Changes to Family Trusts in Kenya on How Long Trust Property Can Be Held, And More

Estate planning can be a complex topic, but a recent legal update in Kenya aims to simplify things for families. The Perpetuities and Accumulations (Amendment) Act No. 10 of 2022, (the Amendment Act) which came into effect on March 21, 2022, introduced significant changes that benefit family trusts, making them a more attractive tool for family wealth preservation and growth across multiple generations.

What are Perpetuities and Accumulations?

These are legal principles that govern how long trust property can be held and how income generated by the trust can be accumulated. Both rules are intended to prevent the concentration of wealth and power in private hands.

1.     Rule Against Perpetuities: This rule sets a time limit for when beneficiaries must receive their inheritance. Previously, all trusts, including family trusts, had a maximum lifespan of 80 years.

2.     Rule Against Excessive Accumulations: This rule restricts the period for which trust income can be accumulated before it’s distributed to beneficiaries.

How Does the Amendment Act Change Things?

The new Act brings welcome changes for family trusts:

1.     Focus on Immovable Property: The perpetuity rule now only applies to immovable property like land and buildings. Movable assets like shares and cash are no longer subject to this restriction.

2.     Family Trusts Perpetuate: The 80-year limit on family trusts is gone! These trusts can now exist indefinitely, allowing wealth to benefit multiple generations.

3.     Accumulation Freedom: The Act has abolished the general restriction on the accumulation of income, enabling trustees to retain all or part of the income of the trust for the benefit of multiple future generations. This change allows for more effective estate planning and the creation of dynasty trusts. However, any unaccumulated income must still be distributed to beneficiaries as per the trust deed.

Benefits of the new law

These changes offer several advantages for families:

1.     Generational Wealth Preservation: Family trusts can now effectively hold and grow wealth for future generations, ensuring a financial safety net for your descendants.

2.     Estate Planning Flexibility: The ability to hold assets and accumulate income for longer periods provides more options for structuring your estate plan.

3.     Tax Efficiency: Family trusts can offer tax benefits, making them a valuable tool for managing inheritance taxes.

Seek Professional Guidance

While the recent Act simplifies family trusts, navigating legal matters is always best done with professional help. A lawyer or law firm with expertise in estate planning, like MMTK Law, can guide you through the process of setting up a trust that meets your family’s specific needs.

Remember: This article provides a general overview of the recent legal changes. It’s not a substitute for qualified legal advice.

Remember: The above is not specific legal advice for you. Always consult a lawyer to determine the best option for your specific situation

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