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

Wealth management begins with wealth creation: More in your hands

Wealth has variously been defined as:

“all material objects that have economic utility especially : the stock of useful goods having economic value in existence at any one time”   https://www.merriam-webster.com/dictionary/wealth

“The total amount of money and assets an individual or group owns” https://sociologydictionary.org/wealth/

Usage Note

Wealth is typically measured by net worth, which is the total value of money owned and assets owned (e.g., real estate, stocks) minus the total value of all debts (e.g., credit cards, loans). The key point is- wealth is what you actually own, not what you have merely in your possession.  https://sociologydictionary.org/wealth/

I would like to borrow from the sociology dictionary and the accompanying usage note above to define wealth. If wealth is measured by net worth, it is worthwhile to note that one must create a positive net worth and lock in the benefits. This to me is what defines wealth management. The discussion of wealth management should therefore include how to generate wealth, lock in the net worth, in such a way that at any one time, there is a positive net worth; thereafter devise ways to grow the net worth.

Creating wealth would require that you identify your niche/idea/business that will enable you have a positive net worth. Many of us can create or generate wealth but are unable to lock in the benefits or grow the wealth. Some of the reasons that we are unable to do this is because we choose the wrong “vehicle” for that purpose or structure our affairs in such a way that we do not obtain optimized benefits from our net worth. In this series, we shall analyse various arrangements that can facilitate locking-in of benefits and growth of wealth.

Next-? Trust, Limited Liability Company, Sole Proprietorship, Partnership, Limited Liability Partnership? Which works for you?