a married couple, let’s call them Tom and Mary, the current tax regime allows for these interests to be protected in a tax efficient manner by transferring assets that are jointly owned into a company without payment of stamp duty. Stamp duty is applicable on land transfers in Kenya, with a rate of 4% of the value of the land for urban property and 2% for land in rural areas. However, there are exceptions to this rule where for example Tom and Mary are transferring the land that they jointly own to a family owned company. Of course the chaps over at Ardhi House, where the Lands Registry is housed, will want to see who the shareholders of the family company are. To prove that it is a “family” company, a marriage certificate would have to be produced to demonstrate Tom and Mary’s connection to each other. If there is a third unrelated shareholder in the company, as the annual returns of the company also have to be provided, then this would not qualify as a “family” company for stamp duty exemption purposes.

The definition of family extends beyond just spouses. It can include parents, children and siblings and for the latter to happen birth certificates have to be produced or, in the unfortunate event that a family member has died, then death certificates as well. In the case of a Side Dish, then the assumption I am making is that a new company is being formed to hold an asset being acquired during the tenure of the situation-ship so that in the event of the founder dying, then Side Dish’s shares are protected under company law. It would be difficult to get stamp duty exemption for an existing joint ownership with Side Dish when being transferred to a company, as there are no legal ties that bind to qualify as family. But the transfer can still happen, at a 2% – 4% stamp duty price.

If the land is singularly held by Tom, or by Mary, then very sensitive discussions would have to be held between spouses as to why transfer into a family company is necessary. Mary might be quite happy to have the property in her name and let her children, spouse and whoever else crawls out of the woodwork fight over the property in the event of her demise. But if she transferred the property to a company and made her spouse as well as her children shareholders, then in the event of her demise it would only be her share in the company that would be subjected to the law of succession as the rest of the family merrily continue on as shareholders. If her children are under the age of 18, then she could appoint her spouse to hold the children’s shares on behalf of her children and ensure that the correct proxy documents are executed and held in safe custody.

If the land is jointly held by Tom and Mary, then transitioning the ownership into a company should not be a landmine filled discussion as the intention for joint ownership has been there from the start. What mischief does all of this attempt to cure:  Families being left at the funeral home traffic lights.   Get talking to your lawyers and make sure you get some tax advice too.

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Twitter: @carolmusyoka