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Family trusts in Kenya, an alternative to probate? The overhaul of the legal trust regime in Kenya

Updated: Apr 25


This newsletter highlights the overhaul of the legal trust regime in Kenya.

It proposes family trusts as an alternative to probate and the limitations under the Law of Succession Act(Cap 160). It further finds that the Finance Act 2021 has enacted changes to the Income Tax Act (Cap 470) & The Stamp Duty Act (Cap 480) which have created exemptions in Capital Gains Tax and Stamp Duty for assets being transferred to the registered family trust, it also highlights the applicable exemptions of income tax to income accrued by the registered family trust and income paid to the beneficiaries under the Act. The newsletter highlights the changes proposed by the The Trustees (Perpetual Succession) (amendment) Bill, 2021 & The Perpetuities and Accumulations (Amendment) Bill, 2021. Which among others scrape the perpetuity period of registered family trusts and the accumulation period of income under family trusts.

The newsletter concludes by drawing comparison to probate vis-a-vis family trusts and finds the enacted and proposed changes to various statutes have created a legal, favourable and enabling framework for the establishment of family trusts and creation of generational wealth.


Succession disputes can be a stressful, expensive, time consuming and result in the deterioration of the deceased's estate. It is however a necessary piece of legislation to ensure the will and wishes of the deceased are protected, and to ensure the equitable distribution of the deceased's estate in the event they died intestate (without a will). Section 45 of the Law of Succession Act expressly prohibits and makes it an offence to intermeddle, dispose of or alienate the free property of a deceased person except with express authorisation as per the Act.


A trust is a fiduciary relationship created where an individual (settlor) gives a third party (Trustee) the right to hold their property for the use, protection and benefit of a beneficiary (cestui que trust).

Trusts are primarily established to ensure the Settlor's assets are legally protected and ensure their assets are managed and distributed according to their wishes. Trusts are an essential tool to settlers to ensure their assets are not mismanaged or deteriorated by their beneficiaries after their death. Trusts are also a means to prevent the settlor's trust assets from being subject to succession proceedings and probate. Trusts that are however, designed to avoid a legal responsibility such as creditors or to perpetuate an illegality will be voided by courts.

Trust Regime in Kenya

The current Trust laws in Kenya only recognize; testamentary trusts, pension & provident trusts, and trusts created for any; religious, educational, literary, scientific, social, athletic or charitable purpose. This exhaustive list excludes the formation of non-charitable purpose trusts such as purpose trusts, living trusts, employee trusts (for private businesses) and family trusts that could be formed during the lifetime of the settlor and hence avoid probate disputes.

Trust law in Kenya is covered under two primary statutes;

(i) The Trustees (Perpetual Succession) Act (Cap 164); and

(ii) Perpetuities and Accumulations Act (Cap 161) of the Laws of Kenya.

The Trustees (Perpetual Succession) Act governs what type of trusts recognized by law, their procedure for registration and their juristic personality. The Perpetuities and Accumulations Act creates restrictions on accumulations of income for the benefit of beneficiaries. The amendments to the two acts shall be discussed below.

Limitations of the current legal regime

1. The law, as is, does not adequately recognize non-charitable purpose trusts.

2. Testamentary trusts are formed under a testator’s will and therefore only come into operation after their death and probate. This exposes it to lengthy litigious disputes and external court intervention which might be against a settlor’s original intention.

3. The current trust registration process is too lengthy & bureaucratic.

Reasons for legislative changes

1. The establishment of family trusts will assist in the creation and preservation of sustainable generational wealth. Currently, hardly any productive family assets survive three successive generations of one family.

2. Recognition of family trusts will reduce the number of cases in Probate Courts and petty ownership disputes between rival siblings.

3. A family trust ring-fences family assets throughout multiple successive generations from any future potential divorces, bankruptcy or thrift spending of any single beneficiary since the property belongs to the trust for the benefit of multiple generations of a family and not necessarily the immediate successive generation.

4. A family trust gives the Settlor more testamentary power on how, when and to whom their assets should be distributed or enjoyed during and even after their death.

