Trust Funds & Family Trusts in Kenya | Estate Planning & Succession

What Are Trust Funds and Family Trusts?

A trust is a legal arrangement where assets are transferred by a settlor (the person creating the trust) to a trustee, who holds and manages these assets on behalf of beneficiaries. The trustee manages the trust according to the terms outlined in a trust deed, ensuring the assets are used for the intended purpose.

Trusts are often used to preserve wealth, manage assets across generations, support dependents, or fund specific causes such as education, healthcare, or charitable activities.

What is a Family Trust?

A Family Trust is a specific type of trust fund set up to manage and protect a family's assets. In Kenya, a family trust can include property, shares, cash, businesses, or other valuable assets, and is designed to benefit family members often across multiple generations.

Family trusts are becoming increasingly popular in Kenya for succession planning, wealth preservation, and estate management, especially among high net worth individuals and business owners.

Key Elements of a Trust

Settlor

The person who establishes the trust and transfers the assets.

Trustee(s)

Individuals or institutions appointed to manage the trust on behalf of beneficiaries.

Beneficiaries

The individuals or groups who are entitled to benefit from the trust.

Trust Deed

Legal document outlining the rules, objectives, and terms of the trust.

Types of Trusts in Kenya

We provide guidance on various trust structures to meet different estate planning needs.

Discretionary Trusts

Trustees have flexibility in deciding how and when to distribute assets

Trustee discretion on distributions
Flexibility for changing circumstances
Protection against beneficiary mismanagement
Tax planning advantages
Ideal for complex family situations

Fixed Trusts

Clear definition of beneficiary entitlements in the trust deed

Predetermined beneficiary shares
Limited trustee discretion
Certainty for beneficiaries
Simplified administration
Suitable for straightforward distributions

Living Trusts

Established during the settlor's lifetime and takes effect immediately

Immediate effect upon creation
Settlor can be a trustee
Avoids probate process
Can be revocable or irrevocable
Maintains privacy

Testamentary Trusts

Created through a will and activated upon the settlor's death

Activated after death
Part of will provisions
Goes through probate
Ideal for minor beneficiaries
Can be changed until death

Charitable Trusts

Established for philanthropic purposes and charitable giving

Exclusively charitable purposes
Tax benefits available
Registered with NGO Board
Perpetual existence possible
Social impact focus

Benefits of Family Trusts

Avoid Succession Disputes

Clear allocation of assets minimizes family conflicts and legal battles over inheritance.

Bypass Probate

Assets in a trust do not go through the lengthy and public court-based succession process.

Asset Protection

Shields assets from creditors, lawsuits, or marital disputes that beneficiaries may face.

Business Continuity

Ensures structured succession and continuity of family businesses across generations.

Tax Efficiency

Potential tax advantages through proper structuring of wealth transfer and distributions.

Confidentiality

Trust arrangements remain private, unlike wills which become public record during probate.

Professional Management

Assets managed by experienced trustees according to clear guidelines and objectives.

Support for Dependents

Provides for minors, special needs dependents, or family members who need financial support.

Trust vs Will: Key Differences

Feature	Trust	Will
Effective Date	During settlor's lifetime (living trust)	After death
Probate Process	Avoids probate	Requires probate
Privacy	Private document	Becomes public record
Asset Protection	Strong protection	Limited protection
Flexibility	Can be amended (revocable)	Can be changed until death
Cost	Higher setup costs	Lower initial costs
Complexity	More complex to establish	Simpler to create

Setting Up a Trust in Kenya

Establishing a trust involves several important steps to ensure legal compliance and proper structure:

1

Identify Purpose

Define the objectives and structure of the trust based on your needs.

2

Draft Trust Deed

Create a comprehensive trust deed with legal assistance.

3

Appoint Trustees

Select qualified trustees (can include corporate trustees).

4

Transfer Assets

Legally transfer assets into the trust ownership.

5

Register Trust

Register with relevant authorities including Ministry of Lands.

