Who this guide is for

This guide is for anyone considering setting up a family trust in Kenya — whether you are a parent planning how to pass land and investments to your children, a business owner looking to separate personal assets from business risk, or a professional advising a client on estate planning. It sits alongside our guides to trusts in Kenya, buying land and title transfer, and real estate and property law.

What a family trust is

A family trust is a legal arrangement under which one person (the settlor) transfers ownership of assets to one or more trustees, who hold and manage those assets for the benefit of named family members (the beneficiaries). The terms of the arrangement are set out in a written document called the trust deed. Once the assets are transferred into the trust, they belong to the trust — not to the settlor, not to the trustees personally, and not yet to the beneficiaries. The trustees manage the assets according to the trust deed and must act in the best interests of the beneficiaries at all times.

The Trustees (Perpetual Succession) Act, as amended in 2021, provides for charitable trusts (section 3B), non-charitable purpose trusts (section 3C) and family trusts (section 3D). A discretionary trust is not a separate statutory category but a way of structuring distributions — a family trust may itself be discretionary. A family trust is specifically defined as a trust established for the benefit of persons who are related to the settlor by blood, marriage or adoption.

How a family trust differs from a discretionary trust

A discretionary trust gives the trustees wide power to decide how much each beneficiary receives and when. A family trust can be either fixed (each beneficiary’s share is stated in the deed) or discretionary (the trustees allocate based on need), but the defining feature is that the beneficiaries must be family members. Many Kenyan families opt for a discretionary family trust because it gives trustees the flexibility to respond to changing circumstances — for instance, directing more support to a beneficiary who is still in school while another is already earning.

Why set up a family trust in Kenya

Asset protection

Once property is transferred into a family trust, it is no longer part of the settlor’s personal estate. This means it cannot be seized by the settlor’s creditors, divided in a divorce settlement, or attached by a judgment creditor. For business owners, this separation between personal wealth and business risk is particularly valuable. If the business fails, the family home, investments and other assets held in the trust are protected.

Succession without probate

When a person dies in Kenya, their estate must go through a succession cause in court before it can be distributed. This process routinely takes 12 to 24 months and often much longer when relatives dispute the distribution. A family trust avoids this entirely. The trust assets do not form part of the deceased’s estate, so the trustees continue to manage and distribute them according to the trust deed without any court process. The beneficiaries can access funds for school fees, medical bills or living expenses without interruption.

Tax efficiency

The Finance Act 2021 introduced significant tax advantages for family trusts, making them one of the most tax-efficient vehicles for intergenerational wealth transfer in Kenya. Transfers of property into a family trust are exempt from both stamp duty and capital gains tax. Distributions to beneficiaries for qualifying purposes attract no income tax up to KES 10 million per year. The detail of these exemptions is set out in the tax benefits section below.

Privacy

Unlike a will, which becomes a public document once it is admitted to probate, the terms of a family trust deed remain private. Only the trust’s existence (not its terms) is on the public register. This is important for families that prefer to keep the details of their wealth and its distribution out of public view.

Continuity for family businesses

A family trust can hold shares in a family company. This prevents the fragmentation that occurs when shares are inherited by several children, some of whom may want to sell while others want to continue the business. The trust holds the shares as a single block, the trustees vote as a unit, and distributions are made according to the deed rather than according to each beneficiary’s individual wishes.

The legal framework

The law governing family trusts in Kenya comes from three principal statutes. The Trustee Act (Cap 167) sets out the general duties and powers of trustees, including the duty to act in good faith, the power to invest trust assets, and the standard of care expected. The Trustees (Perpetual Succession) Act (Cap 164), as substantially amended in 2021, provides for the registration and regulation of trusts and gives them legal personality. The Finance Act 2021 introduced the tax exemptions that make family trusts attractive for wealth planning.

In addition, the Stamp Duty Act (Cap 480) and the Income Tax Act (Cap 470) contain the specific provisions that exempt family trust transfers from stamp duty, capital gains tax and (in certain cases) income tax. These are discussed in detail below.

