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Law of trusts in Kenya summarized
Introduction
The law of trusts in Kenya is a complex area governed by a combination of statutes, common law principles, and judicial precedents. This summary will provide an overview of the key aspects of Kenyan trust law, including the types of trusts recognized, their creation, administration, and relevant legislation. It is important to note that this is a simplified explanation, and seeking professional legal advice is crucial for any specific situation involving trusts.
Table of Contents
Governing Legislation
Types of Trusts in Kenya
Creation of a Trust
Duties of a Trustee
Rights of Beneficiaries
Trust Administration and Regulation
Tax Implications of Trusts
Amendments to Trust Law (2021)
Relevant Case Laws
Conclusion
TLDR
Governing Legislation
The primary legislation governing trusts in Kenya is the Trustees (Perpetual Succession) Act (Cap 164), as amended by the Trustees (Perpetual Succession) (Amendment) Act, 2021. This Act provides the framework for the creation, registration, and operation of trusts. Other relevant statutes include the Law of Succession Act (Cap 160), which recognizes trusts as a valid method of estate planning, and the Income Tax Act (Cap 470), which governs the tax implications of trusts. The Stamp Duty Act (Cap 480) also applies, regulating stamp duty on trust deeds and property transfers related to trusts. (Sources: http://www.kenyalaw.org:8181/exist/kenyalex/actview.xql?actid=CAP.%20164 ↗, http://www.kenyalaw.org:8181/exist/kenyalex/actview.xql?actid=CAP.%20160 ↗, http://www.kenyalaw.org:8181/exist/kenyalex/actview.xql?actid=CAP.%20470 ↗, http://www.kenyalaw.org:8181/exist/kenyalex/actview.xql?actid=CAP.%20480 ↗)
Types of Trusts in Kenya
Kenyan trust law recognizes various types of trusts, including:
Express Trusts: These are trusts created intentionally by a settlor through a written trust deed. The settlor clearly defines the terms of the trust, including the trustee's duties, the beneficiaries' rights, and the trust property.
Implied Trusts: These trusts arise by operation of law, rather than by the express intention of the settlor. They are often used to rectify situations where there is an unjust enrichment or to prevent fraud. Examples include resulting trusts and constructive trusts.
Private Trusts: These trusts benefit specific individuals or groups of individuals.
Public Trusts (Charitable Trusts): These trusts benefit the public at large or a section of the public. They are governed by specific rules and regulations, often requiring registration with the relevant authorities.
Family Trusts: These trusts are specifically designed to manage and protect family assets across generations. The Trustees (Perpetual Succession) (Amendment) Act, 2021, significantly clarified the legal framework for family trusts in Kenya. (Sources: https://mmtklaw.com/understanding-the-new-kenyan-trust-laws-a-comprehensive-guide-to-family-trusts-and-beyond/ ↗, https://www.lkklawllp.com/post/family-trusts-in-kenya-an-alternative-to-probate-the-overhaul-of-the-legal-trust-regime-in-kenya ↗)
Creation of a Trust
A trust in Kenya is typically created through a written trust deed. This document must clearly outline the following:
The Settlor: The person who creates the trust and transfers the trust property.
The Trustee: The person or entity responsible for managing the trust property and administering the trust according to its terms.
The Beneficiary: The person or entity who benefits from the trust.
The Trust Property: The assets held in trust.
The Trust Purpose: The objectives the trust is intended to achieve.
The trust deed must comply with the requirements of the Trustees (Perpetual Succession) Act (Cap 164) and other relevant legislation. Failure to comply with these requirements can render the trust invalid. (Source: http://www.kenyalaw.org:8181/exist/kenyalex/actview.xql?actid=CAP.%20164 ↗)
Duties of a Trustee
Trustees in Kenya have a fiduciary duty to act in the best interests of the beneficiaries. Their duties include:
Duty of Loyalty: Acting solely in the best interests of the beneficiaries and avoiding any conflict of interest.
Duty of Prudence: Managing the trust property with reasonable care and skill, similar to how a prudent person would manage their own affairs.
Duty of Impartiality: Treating all beneficiaries fairly and equitably.
Duty to Account: Keeping accurate records of the trust's finances and providing regular accounts to the beneficiaries.
Breach of these duties can result in the trustee being held personally liable for any losses incurred by the trust. (Sources: http://www.vivaafricallp.com/wp-content/uploads/2017/03/Newsletter-Volume-XXXI-Trust-Law-in-Kenya-Need-for-Enhancement.pdf ↗, https://insights.advocates.ke/law-of-trusts-trust-law-and-trust-accounts/ ↗)
Rights of Beneficiaries
Beneficiaries have certain rights under a trust, including:
Right to Information: The right to receive regular accounts and information about the trust's administration.
