Under Kenyan law, a family trust may take the form of either a living trust or a testamentary trust, which are primarily established for the planning and management of personal estates and the preservation or creation of wealth for future generations. A family Trust is provided for under the Trust Administration Act, 2026.
A testamentary trust in Kenya is created through a Will and takes effect after the death of the testator. It identifies the trustees and beneficiaries and sets out how the trust assets will be managed and distributed. It is an effective estate planning tool, particularly where assets are intended to benefit children, dependants or other beneficiaries over time.
A living trust in Kenya, also known as an inter vivos trust, is established during the settlor’s lifetime. Assets are transferred to the trust for management by trustees for designated beneficiaries. Unlike a testamentary trust, it operates during the settlor’s lifetime and may support wealth management, asset succession and intergenerational wealth preservation. Depending on its terms, a living trust may be revocable or irrevocable.
Revocable Living Trust
A revocable living trust allows the settlor to retain a degree of control over the trust during their lifetime. Subject to the terms of the trust deed, the settlor may amend, vary or revoke the trust.
This structure may provide flexibility where the settlor anticipates that their circumstances, assets or intended beneficiaries may change over time.
Irrevocable Living Trust
An irrevocable living trust is structured so that, once properly established and the relevant assets transferred, the settlor generally cannot unilaterally amend or revoke the trust.
The settlor consequently gives up significant control over the assets placed in the trust, which are thereafter administered by the trustees in accordance with the trust deed and for the benefit of the beneficiaries.
Requirements for Registration of a Family Trust in Kenya
To register a family trust in Kenya, the applicant must make an application to the Registrar in the prescribed manner and submit the required supporting documents and information. The key requirements include:
- Trust Deed – A duly executed Trust Deed setting out the terms and administration of the trust, including the identity of the settlor, trustees, beneficiaries, enforcer and the initial trust property.
- Trustees – A family trust must have at least one trustee. Where a trustee is a natural person, at least one trustee must be a Kenyan citizen.
- Prescribed Fees – Payment of the applicable registration and other statutory fees, together with any professional fees.
- Initial Trust Property – A statement identifying the assets initially settled into the trust.
- Beneficiaries’ Details – Information identifying the beneficiaries of the family trust.
- Settlor’s Details – The prescribed particulars and identification documents of the settlor.
The specific documentation and applicable fees should be confirmed at the time of registration, as regulatory requirements and charges may change.
Benefits of Registering a Family Trust in Kenya
A properly structured family trust in Kenya can provide several estate-planning and wealth-management benefits, including:
- Facilitating intergenerational wealth transfer and succession planning.
- Reducing the risk of family disputes over the management and distribution of assets.
- Providing a structured framework for managing family property for beneficiaries, including minors.
- Separating trust assets from the personal estate of the settlor, subject to applicable law.
- Providing flexibility in determining how and when beneficiaries receive trust assets.
- Potentially providing applicable tax benefits and exemptions, including exemptions relating to certain transfers of property into a registered family trust, where the statutory requirements are satisfied.
Is Stamp Duty Payable On transactions Involving a Family Trust?
Stamp duty may be payable on certain transfers to and from the trust, but properly registered family trusts can enjoy relief on transfers of property into the trust and on transfers from the trustee to beneficiaries, while transfers to third parties remain subject to normal duty. Under Section 52(2)(b) of the Stamp Duty Act:
- Transfer of property from the settlor to the trust is exempt from stamp duty.
- Under Section 52(6), transfer from the trust to beneficiaries is also exempt.
Is a Registered Family Trust Taxed on Its Income?
A registered family trust in Kenya enjoys specific tax exemptions under Section 36 (g) the Income Tax Act. The income or principal sum of a registered family trust is exempt from income tax, subject to the applicable statutory conditions.
Does a Family Trust Pay Capital Gains Tax in Kenya?
The Income Tax Act specifically exempts capital gains arising from the transfer of title of immovable property to a family trust. However, subsequent transactions involving trust property may have different tax implications depending on the nature of the transaction.
Creating a family trust can be a smart, future-focused move, but only if structured correctly. Before you transfer any property, seek legal and tax counsel to ensure that the transaction is compliant, cost-effective, and strategically aligned with your goals.
At Omogi & Kaka Company Advocates, we provide tailored legal solutions for trusts, succession, and estate planning, helping you preserve and protect your family legacy.
Need help setting up a family trust or navigating a property transfer?
Talk to our legal team today: info@omogiandkakaadvocates.co.ke