What the 2021 reforms changed

Before 2021, Kenyan trusts operated under a dated legal framework that gave them no separate legal personality and offered little regulatory clarity. The Trustees (Perpetual Succession) (Amendment) Act 2021 transformed the landscape. The most important changes were:

Reform	What it means
Body corporate status	A registered trust now has its own legal identity. It can hold property in its own name, sue and be sued, and enter into contracts. Trustees no longer need to hold property in their personal names on behalf of the trust.
Perpetual succession	The trust continues to exist regardless of changes in trustees. If a trustee dies, retires or is removed, the trust and its assets are unaffected.
The enforcer	A family trust may appoint an enforcer — an independent person whose role is to ensure the trustees comply with the trust deed and act in the beneficiaries’ interests. Where appointed, the enforcer has standing to apply to court to compel the trustees to perform their duties.
60-day registration	On a complete application to register/incorporate the trust, the Registrar issues (or declines) the certificate within 60 days. Registration confers body corporate status.
Irrevocability by default	Unless the trust deed expressly reserves the power to revoke, a family trust is irrevocable once registered. The settlor cannot change their mind and take the assets back.
Consolidated process	Registration, trust administration and compliance are now handled through a single regulatory framework rather than across multiple uncoordinated agencies.

How to set up a family trust in Kenya

Setting up a family trust involves several steps, each of which must be done correctly to ensure the trust is legally valid and effective.

Step 1: Define the objectives

Before instructing a lawyer, the settlor should be clear about what the trust is meant to achieve. Common objectives include protecting a family home, providing for children’s education, holding shares in a family business, or an ensuring a surviving spouse has income for life. The objectives shape every decision that follows — the type of trust, the choice of trustees, and the terms of the deed.

Step 2: Identify the trust property

The settlor must decide which assets to transfer into the trust. These can include land, buildings, shares, bank deposits, motor vehicles, or any other property capable of being owned. Each asset must be specifically described in the trust deed. For land, this means the title number and description from the land register. For shares, the company name and number of shares.

Step 3: Choose the beneficiaries

The beneficiaries must be persons related to the settlor by blood, marriage or adoption. The trust deed should name them individually or describe them as a class (for example, “all my children and their descendants”). It should also set out what each beneficiary is entitled to — whether a fixed share or a discretionary entitlement determined by the trustees.

Step 4: Appoint the trustees and enforcer

The trust must have at least two trustees. The settlor may be one of them but should not be the sole trustee. The trust may also appoint an enforcer. The practical considerations for choosing these roles are discussed in the choosing trustees and enforcer sections below.

Step 5: Draft and execute the trust deed

The trust deed is the constitution of the trust. It must be drafted by an advocate and should cover all the matters set out in the trust deed section below. The deed is executed by the settlor, the trustees and the enforcer in the presence of witnesses.

Step 6: Register the trust

The executed trust deed must be lodged with the Principal Registrar of Documents within 60 days. On registration, the trust is issued a certificate of registration and acquires body corporate status. The registration fee is prescribed by regulation.

Step 7: Transfer the assets

After registration, the settlor transfers the identified assets into the trust’s name. For land, this means executing a transfer form and registering it at the relevant Land Registry. For shares, it means executing a share transfer form and updating the company’s register of members. These transfers are exempt from stamp duty and capital gains tax (see tax benefits below).

What the trust deed should cover

The trust deed is the most important document. A well-drafted deed should address, at a minimum:

• The parties. The full names, ID numbers and addresses of the settlor, each trustee, the enforcer, and each named beneficiary.
• The trust property. A specific description of each asset being settled into the trust.
• The trust objectives. A statement of the purposes for which the trust is established.
• Beneficiary entitlements. Whether fixed or discretionary, and any conditions (such as reaching a certain age).
• Powers of the trustees. What the trustees can and cannot do — investment powers, power to sell and reinvest, power to distribute income and capital, power to appoint agents.
• The enforcer’s powers. The scope of the enforcer’s oversight role and the circumstances in which they may apply to court.
• Succession of trustees. How new trustees are appointed and retiring or deceased trustees are replaced.
• Amendment and revocation. Whether the deed can be amended, and by whom. If the settlor wishes to retain the power to revoke, this must be expressly stated; otherwise the trust is irrevocable by default.
• Governing law and disputes. A clause confirming Kenyan law applies and setting out how disputes are to be resolved (typically by arbitration or in the High Court).