6

Tax Compliance

Register with KRA and ensure ongoing tax compliance.

7

Management

Implement proper trust administration and record-keeping.

8

Review

Regularly review and update trust arrangements as needed.

Start the Process

Legal Framework in Kenya

As of the enactment of The Trustees (Perpetual Succession) (Amendment) Act, 2021, and the Finance Act, 2021, Kenya now formally recognizes family trusts as legal persons. This development has enhanced the credibility and enforceability of trusts in Kenya.

Key Legal Points:

Trusts can now be registered and issued with a certificate of incorporation
A family trust can own property, sue or be sued in its own name
Trusts can be perpetual or have a defined duration
The Kenya Revenue Authority (KRA) recognizes trusts for tax purposes
Trustees have fiduciary duties and must act in beneficiaries' best interests
Proper registration with the Ministry of Lands & Physical Planning is required

Important Legal Consideration

Trust establishment and administration require proper legal guidance. We work with experienced legal professionals to ensure your trust is properly structured and compliant with Kenyan laws and regulations.

Challenges and Considerations

Trustee accountability is critical; poor management can lead to loss or misappropriation of assets.
Legal and tax compliance must be maintained, including annual returns and proper documentation.
Initial setup and maintenance costs may be significant, especially with professional trustees or complex assets.
Evolving legislation requires keeping up to date with regulatory changes.

Conclusion

Trust funds and family trusts in Kenya offer an effective legal mechanism for wealth management, succession planning, and long-term financial security. With recent legal reforms, trusts are now more accessible and reliable for individuals, families, and businesses looking to protect their legacy. Working with experienced legal and financial advisors is essential to set up a trust that meets both legal requirements and family objectives.

Why Choose Laren Insurance Agency?

Expert Guidance: Our team understands Kenyan trust laws and estate planning requirements
Comprehensive Approach: We consider your entire financial picture when recommending solutions
Trusted Partnerships: We work with experienced legal professionals specializing in trust law
Ongoing Support: We provide continuous advice as your circumstances change
Local Expertise: Deep understanding of the Kenyan legal and financial landscape
Client-Focused: We prioritize your family's needs and long-term objectives
Proven Track Record: Years of experience helping families secure their legacies
Holistic Planning: Integration of trusts with your overall estate and financial plan

Frequently Asked Questions

Who should consider setting up a family trust in Kenya?

Family trusts are particularly beneficial for individuals with significant assets, business owners, those with complex family situations, people concerned about succession disputes, and anyone wanting to provide for minors or dependents with special needs. If you have assets worth KSh 5 million or more, or own a business, a family trust is worth considering.

How much does it cost to set up a trust in Kenya?

Costs vary depending on complexity, but typically include legal fees for drafting the trust deed (KSh 20,000-100,000+), registration fees, and potentially ongoing trustee fees if using professional trustees. We provide transparent cost estimates during consultation and can help you understand all associated costs before proceeding.

Can I be the trustee of my own trust?

Yes, for living trusts, you can appoint yourself as a trustee. However, it's often advisable to include additional trustees for continuity and to manage the trust if you become incapacitated. Many people choose to have a corporate trustee or family members as co-trustees to ensure proper management.

What assets can I put in a family trust?

Most assets can be placed in a trust including real estate, bank accounts, investments, business interests, intellectual property, and personal property. Some assets may require special consideration for transfer. We can help you identify which assets are suitable for trust ownership and guide you through the transfer process.

How does a trust protect assets from creditors?

Properly structured trusts can provide asset protection as the legal ownership transfers to the trust. However, transfers made to defraud existing creditors can be challenged in court. It's important to establish trusts before creditor issues arise and to follow proper legal procedures. We can advise on the best approach for your situation.

Can a trust be changed or revoked?

It depends on the type of trust. Revocable trusts can be amended or revoked by the settlor. Irrevocable trusts generally cannot be easily changed, though some provide mechanisms for modification under certain circumstances. We help you understand the implications of each type and choose the right structure for your needs.