Enacted Legislative Changes by the Finance Act 2021

The Finance Act 2021 has brought amendments to the Income Tax Act and the Stamp Duty Act with the aim of providing exemptions that benefit and incentivise Individuals to create family trusts.

Income Tax Act

Section 11(3) of the Income Tax Act provides any income (taxable on the trustee) received by a beneficiary from a trustee is subject to taxation on the beneficiary under the Act.

The finance Act 2021 has introduced section 11(3A) to the Income tax to provide an exemption of taxable income under Section 11(3) of the Income Tax Act with respect to "registered trusts" in the following circumstances;

  1. any amount that is paid out of the trust income on behalf of any beneficiary and is used exclusively for the purpose of education, medical treatment or early adulthood housing;

  2. income paid to any beneficiary which is collectively below ten million shillings in the year of income; and

  3. such other amount as the Commissioner may prescribe from time to time.

The Finance Act has introduced paragraph 57 of the first schedule to the Income Tax Act which provides an exemption on the income or principal sum of a registered family trust.

The Finance Act has also amended section 25 (7) which covers the definition of a settlement under the Income Tax Act to include "transfer assets through a registered family trust."

Capital Gains Tax Exemptions

Paragraph 36 of the first schedule of the Income Tax Act has been amended introducing a new provision granting exemption from capital gains tax on income derived by an individual upon transfer of property, including investment shares, which is transferred or sold for the purpose of transferring the title or the proceeds into a registered family trust.

Paragraph 58 of the Income Tax Act is also amended to provide an exemption to capital gains tax on an individual who transfers immovable property to a family trust. We do note that the exemption has not highlighted a registered family trust, which means the exemption may apply to both registered & unregistered family trusts.

A family trust has not been defined in the amendments introduced by the Finance Act 2021, however the same is defined in the Trustees (Perpetual Succession) (Amendment) Bill, 2021 as a ‘’a trust, whether living or testamentary, partly charitable or non-charitable, that is registered or incorporated by any person or persons, whether jointly or as an individual, for the purpose of planning or managing their personal estate’’. The bill will be further discussed below.

Stamp Duty Exemptions

The Finance Act 2021 has amended Section 52 and 117 of the Stamp Duty Act to provide for exemption of payment of stamp duty by a registered family trust upon transfer of a gift inter vivos (during the lifetime of the settlor). Currently any conveyance or transfer operating as a voluntary disposition (gift) inter vivos would be chargeable with stamp duty as if it were a conveyance or transfer on sale, with the substitution in each case of the value of the property conveyed or transferred for the amount or value of the consideration for the sale, unless expressly exempted by the Stamp Duty Act. The Stamp Duty Act however has an exemption under Section 52 (2) (b) on "any body of persons established for charitable purposes only or the trustees of a trust so established", however this does not cover family and non-charitable trusts.

The amendment brings registered family trusts into the ambit corporate bodies exempt from paying stamp duty upon transfers of property from an individual to the registered family trust.

The Trustees (perpetual Succession) (amendment) Bill, 2021

The Trustees (Perpetual Succession) (amendment) Bill, 2021 proposes changes that seek to harmonise and provide a legal framework for the recognition and establishment of family and non-charitable trusts. Section 3D of the bill defines family trusts as "a trust whether living or testamentary, partly charitable or non-charitable, that is registered or incorporated by any person or persons, wether jointly or as an individual, for the purposes of planning or managing their personal estate."

The Act specifies that a family trust shall be made in contemplation of other beneficiaries other than the settlor, wether such intended beneficiaries are directly related to the settlor or not, or are living or not. The section further provides notwithstanding creation of a trust in contemplation of the beneficiaries, a family trusts shall not be invalid for the reason that the settlor(s) are also beneficiaries to the trust.

The registered family trust will also be registered as a corporate body however, under the bill it shall be a non-trading entity. This means the trust will be exempt from corporation tax rate that is ordinarily imposed on other corporate bodies such as limited companies & co-opertaive societies.

