BENEFITS OF A FAMILY TRUST: A SMART WAY TO MANAGE AND PROTECT YOUR ASSETS

By Ameli Inyangu & Partners Advocates

A family trust is one of the most effective tools for managing, protecting, and distributing wealth across generations. Whether you are looking to preserve assets, plan for tax efficiency, or ensure that your wealth is used responsibly, a family trust provides legal and financial benefits that can safeguard your estate for years to come.

In this article, we explore the key benefits of setting up a family trust and how it can serve as a valuable estate planning tool.

WHAT IS A FAMILY TRUST?

A family trust is a non-trading legal entity registered for the purpose of managing and preserving assets. Once registered, a family trust becomes a corporate entity capable of:

• Owning property under its name.
• Suing and being sued as a corporate body.
• Using a corporate seal to validate transactions.

A family trust ensures that wealth is effectively managed and transferred in a structured manner, protecting it from risks such as mismanagement, divorce settlements, or financial instability.

WHY SET UP A FAMILY TRUST?

1. Protecting Assets for Those Who Cannot Manage Them

A family trust allows assets to be held and managed for individuals who may be unable to manage them on their own, including:

• Minors (children under 18) who are not legally able to manage property.
• Disabled individuals who require financial security and management assistance.
• Spendthrifts or individuals who have poor financial management skills.

Example: A parent can establish a family trust to ensure that property and financial assets are managed responsibly for the benefit of a child with disabilities.

2. Preserving Wealth for Future Generations

A well-structured family trust ensures that assets remain intact and preserved for successive generations, reducing the risk of family wealth being mismanaged or squandered.

Key Benefit: Unlike outright inheritance, which can be spent irresponsibly, a trust provides structured disbursement of funds according to predetermined conditions.

Example: A business owner can use a family trust to ensure that the family business remains operational and profitable for generations instead of being sold off or mismanaged.

3. Managing Matrimonial Homes After Divorce

Divorce can create uncertainty regarding property ownership. A family trust can hold a matrimonial home for the benefit of a parent and their child, ensuring stability until the child reaches adulthood.

Example: If a couple divorces, a trust can protect the home so that the primary caregiver and child retain residency until the child turns 18.

4. Providing Flexibility in Uncertain Circumstances

Life is unpredictable. A family trust allows for flexibility in cases of:

• Financial problems – Protects assets from creditors.
• Divorce – Shields assets from being split in legal settlements.
• Disability – Ensures long-term financial security for dependents.

Example: If a beneficiary encounters financial struggles, a trust ensures that they receive necessary support without the risk of losing their inheritance due to bankruptcy or legal claims.

5. Tax Benefits of a Family Trust

A registered family trust comes with several tax advantages, including:

• Education, Medical & Housing Expenses – Any amount used exclusively for education, medical treatment, or early adulthood housing is not subject to income tax.
• Income Tax Exemptions – Beneficiaries receiving less than Ksh 10 million per year from the trust are exempt from income tax.
• Capital Gains Exemptions – Transferring immovable property (such as land or houses) into a registered family trust is exempt from capital gains tax.
• Stamp Duty Exemption – Property transfers to a registered family trust as a gift are exempt from stamp duty.

Key Insight: These tax exemptions make a family trust an attractive estate planning tool, allowing wealth to be managed efficiently with minimal tax liabilities.

HOW A FAMILY TRUST WORKS

Once a family trust is established, the trustee (the person or entity managing the trust) administers the assets according to specific instructions set by the trust founder.

Who Is Involved in a Family Trust?

• The Settlor – The person who creates the trust and contributes assets.
• The Trustee – The individual or entity that manages and distributes assets.
• The Beneficiaries – The individuals who receive benefits from the trust.

The trust deed outlines how assets should be managed, distributed, and protected, ensuring that the settlor’s wishes are followed.

IS A FAMILY TRUST RIGHT FOR YOU?

A family trust is ideal if you:

1. Want to protect assets for children, dependents, or vulnerable individuals.
2. Need long-term estate planning that secures wealth for future generations.
3. Want to reduce tax liabilities and take advantage of legal exemptions.
4. Need a structured way to manage inheritance, preventing misuse or disputes.

If any of these scenarios apply to you, setting up a family trust can be one of the most effective ways to protect your wealth and legacy.

CONCLUSION

A family trust is more than just a legal document—it is a financial planning tool that offers asset protection, tax benefits, and long-term wealth preservation. Whether you are safeguarding property, investments, or a business, a trust provides structure, security, and peace of mind for you and future generations.

For expert advice on setting up a family trust, reach out to us at Ameli Inyangu & Partners Advocates.

CONTACT US:

Email: [email protected]

Phone: +254 722 367 647