TYPES OF TRUSTS IN KENYA

1. Family Trusts

A family trust can be established either while the settlor is still alive or in their will. It can be charitable or non-charitable, registered or incorporated, and its purpose is to manage the settlor's estate. The trust must be established to benefit other beneficiaries, whether they are relatives or not, living or deceased, and it should be a non-trading entity. The main goal of the trust is to protect and build wealth for future generations.

2. Charitable Trusts

A trust that is created to benefit the general public is known as a charitable trust. It focuses on various critical areas such as human rights, religion, environment, education, and more. It is worth noting that a charitable trust registered in Kenya can operate in any jurisdiction, including Kenya. The trustee has the power to defer distribution for a period not exceeding the duration of the trust, and it must be discretionary.

3. Irrevocable Trusts

If a trust is created with the specific power of revocation, it will be considered an irrevocable trust. In addition, if a trust allows for the power of revocation, but the settlor never exercises it during their lifetime, then the trust will also be considered irrevocable.

4. Non-Charitable Trusts

By incorporating solely for non-profit purposes, committed to making a meaningful difference in the world and contributing to causes.

Benefits of Trusts.

• Tax Savings - The Finance Act 2006 provides that any contributions made from a tax-exempt entity shall be exempt from tax. Charitable trusts are exempted from paying land rates payable on their immovable properties and are also exempted from paying stamp duty when buying land and property.

In addition, since charities are widely recognized as existing for social good this shall attract and aid in fundraising. To note, organizations with charitable status

• A tool of estate and tax planning - Testamentary and Family trusts are another method of estate transfer, as they ensure the smooth transfer of assets to one’s Beneficiaries by avoiding costs that would be associated with probate such as legal fees on determining the validity of a will,
• Asset Protection - A Trust arrangement confers a significant level of protection for the Beneficiary assets since the legal ownership is held by the Trustees who are bound by the Trust Deed while the beneficial ownership rests with the Beneficiaries
• Enhanced Certainty – revocable trusts can help during illness or disability – not just death.
• Trusts are flexible and Trustees can further invest the assets in their possession in authorized investments. Furthermore, in a revocable trust, the objects of the trust document can be amended to suit current circumstances in the best interests of the Beneficiaries,
• A Trust offers continuity and its life is not limited to the life of the Settlor depending on how it is structured as such it offers a smooth transition in the event of the demise of the Settlor.

A trust is established by way of a trust deed. The trust deed contains the objects of the trust, the name of the trust, the properties held under the trust, the power of the trustees, meetings of the trustees, and the trust’s administration.