Right to Enforcement: The right to enforce the terms of the trust and hold the trustee accountable for any breaches of duty.
Right to Distribution: The right to receive the trust property or income according to the terms of the trust.
The specific rights of beneficiaries will depend on the terms of the trust deed. (Source: http://www.vivaafricallp.com/wp-content/uploads/2017/03/Newsletter-Volume-XXXI-Trust-Law-in-Kenya-Need-for-Enhancement.pdf ↗)
Trust Administration and Regulation
The administration of a trust involves various aspects, including:
Investment of Trust Funds: Trustees must invest trust funds prudently to maximize returns while minimizing risk.
Distribution of Income and Capital: Distributions must be made according to the terms of the trust deed.
Record Keeping: Trustees must maintain accurate records of all trust transactions.
Compliance with Legislation: Trustees must comply with all relevant legislation, including the Trustees (Perpetual Succession) Act (Cap 164).
The Public Trustee can be appointed as a trustee in certain circumstances. (Source: http://www.kenyalaw.org:8181/exist/kenyalex/actview.xql?actid=CAP.%20164 ↗, http://www.kenyalaw.org:8181/exist/rest//db/kenyalex/Kenya/Legislation/English/Acts%20and%20Regulations/P/Public%20Trustee%20Act%20Cap.%20168%20-%20No.%2015%20of%201951/subsidiary%20legislation/docs/PublicTrusteeAct_subsidiary.pdf ↗)
Tax Implications of Trusts
The Income Tax Act (Cap 470) governs the tax treatment of trusts in Kenya. Trust income is generally taxed at the applicable corporate tax rate. The tax implications can be complex and depend on various factors, including the type of trust, the source of income, and the distribution of income to beneficiaries. Professional tax advice is essential for understanding the tax implications of a specific trust. (Source: http://www.kenyalaw.org:8181/exist/kenyalex/actview.xql?actid=CAP.%20470 ↗)
Amendments to Trust Law (2021)
The Trustees (Perpetual Succession) (Amendment) Act, 2021, introduced significant changes to Kenyan trust law, including:
Clarification of Family Trusts: The amendment provided a clearer legal framework for family trusts, making them more accessible and attractive for estate planning.
Introduction of Living Trusts: The amendment allowed for the creation of living trusts, where the settlor retains control over the trust property during their lifetime.
Role of Trust Enforcers: The amendment introduced the role of trust enforcers, individuals or entities responsible for ensuring the trust is administered according to its terms.
These amendments modernized Kenyan trust law and addressed some of the ambiguities that existed previously. (Sources: https://mmsadvocates.co.ke/setting-up-a-family-trust-in-kenya/ ↗, https://bowmanslaw.com/insights/kenya-a-snapshot-of-family-trusts/ ↗, https://mmtklaw.com/understanding-the-new-kenyan-trust-laws-a-comprehensive-guide-to-family-trusts-and-beyond/ ↗)
Relevant Case Laws
While specific case citations are not readily available within the provided search results in a readily usable format, Kenyan courts have interpreted and applied trust law principles in numerous cases. These cases often deal with issues such as the validity of trust deeds, the duties of trustees, and the rights of beneficiaries. Access to the Kenyan Law Reports (http://www.kenyalaw.org ↗) is crucial for researching specific case law on trust matters. The search results mention several cases, but detailed information requires direct access to the Kenyan Law Reports database. For example, the results mention In re Estate of Hashmatbibi Kherdin Imamudin (Deceased) and Arvind Shah and 7 Others v Mombasa Bricks and Tiles Limited and 5 Others, highlighting the importance of consulting the Kenyan Law Reports for complete details.
Conclusion
The law of trusts in Kenya is a dynamic area of law that continues to evolve. The 2021 amendments to the Trustees (Perpetual Succession) Act have significantly modernized the legal framework, making trusts a more viable option for estate planning and wealth management. However, the complexities of trust law necessitate seeking professional legal advice to ensure compliance with all relevant legislation and to protect the interests of all parties involved.
TLDR
Kenyan trust law is primarily governed by the Trustees (Perpetual Succession) Act (Cap 164), as amended in 2021. It recognizes various trust types, including express, implied, private, public, and family trusts. Trusts are created through a trust deed, and trustees have fiduciary duties to beneficiaries. The 2021 amendments clarified family trusts and introduced living trusts and trust enforcers. Tax implications are governed by the Income Tax Act (Cap 470). Professional legal advice is crucial for navigating the complexities of Kenyan trust law.
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