By the end of this article, you will know exactly what a trust is, which laws govern it in Kenya, the types available to you, and how to tell them apart.
What is A Trust?
A trust is a legal arrangement where one person hands over their assets, property, money, or investments to another person to manage, on behalf of someone else.
Here is a simple way to picture it. A mother wants to make sure her three children are taken care of, no matter what happens to her. She sets up a trust and places her properties and savings into it. She appoints her brother as the person responsible for managing everything.
The trust deed, the document that creates and governs the trust, spells out exactly what he can and cannot do, and what each child is entitled to receive and when. The mother is the settlor, the one who creates the trust. Her brother is the trustee, the one who holds and manages the assets. Her children are the beneficiaries, the ones the trust exists to protect.
The assets are no longer in the mother’s name. They belong to the trust. And because of that, they are protected from mismanagement, from disputes, and from the delays and costs that come with settling an estate after someone passes away. That is the core of what a trust does. It separates who legally owns the assets from who benefits them, and puts a structure around how those assets are handled.
The Law Governing Trusts in Kenya
Three laws form the backbone of how trusts are created, managed, and taxed in Kenya. You do not need to memorise them, but knowing they exist, and what each one covers helps you understand why certain things are required when setting up a trust.
1. The Trustees (Perpetual Succession) Act, Cap. 164
This is the main law. It is the one that makes a trust a real, recognised legal entity in Kenya, meaning the trust can own property, open accounts, and operate in its own name, separate from the people involved in it. It also sets out what types of trusts exist, what trustees are allowed to do, and how a trust gets officially registered. It has been updated over the years, most recently in 2021 and 2024, to reflect how trusts are being used today.
2. The Trustee Act, Cap. 167
Where the first law deals with the trust itself, this one focuses on the trustee, the person managing it. It covers things like how trustees are appointed or replaced, what decisions they can make with the trust’s assets, and how they can delegate responsibilities if needed. In short, it sets the rules for how the job of being a trustee is supposed to be done.
3. The Income Tax Act
A trust in Kenya is required to have its own KRA PIN and file tax returns. This law governs how any income generated by trust assets is taxed. It is worth knowing early in the process, because tax planning and trust structuring often go hand in hand. Together, these three laws shape every trust that is set up in Kenya, from the day it is created to how it operates and what it pays in taxes.
Worth noting: A Trust Administration Bill, 2025 is currently being reviewed in Kenya. It aims to bring all these rules under one updated law. If it passes, it could change some of the current requirements, so it is something to keep an eye on.
Types of Trusts in Kenya
In Kenya, there are three types of trusts, and the type you set up depends on what you are trying to achieve. Here is how each one comes to be and what it is used for.
1. Charitable Trust
A charitable trust exists to serve the public, not a specific family or individual. It is set up to support a cause: education, healthcare, poverty alleviation, environmental conservation, and religion. Think of it as a formal, legally protected way of directing your resources toward something bigger than yourself or your household.
For a trust to be recognised as charitable in Kenya, the work it does must be open to the public, or at least a broad enough section of it, not just a private group. This is the commonly registered type of trust in Kenya, and it is the structure most NGOs, foundations, and faith-based organisations use.
2. Non-Charitable Trust
A non-charitable trust is set up for a specific purpose that is legal and defined but does not meet the requirements to be classified as charitable. The trust is not about benefiting a person; it is about achieving something.
A practical example: a businessman sets up a trust specifically to fund the maintenance of a private family cemetery, or to ensure a particular piece of land is preserved exactly as it is for future generations. There is no charity involved. No named person walks away with money. The trust simply exists to carry out that one specific objective.
For this type of trust to be valid:
- The purpose must be clearly stated and achievable,
- The trust deed must specify what happens to any remaining assets once that purpose has been fulfilled.
3. Family Trust
A family trust is a private arrangement set up to protect and manage wealth for family members, across generations if needed. It does not run a business. It holds assets: property, investments, savings, shares, and manages them according to the rules the person who created the trust has put in place.
It is one of the most powerful tools available to families who want to plan ahead. When structured well, a family trust means your children do not have to go through a lengthy court process to access what you have left for them. It means you can set conditions, for example, that a child only receives their share when they turn 30, or after completing university.
Trusts Based on When They Are Created
Beyond the three main types, trusts are also classified by when they come into effect, whether during the person’s lifetime or after their death.
1. A Living Trust (Inter Vivos Trust)
A living trust is set up and activated while the person creating it is still alive. The assets move into the trust immediately. The person does not have to wait until they pass away for the trust to start working.
This is useful when someone wants to start protecting assets now, for instance, a parent who wants to ring-fence certain properties for their children while they are still around to oversee how it is being managed. It can also help avoid complications that come with transferring assets through a will after death.
2. A Testamentary Trust
A testamentary trust is written into a person’s will and only kicks in after they die. During their lifetime, the trust does not exist yet, it is essentially a set of instructions that activate when the will is executed.
This works well for parents who want to provide for young children but do not want a large sum of money handed over before the child is mature enough to manage it. It is also commonly used in blended families, where the interests of a spouse, biological children, and stepchildren all need to be carefully considered and clearly structured.
Final Thoughts
Trusts are one of the most effective and underused tools for protecting wealth and planning ahead in Kenya. Whether you want to provide for your family, support a cause, or make sure your assets go exactly where you intend, the right trust, properly set up, can do all of that.
If you have any questions about this article or trusts, please reach out to us at [email protected]