ESTATE PLANNING IN KENYA:

TRUSTS & SUCCESSION

PART I: UNDERSTANDING THE BASICS

Life has three important milestones: birth, marriage and death. Of these, death is perhaps the most feared. This fear is, of course, justified. Death is associated with the loss of a loved one, and, in many cases, the loss of a breadwinner. The aftermath of death can be equally unsettling, as it often extends to the inheritance and division of the property of the deceased. However, that position is not constant. With proper estate planning, death need not become an economic nightmare. Instead, it can be another stage of life for which one has prepared. As has been observed by Chris Palmer in Achieving a Good Death: A Practical Guide to the End of Life, “A good death is often the result of earlier conversations and clear plans that reduce fear and allow people to live fully until the end-mechanically, financially, practically and relationally.” A good death, in this sense, is not only about dignity in passing, but about clarity in what is left behind.

It is against this background that this blog series proceeds. How can one plan for the inevitable, so that death does not leave behind uncertainty, disputes and a family struggling to determine what happens to the wealth accumulated during a lifetime? That question sits at the heart of estate planning in Kenya, and it is more layered than most families realise. This is the first blog post in a series that will walk through two of the main tools Kenyan law offers for managing what happens to a person’s property during their lifetime and after their death: trusts and succession. By the end of this blog series, you should be comfortable with the basic principles of estate planning and, more importantly, be in a better position to avoid some of the uncertainties that can accompany death.

The Blog Series

Before the rubber meets the road, it is worth giving you a glimpse of what to expect in this blog series. In this post, Part I, we lay the foundation for understanding estate planning in Kenya and introduce the two principal mechanisms that will guide our discussion: succession and trusts. We will focus on the fundamental components of a trust: who the settlor, trustee, and beneficiary are, what a trust deed entails, and the main types of trusts recognised in Kenya. We will also cover the basics of succession law: the difference between testate and intestate succession, what counts as “free property”, and the difference between a grant of probate and letters of administration.

Part II of this blog series will focus on the details of these two estate-planning methods, comparing succession and trusts side by side. We will objectively examine the strengths and weaknesses of each, including a common problem known to all: property that remains tied up in succession disputes for years benefits no one. In contrast, as the dispute drags on, it represents a loss not only to the family but also to the wider economy. Property, businesses and even money held in bank accounts can remain locked away from productive use while litigation continues. From that comparison, we will introduce a particular kind of trust, the family trust, and consider whether it may offer a more effective way to manage and preserve family wealth than succession alone.

In Part III, we will discuss the reforms made to Kenya’s trust regime, primarily through the Finance Act 2021 and the Trustees (Perpetual Succession) (Amendment) Act 2021, commonly referred to as the TPSA Amendment Act. These legal changes are further complemented by the proposed amendments in the Perpetuities and Accumulations (Amendment) Act, 2021. We will examine what these reforms entail, the requirements outlined in the relevant provisions, and the consequences of failing to document a family trust properly. We will analyse Kenyan court decisions in cases where an alleged family trust fails because of improper documentation. This will help you understand not just the theory, but the real consequences of getting it wrong.

In Part IV, we bring it all together with a practical, step-by-step guide to actually registering a family trust in Kenya, what documents you need, what the process looks like, and the common pitfalls to avoid.

By the end of this series, our aim is that you will understand not just the difference between a will and a trust, but how to think about structuring your family’s property so that it does not become the subject of the next generation’s court case. More importantly, you will understand the steps involved in putting that structure in place properly, and why wealth planning need not be limited to the period when one is alive but can, through proper planning, extend beyond death. With that roadmap in mind, let’s start with the basics.

Trusts

At its core, a trust is a legal arrangement in which one person holds property for another’s benefit. That simple idea has powered centuries of English common law, and Kenyan law has inherited much of it. To understand a trust, you need to know four things: the actors, the instrument, the underlying principle and the main types.

The actors

A trust involves three principal roles, though, in some circumstances, the same person may occupy more than one. The settlor creates the trust and places property into it. The trustee is the person or entity given legal control over that property, subject to the duty to manage it according to the terms set by the settlor. The beneficiary is the person, or class of persons, for whose benefit the trust exists. The beneficiary is entitled to enjoy the benefit of the property or income arising from it, even though legal title to the property is vested in the trustee.

The instrument

A trust does not simply exist because a family says it does. It is ordinarily created and evidenced through a trust deed. A trust deed is a written instrument that sets out who the settlor and trustees are, who the beneficiaries are, what property is being placed into the trust, and the terms upon which the trustees are to manage that property. As we will see later in this series, proper documentation can be the difference between a trust that withstands scrutiny and one that does not.