Choosing trustees

The choice of trustees is critical. The trustees will manage the trust property, make investment decisions, and determine (in a discretionary trust) how much each beneficiary receives. Kenyan law requires at least two trustees. In practice, families often appoint three: two family members and one independent professional such as a lawyer or accountant.

A good trustee should be someone the settlor trusts completely, who understands financial matters, and who is likely to outlive the settlor (or at least serve for a significant period). The settlor can serve as a trustee, and often does, but appointing the settlor as the sole trustee defeats the purpose of the trust and can be challenged as a sham.

Consider appointing a corporate trustee — a trust company licensed by the Capital Markets Authority or a law firm’s trust subsidiary. A corporate trustee does not die or become incapacitated, provides professional administration, and adds a layer of institutional accountability that individual trustees cannot match.

The enforcer: a new role under the 2021 Act

The enforcer is a role introduced by the 2021 amendments. A family trust may appoint one. The enforcer’s function is to monitor the trustees and ensure they comply with the trust deed and their fiduciary duties. The enforcer is not a trustee and has no power to manage trust assets directly, but they have standing to apply to the High Court to compel the trustees to act, to seek the removal of a trustee who has breached their duty, or on to obtain directions from the court on any question of administration.

The enforcer should be a person who is independent of the trustees and who has the knowledge and willingness to hold them to account. A trusted family lawyer, an accountant, or a senior family member who is not a beneficiary is usually suitable. The enforcer’s appointment, powers and removal should be clearly set out in the trust deed.

Tax benefits of a family trust in Kenya

The 2021 reforms made the family trust one of the most tax-efficient structures for passing wealth to the next generation. The key exemptions are:

Stamp duty exemption

Section 52(2)(b) of the Stamp Duty Act (Cap 480) exempts voluntary dispositions of property to a family trust from stamp duty. This means that when the settlor transfers land or buildings into the trust, no stamp duty is payable — a saving of four per cent of the property’s value for property in a city or gazetted town, or two per cent for rural property. Under section 52(6), distributions of trust property to beneficiaries are also exempt from stamp duty.

Capital gains tax exemption

Paragraph 58 of the First Schedule to the Income Tax Act exempts transfers of property into a trust from capital gains tax. This means the settlor does not pay the capital gains tax (currently 15%) that would ordinarily apply on any gain realised on the transfer. Under paragraph 6(2)(g) of the Eighth Schedule, distributions of property from the trust to beneficiaries are similarly exempt. Separately, paragraph 36(g) exempts gains on investment shares held in the trust from CGT.

Income tax treatment

Section 11 of the Income Tax Act gives trusts preferential income tax treatment. Income earned by the trust (such as rental income from trust property) is taxed at the trust level at prevailing rates, but distributions to beneficiaries are treated differently. Under paragraph 57 of the First Schedule, the principal sum settled into the trust is not subject to income tax. More significantly, distributions from the trust to beneficiaries for education, medical expenses or housing are exempt from income tax up to KES 10 million per beneficiary per year. This makes the family trust a powerful vehicle for funding school fees, university costs, medical treatment and housing for the next generation.

Summary of tax treatment

Event	Tax	Treatment
Transfer of property into the trust	Stamp duty	Exempt — s.52(2)(b), Stamp Duty Act
Transfer of property into the trust	Capital gains tax	Exempt — para 58, First Schedule, ITA
Distribution to beneficiaries	Stamp duty	Exempt — s.52(6), Stamp Duty Act
Distribution to beneficiaries	Capital gains tax	Exempt — para 6(2)(g), Eighth Schedule, ITA
Investment gains in trust	Capital gains tax	Exempt — para 36(g), ITA
Distribution for education, medical, housing	Income tax	Exempt up to KES 10m per beneficiary p.a.
Trust income (rental, interest, dividends)	Income tax	Taxed at trust level at prevailing rates

Family trust vs will: which is right for you?