Section 3J of the bill also proposes to introduce an enforcer, an enforcer under the bill shall be an individual or corporate body, appointed by the settlor or beneficiaries in the absence of the settlor and who's role is to enforce the terms of the trust. An enforcer must be a neutral party and cannot double as a trustee. An enforcer should also not profit from the trust save for a reasonable compensation to enable them to perform their duties.

The Perpetuities and Accumulations (Amendment) Bill, 2021

The Object of the bill is to limit the application of the Act to dispositions relating to immovable property and allow for the accumulation of the income of a trust so that it can benefit multiple generations of beneficiaries, particularly in a family trust. The intention of the amendments is to create an enabling legal framework for preservation of generational wealth.

The rule against perpetuities is a common law principle that was developed by English courts at the end of the seventeenth century. The rule restricts the time period within which future interests in property must vest. The perpetuity period is the length of a life or lives in being, plus 18 years under Kenyan law.

Perpetuity periods are defined under section 5 of the Perpetuities and Accumulations Act

to last for a duration of a maximum of 80 years from the creation of the instrument and if not specified in the instrument, the lifetime of the settlor plus 18 years after their death. After the duration, the interest disposed will vest, in other words the property in trust shall be transferred to the beneficiaries. Vesting would then subject the trust property to capital gains tax and stamp duty, which would probably amount to a substantial amount of tax shillings.

To cure this, the The Perpetuities and Accumulations (Amendment) Bill, 2021 proposes amendments to section 2 of the act which provide any reference to disposition of property shall be in reference to immovable property . The bill further provides that the perpetuity period shall not apply to family trusts. These proposed amendments mean that family trusts and registered family trusts enacted under the The Trustees (Perpetual Succession) (amendment) Bill, 2021 will subsist indefinitely unless the settlor chooses otherwise, thus creating the legal framework for generational wealth.

The bill proposes to repeal section 19 of the The Perpetuities and Accumulations Act by replacing it with a clause that provides the terms of any instrument or a trust may direct or authorise the accumulation of all or part of the income of such property for a period not exceeding the intended duration of the trust. This amendment removes the general restrictions on the maximum perpetuity periods leaving it at the discretion of the settlor.

Accumulation Period is the the period during which the trustees of a trust may accumulate the trust income (that is, add it to the trust capital, rather than pay it out to or for the benefit of the beneficiaries ). After the accumulation period has ended, the trustees are obliged to distribute trust income to, or for the benefit of, the beneficiaries (unless they have a power to accumulate income for minor beneficiaries under section 33 of (the Trustee Act)).

Trustees must have express authority to accumulate income under the instrument or the power under section 33 of the Trustee Act for minors applies.

Currently the The Perpetuities and Accumulations Act provides general restrictions on accumulation of trust income by giving maximum periods under which trust income maybe accumulated, such as during the lifetime of the person making the disposition or a term of 18 years from the date of creation of the disposition.

The changes in the perpetuity period means a settlor may structure their trusts in a manner that might benefit the second, third or fourth generations.Family trusts provide a settlor with the flexibility of determining the duration in which the income from family trusts will be accumulated and how and when assets will be managed or disposed off.

UPDATE: The proposed highlighted amendments, have since been passed into law.

The Statute Law (Miscellaneous Amendments) (No.2) 2024 has amended the Trustees (Perpetual Succession) Act designating the Registrar of Companies as the registrar and the custodian of the register of trusts


At this juncture, comparison can be drawn to an individual subjecting their assets to probate and distribution of the estate to beneficiaries through transmission, which transmission is exempt from all inheritance tax including stamp duty. Family trusts on the other hand provide exemption to stamp duty on the family trust and capital gains tax on the individual transferring the property to the family trust. The property when vested, will however be subject to the respective taxes when transferring them to the beneficiaries from the family trust. Family trusts however provide a degree of certainty and compliance with the wishes of the settlor whereas wills are subject to scrutiny through probate and the wishes of the testator may be varied where the validity of the will is challenged in court

For more information on trusts and registration of family trusts contact;



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