The underlying principle

What makes a trust different from simply gifting property or registering property in someone else’s name is the separation of legal and beneficial ownership. The trustee holds legal title to the trust property, but is bound by fiduciary and equitable obligations in relation to it. The trustee therefore cannot simply treat the property as their own. They must manage it for the beneficiaries’ benefit and in accordance with the trust terms. In simple terms, the trustee may own the property on paper, but the benefit of that property belongs elsewhere.

Types of Trust

In Kenya, several categories of trusts are recognised, each suited to a different purpose;

A family trust is established for the planning or management of a person’s estate and, in particular, for the preservation and creation of wealth across generations. This is the type of trust we will focus on for the remainder of this series.

A charitable trust is established for charitable purposes, including the alleviation of poverty, the advancement of education or religion, or other purposes beneficial to the public.

A discretionary trust is one in which the beneficiaries, or the extent of what they are entitled to receive, are not necessarily fixed in advance. Instead, trustees exercise discretion within the parameters set out in the trust deed.

A non-charitable purpose trust is established for a specific lawful purpose rather than primarily for the benefit of identifiable individual beneficiaries, subject to legal requirements.

We will unpack the family trust in much greater detail in Part III. For now, there is one key point to take away: a trust can be created and put to work while the settlor is still alive. That single fact, that a trust can operate during a person’s lifetime, is one of the features that distinguishes it fundamentally from succession. And that is where we turn next.

Succession

Succession law governs what happens to a person’s property after they die. In Kenya, the Law of Succession Act, Cap 160, primarily governs this, and it operates in two broad modes: testate succession and intestate succession. Testate succession applies where the deceased left a valid will. The will sets out how the deceased wished their property to be distributed. Broadly speaking, the court’s role is to determine whether the will is valid and, where appropriate, issue a grant of probate to the executor named in it, authorising that person to administer the estate in accordance with the will.

Intestate succession, on the other hand, applies where a person dies without leaving a valid will, or where the will does not dispose of all of their property. In such circumstances, the law determines how the estate is to be distributed among the surviving beneficiaries in accordance with the statutory framework. The court issues letters of administration to a person authorised to administer the estate, who then collects, manages and distributes the estate in accordance with the law rather than solely according to the deceased’s personal wishes.

One important definition to understand here is “free property.” This refers, broadly, to the property over which the deceased had the power of disposition immediately before death and which is subject to the operation of the Law of Succession Act. Property that is already subject to a distinct legal or beneficial interest by another person, such as property held in trust, may not be considered part of the deceased’s estate. We will return to this point later in the series.

The single most important thing to understand about succession, for our purposes, is that succession only comes into effect upon death. Whatever planning a family wants to do, whatever protections they want to put in place, succession law does not begin administering the deceased’s estate until the person concerned has actually died. Probate, letters of administration, administration of the estate and distribution all follow death. In this sense, succession is reactive. It reacts to an event that has already occurred, death, and provides the legal machinery for dealing with the deceased’s property thereafter. Trusts, by contrast, can be proactive. They allow a person to arrange the ownership, management, and enjoyment of property before death. The settlor can establish the structure, transfer property into it and determine the rules governing that property while still alive. The trust can then continue operating beyond the settlor’s death, subject to its terms and the law. The distinction, therefore, is not simply about whether one chooses a will or a trust. It is also about when the legal structure begins to operate.

Implications of This Discussion

At this point, the basic vocabulary for both systems has been settled. A trust is a live, working legal arrangement that can operate during a person’s lifetime, built around the relationship between a settlor, trustee and beneficiary and formalised through a trust instrument. Properly constituted, it can continue beyond the death of the settlor. Succession, on the other hand, is the legal process, whether testate or intestate, through which a person’s free property is dealt with after death, principally through probate or letters of administration. When comparing the two, a clear question arises: if succession is only activated upon death, while a trust can be in effect long before that, does this mean that a trust is the superior tool for managing a family’s property? Or do the advantages of succession still outstrip those of a trust?

That is exactly the question we take up in Part II, where we weigh each option’s strengths and weaknesses. More importantly, we shall begin to make the case for a particular kind of trust, the family trust, as a potentially more effective vehicle for preserving and managing family wealth across generations. For now, however, the foundation is laid. The important question is no longer whether death is inevitable. It is whether the consequences of death have to be.