You have spent years building something worth protecting. Now you are ready to set up a trust, and the first question is usually where do I even begin? Wealth comes in many forms and through many paths. It may be built over years of hard work, received through inheritance or gift, acquired through investment, or gained through an unexpected opportunity.
Whatever its source, wealth requires thoughtful planning to ensure that it is protected, managed, and transferred in accordance with your wishes. Without a clear estate plan, families may face uncertainty, disputes, delays, unnecessary costs, and loss of control. Proper planning allows you to preserve your wealth, care for your loved ones, and shape your legacy with clarity and intention.
The Steps to Registering a Trust in Kenya
Step 1: Be Clear on the Purpose of the Trust
Before preparing the trust deed, it is important to understand what the trust is intended to achieve. This includes identifying the assets to be held in the trust, the beneficiaries or causes to be supported, and the trustees who will be responsible for managing the trust property. A trust may be used to preserve family wealth, hold property or business interests, provide for children and future generations, support a charitable purpose, or create a clear structure for the management and transfer of assets. Once the purpose is clear, the trust can be properly structured and the trust deed can be drafted to reflect the founder’s intentions.
Step 2: Determine the Appropriate Type of Trust
Once the purpose of the trust has been identified, the next step is to determine the most suitable type of trust to establish. In Kenya, trusts may generally be registered as charitable trusts, non-charitable trusts, or family trusts. The appropriate structure will depend on the intended purpose of the trust, the nature of the assets to be held, the persons or causes intended to benefit, and the long-term objectives of the founder.
For a more detailed discussion on the different types of trusts, please see our article: Types of Trusts in Kenya.
Step 3: Prepare the Trust Deed
The trust deed is the foundational legal document that establishes the trust and sets out the terms upon which it will operate. It identifies the founder, trustees and beneficiaries, describes the trust property, and outlines the powers, duties and obligations of the trustees. It also provides for key matters such as administration of the trust, distribution of benefits, appointment and removal of trustees, dispute resolution, and termination of the trust.
A trust deed must be carefully drafted to reflect the founder’s intentions, the nature of the assets, the needs of the beneficiaries, and the long-term objectives of the trust. Poorly drafted or vague provisions may create uncertainty, disputes, administrative difficulties, or unintended legal and tax consequences. For this reason, it is advisable to seek legal guidance when preparing a trust deed.
Step 4: Register the Trust Deed
Once the trust deed has been prepared and executed by the founder and trustees, it should be assessed for stamp duty, stamped and thereafter registered at the Registry of Documents.
Step 5: Incorporate the Trust
Registered family trusts and charitable trusts may subsequently be incorporated to give them separate legal personality. Once incorporated, a trust can hold property, open bank accounts, enter into contracts, sue and be sued, and operate with greater continuity notwithstanding changes in trusteeship. Incorporation is carried out through the Companies Registry via the eCitizen BRS platform.
Step 6: Obtain a KRA Pin for the Trust
Once the trust has been incorporated, the trustees should apply for a KRA PIN certificate for the trust through the KRA iTax portal. The KRA PIN enables the trust to meet its tax compliance obligations, open and operate bank accounts where required, and undertake transactions that require tax identification.
The trustees should also ensure that annual tax returns are filed for the trust for as long as the trust remains in existence, even where the trust has not earned taxable income during a particular year.
Documents Required to Register a Trust in Kenya
- The trust deed, registered under the Registration of Documents Act.
- A duly completed application for incorporation in the prescribed form (Form TR1).
- A commissioned Petition for Incorporation.
- A statement of donor funding or commitment (where applicable for charitable trusts).
- Title deeds or proof of asset ownership.
- Current search indicating ownership position of assets listed.
- Financial statement of the organization or of one trustee such as a current bank statement;
- Minutes appointing the Trustees;
- Brief Summary of the Trust (should not exceed 1 Page);
- Curriculum vitae of the trustees or employees;
- Diagrammatic representation of the common seal;
- Certified copies of ID, KRA Pin and passport photos of the Settlor, Trustees, beneficiaries and enforcers if any.
Frequently Asked Questions About Trusts in Kenya
- How long does registration take? The registration process typically takes approximately three to four weeks. However, timelines may vary depending on the completeness of the documents provided, the number of corrections required, and the processing timelines at the relevant registries.
- Is a trust the same as a will? No. A will sets out how a person’s assets should be distributed after death and ordinarily takes effect after the probate process. A living trust, on the other hand, is established during the founder’s lifetime and may continue to operate after the founder’s death without the trust assets forming part of the probate process, provided that the assets have been properly transferred to the trust.
- Can I change the details of my trust after it has been set up? Yes, provided that the trust deed allows for amendment. The extent to which a trust may be amended will depend on the amendment clause contained in the trust deed and the nature of the proposed changes.
- Can I add more assets to the trust after it has been set up? Yes. Additional assets may be transferred to the trust after it has been established, provided that the trust deed does not restrict this. The founder or any other person may also transfer assets, income or other benefits to the trust in accordance with the terms of the trust deed and applicable law.
- Does the process differ depending on the type of trust? The core steps are generally similar across different types of trusts. However, the drafting, structure, regulatory requirements and supporting documents may vary depending on whether the trust is a family trust, charitable trust or non-charitable purpose trust.
- What are the tax obligations of a trust? Trusts may have ongoing tax compliance obligations, including the requirement to obtain a KRA PIN and file annual tax returns. Income generated by trust assets, such as rental income, dividends or interest, may be subject to tax depending on the nature of the income, the type of trust, and the applicable tax exemptions. Certain tax reliefs may be available to registered family trusts. For example, KRA recognises exemptions in respect of property, including investment shares, transferred or sold for the purpose of transferring title or proceeds into a registered family trust, and the transfer of title of immovable property to a family trust. The availability of any tax exemption should, however, be assessed on a case-by-case basis before any transfer is undertaken.
- Who can be a trustee? A trustee may be an individual or a corporate entity, such as a trust corporation, corporate trustee company or bank. The choice of trustee is important, as trustees are responsible for managing and administering the trust property in accordance with the trust deed and applicable law.
If you have any questions about this article or trusts, please reach out to us at [email protected].