A trust is a legal arrangement where a person (the settlor) transfers assets (trust property) to trustees, who manage them to benefit the designated beneficiaries. This relationship is formalized through a written trust deed detailing the duties and powers of the Trustee, the trust property, and the parties involved. Trusts are widely used for estate planning, asset protection, and charitable purposes.
Governing Law
The registration and operation of trusts in Kenya are governed by:
- The Trustees (Perpetual Succession) Act (Cap. 164) – Provides for the incorporation of trusts, granting them a separate legal identity.
- The Trustee Act (Cap. 167) – Defines the duties and powers of trustees.
- The Income Tax Act – Regulates the taxation of trusts.
- The Registration of Documents Act (Cap. 285) – Governs the registration of trust deeds.
Types of Trusts
Trusts in Kenya can be categorized into:
- Charitable Trusts – Established for philanthropic purposes such as education, health, social welfare, and poverty alleviation.
- Family Trusts – For managing personal estates and to preserve wealth for future generations.
- Non-Charitable Trusts: For specific personal objectives beyond family or charity, including pension or provident funds.
Benefits of Creating a Trust
- Asset Protection: Trusts provide a structured framework for managing and safeguarding family wealth from creditors, lawsuits, or external claims.
- Estate Planning: They enable the smooth transfer of assets to heirs, reduce legal disputes, and ensure clear instructions on asset distribution.
- Privacy: Trusts keep financial affairs confidential, preventing public disclosure.
- Tax Efficiency: Trusts can reduce inheritance and estate taxes, helping families retain more wealth through strategic tax planning.
Procedure for Incorporating a Trust
The process of registering a trust in Kenya involves several steps:
- Define Trust Objectives: Clarify your goals- whether to protect assets, plan for future generations, support charitable causes, or manage estate distribution.
- Choose the Trust Type: Select the appropriate trust type based on your objectives (family, charitable, or non-charitable).
- Select Trustees: Appoint trustworthy individuals or entities with financial management skills and legal competence to manage the trust responsibly.
- Draft the Trust Deed: Prepare a detailed trust deed outlining the name, objectives, trustee powers, and beneficiary rights. This document formalises trust.
- Payment of Stamp Duty – The trust deed must be assessed and stamped at the Lands Registry.
- Register the Trust:
- Under the Registration of Documents Act: Registration is possible but does not confer corporate status; trustees remain personally liable.
- Under the Trustees (Perpetual Succession) Act: Registration grants the trust a corporate status with perpetual succession, allowing it to hold property, sue or be sued in its name.
- Submit Required Documents: File the trust deed and registration forms with the relevant government office.
- Issuance of Certificate of Incorporation – Upon approval, the trust is granted legal status.
Note: The incorporation application is submitted online via the Business Registration Service portal at manual.brs.go.ke.
Required Documents for Trust Registration:
- Duly completed application form (Form TR1).
- Commissioned petition for incorporation.
- Registered trust deed or constitution.
- Statement of donor funding or commitment.
- Title deeds or asset ownership documents.
- Current asset ownership searches.
- Financial statements or bank statements.
- Minutes appointing trustees.
- Summary of the trust.
- Curriculum vitae of trustees or employees.
- Diagrammatic representation of the common seal.
- Certified copies of IDs, KRA PINs, and passport photos of all relevant parties.
Frequently Asked Questions (FAQs) on Trust Registration in Kenya
Q1: What is the difference between a registered and an unregistered trust?
A: An unregistered trust exists once the trust deed is executed and stamped, but it cannot hold property in its name. A registered trust, incorporated under the Trustees (Perpetual Succession) Act, has a legal personality and can acquire, hold, and dispose of property in its name.
Q2: Can a trust be used for family wealth planning in Kenya?
A: Yes. Family trusts are increasingly popular for succession planning, protecting assets across generations, and managing wealth while ensuring privacy and flexibility in distribution.
Q3: How long does it take to register a trust in Kenya?
A: The duration depends on the completeness of documentation and approval timelines at the Registrar of Documents and BRS. On average, it may take 4 – 12 weeks from start to finish.
Q4: Who can be a trustee?
A: Any individual or corporate entity with legal capacity and integrity can be appointed as a trustee. Trustees should be competent, trustworthy, and ideally have some financial or legal literacy.
Q5: Can a trust be revoked after it is registered?
A: Yes, a trust can be revoked if it is revocable, as specified in the trust deed. Irrevocable trusts, however, cannot be terminated unilaterally once created unless court-ordered or under exceptional circumstances provided in the deed.
Q6: Is a trust subject to tax in Kenya?
A: Yes. Trusts are recognised as separate tax entities and may be required to file annual tax returns with KRA. The tax treatment depends on the type of trust and the income generated.
Q7: What happens if a trustee dies or resigns?
A: The trust deed usually provides for the appointment of replacement trustees. In a registered trust, a resolution and filing with the Registrar are required to update trustee details.
Q8: Can foreigners establish or benefit from a trust in Kenya?
A: Yes. Foreigners can create trusts in Kenya and can also be named as beneficiaries or trustees, subject to legal compliance and documentation requirements.
Q9: Is it mandatory to use a lawyer to register a trust?
A: While not strictly mandatory, legal assistance is strongly recommended. Trust registration involves complex legal and procedural requirements, and errors can invalidate the trust or expose assets to risk.
How Njaga & Co Advocates LLP Can Assist
At Njaga & Co Advocates LLP, we provide expert legal services in trust registration, including:
- Legal Consultation: Providing expert advice on the suitability and structure of trusts for your specific needs.
- Drafting trust deeds tailored to your needs.
- Facilitating registration with the Business Registration Service.
- Tax Advice: Advising on tax implications and estate planning strategies.
- Post-Incorporation Support: Offering ongoing legal support for trust management, compliance, and dispute resolution.
By partnering with Njaga & Co., Advocates LLP, clients benefit from deep Kenyan legal expertise and a global perspective, ensuring innovative, cost-effective, and professional solutions for establishing and managing trusts.
Creating a trust in Kenya is a strategic way to protect and manage your assets for current and future generations. With proper planning, legal expertise, and clear documentation, trusts offer a robust framework for wealth preservation, privacy, and tax efficiency.
Our experienced team is committed to providing tailored legal solutions to meet your trust registration and management needs and to ensure the process is smooth, legally sound, and aligned with your family’s financial goals. Contact us today for professional assistance.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a qualified advocate for personalized legal guidance.
