Trusts are legal relationships involving three parties: the Settlor (creator of the trust), the Trustee (protector of the trust), and the Beneficiary. These parties can be individuals or legal entities. The Settlor transfers legal ownership of assets to the Trustee, who holds and manages these assets for the benefit of the Beneficiaries.

Trusts in Kenya are established through a written document, such as a Trust Deed, which outlines the duties and powers of the Trustee. Trusts are governed under the Trustees (Perpetual Succession) Act (Cap.164 of the Laws of Kenya). Additional statutes, such as the Income Tax Act and the Tax Procedures Act, also affect the operation of trusts.

Formation and Registration of Trusts

Simple Trust

Simple Trusts are registered at the Lands Registry under the Registration of Documents Act (Cap. 285). This registration process establishes the trust as an unincorporated entity, meaning it does not have a separate legal personality. Consequently, the trust cannot own property or enter into contracts in its own name but must do so through its Trustees. Any change in Trustees must be individually noted on all ownership documents, which can pose administrative challenges.

Incorporated Trusts

To avoid these challenges associated with Simple Trusts, it is advisable to register the trust under the Trustees (Perpetual Succession) Act. This registration is undertaken at the Business Registration Service and grants the trust a distinct legal identity, allowing it to own property, enter into contracts, and perform other legal actions in its own name.

Charitable Trusts and Foundations in Kenya

A charitable trust is a specific type of trust where the property held by a trustee must be used for charitable purposes, such as advancing health, education, religion, or other community benefits. Charitable trusts in Kenya can provide significant tax savings, protect assets from legal liabilities, and ensure that the donor’s charitable intentions are fulfilled.

Advantages of Charitable Trusts

• Tax Savings

Minimize income tax, capital gains tax, and estate taxes.

• Asset Protection

Shield assets from potential legal claims or liabilities.

• Enhanced Certainty

Clear rules and recognition by courts ensure that the donor’s wishes are carried out.

Disadvantages of Charitable Trusts

• Irrevocability

Once established, charitable trusts are often irrevocable, meaning assets cannot be reclaimed.

• Cost Implications

Establishing a trust incurs costs, although these are typically offset by tax benefits.

Requirements for Registration of a Charitable Trust

To register a charitable trust or foundation in Kenya, the following are required:

1. Name of the Trust or Foundation
2. Main Objective of the Trust (e.g., relief of poverty, advancement of education, health, religion, environmental protection, etc.)
3. Name and details of the Settlor/Donor (individual or company)
4. Proposed physical address of the trust or foundation
5. Trust Deed
6. Description of beneficiaries
7. Trust Fund and list of initial assets
8. Letter/statement from the donor
9. Trustees’ information (names, addresses, passport photos, PIN certificates, IDs/passports, CVs, statement of accounts, minutes of appointment, petition to the minister, seal of the trust, financial statement)

Procedure for Registration

1. Preparation of Trust Deed

This document must detail the name, objectives, and trustee information, including their powers to appoint or change trustees.

1. Payment of Stamp Duty

The signed trust document is submitted for stamp duty.

1. Registration under the Registry of Documents Act

This process takes 1-3 weeks and allows the trust to commence its activities as a simple trust.

1. Incorporation under the Trustees (Perpetual Succession) Act

A certified copy of the trust deed and a petition for incorporation are lodged with the Business Registration Service. Once incorporated, the trust receives a Certificate of Registration, granting it corporate identity and the ability to sue and be sued in its own name.

If you need assistance or have any inquiries regarding Trusts in Kenya, we are here to help. Please feel free to reach out to us using the following contact information:

Cell Phone: 0111 888 681

Email: info@dmklaws.co.ke or dmklaws@gmail.com

We are available to provide guidance, answer your questions, and offer support regarding Trusts in Kenya. Don’t hesitate to reach out to us, and we will be glad to assist you.

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