Tax benefits of using a Registered Family Trust for Wealth Management

Creating a nest egg for future generations

The Finance Act 2021 introduced various Tax benefits of having a Registered Family Trust.

  1. Sections 52 and 117 of the Stamp Duty Act Cap. 480 have been amended to exempt the transfer or sale of property from Stamp Duty.

  2. Sections 11, 25, 26 and the First Schedule of the Income Tax Act Cap 470 have also been amended to confer some tax benefits to a Registered Family Trust

It appears therefore that the Government is interested in preservation of Family Wealth and therefore we should use this avenue to create and grow wealth, especially at the Family level.

How to set up a duly incorporated Non-Charitable Trust for Wealth Management

The final evidence of a fully incorporated Trust is a Certificate of Incorporation signed by the Cabinet Secretary, Ministry of Lands and Physical Planning. If you do not have this document, then you do not have a duly Registered and Incorporated Trust under the Perpetual Succession Act Cap 164 of the Laws of Kenya and you could be missing out on all the advantages of having a trust as a vehicle for wealth management.

There are different types of Trusts:-Charitable or Non-charitable. The non-charitable Trust that we would be interested in for Family Wealth Management is a Registered Family Trust. Each of these classifications have ramifications for Tax and/ or other documentary requirements by various Regulatory Authorities. It is important to be clear from the onset the type of Trust you are interested in and create a checklist against all the requirements.

There are many instances where I have come across processes that were terminated at no. 3 of the list below and the holder of the document was made to believe that the Trust had been set up. When the process is not advanced to the end, there could be consequences when trying to claim benefits for the Trust. The following steps should form part of your checklist.

  1. Preparation of a Trust Deed/Agreement/Constitution

  2. Payment of Stamp Duty

  3. Registration of the Deed/Agreement/Constitution under the Registry of Documents

  4. Incorporation under the Perpetual Succession Act Cap 164 of the Laws of Kenya

  5. Obtaining a Certificate of Incorporation by presenting a petition to the Cabinet Secretary. The following are the documents you will require to support the petition.

a. A duly Registered Trust Deed/ agreement/constitution

b. A written petition to the Cabinet Secretary

c. A diagrammatic representation of the seal

d. Abstract of the minutes that appointed the trustees

e. A copy/copies of title documents as proof the body to be set up is in possession of immovable property

f. Application form-can be obtained from the Ministry of Lands but it is also available as part of the prescribed forms in the Trustees (Perpetual Succession) Regulations, 1976

g. Application fees of Kshs. 3,000

h. The organization’s current financial status (e.g. bank statement)

i. Statement of donor funding/commitment (the statement has to be presented whether or not the organization intends to seek donor funding)

j. Curriculum vitae (resume) of the trustees and/or employees

k. Certified copies of IDs and PINs of the proposed Trustees

l. Passport size photos

m. Brief summary of the Trust