Many Kenyans assume a will is sufficient for estate planning. A will is certainly better than dying intestate, but it has significant limitations compared to a family trust.

Factor	Will	Family trust
Takes effect	On death only	Immediately on creation — settlor can see it working
Court process	Probate required (12–24 months, often longer)	No court process needed
Cost of administration	Legal and court fees for probate	Ongoing trustee administration costs, but no court fees
Privacy	Becomes public on probate	Terms remain private
Creditor protection	None — estate assets exposed until distributed	Trust assets protected from settlor’s creditors
Tax on transfer	Stamp duty and CGT may apply on transmission	Exempt from stamp duty and CGT on transfer in and out
Family disputes	Commonly challenged under the Law of Succession Act	Harder to challenge — trust deed controls
Incapacity	Useless if settlor becomes incapacitated before death	Trustees manage assets if settlor loses capacity

For most families with significant assets, a family trust used alongside a will provides the strongest protection. The trust holds the main assets and operates during the settlor’s lifetime, while the will deals with any property that was not transferred into the trust and with personal matters such as guardianship of minor children.

Common mistakes to avoid

Delaying registration

A trust does not acquire body corporate status, and cannot hold property in its own name, until it is registered/incorporated, so registration should be pursued promptly. Delay holds up the transfer of assets into the trust.

Choosing the wrong trustees

Appointing trustees based solely on family loyalty rather than competence is a common error. Trustees must manage investments, file tax returns, keep records, and make difficult distribution decisions. At least one trustee should have financial or legal expertise, or a corporate trustee should be appointed.

Failing to transfer the assets

Creating the trust deed and registering the trust is not enough. The assets must actually be transferred into the trust’s name. A trust deed that lists assets but never transfers them is ineffective — the assets remain in the settlor’s personal estate and will go through probate on death.

Vague trust deed

A poorly drafted deed that does not clearly describe the trust property, the beneficiaries’ entitlements, or the trustees’ powers creates uncertainty and invites disputes. The cost of proper drafting is a fraction of the cost of litigation over an ambiguous deed.

Overlooking the enforcer option

The 2021 Act allows a family trust to appoint an enforcer. Where the settlor wants an independent check on the trustees, it is good practice to appoint one who is independent of them; an enforcer should not also be a trustee.

Treating trust property as personal

Once assets are in the trust, the trustees manage them for the beneficiaries. The settlor (even if also a trustee) cannot treat the property as their own. Using trust funds for personal expenses, failing to keep trust accounts separate, or mixing trust and personal assets can lead to the trust being set aside as a sham.

What you should do now

If you are considering a family trust, these are the practical steps to take:

1. Take stock of your assets. List the property, shares, investments and other assets you want to protect and pass on. Note the value and any encumbrances (such as a mortgage).
2. Define your objectives. Be clear about what you want the trust to achieve: who benefits, when, and how.
3. Consult an advocate. A family trust is a legal structure with serious consequences. It should be set up by a lawyer who understands trust law, tax law and property law in Kenya.
4. Consider the tax position. Make sure you understand which exemptions apply to your situation and how to claim them. Not every transfer qualifies automatically.
5. Budget for the cost. The costs include legal fees for drafting the trust deed, registration fees, valuation fees (if property is being transferred), and ongoing trustee administration costs.

How OLM Law can help

OLM Law Advocates LLP advises individuals, families and business owners on setting up and administering family trusts in Kenya. Our work includes drafting the trust deed, advising on the tax implications, handling registration with the Principal Registrar, and managing the transfer of assets into the trust. We also advise trustees on their ongoing duties and assist with trust administration, compliance, and (where necessary) dispute resolution.

This guide is published by OLM Law Advocates LLP for general information only. It does not constitute legal advice and should not be relied on as such. The law and its interpretation may have changed since this guide was written. For advice on your specific circumstances, please contact us.