The Process of putting Real Estate on Trust in Kenya

What is a Trust?

A trust is a legal arrangement where a person, known as the settlor, transfers the ownership of their assets (in this case, real estate) to a trustee. The trustee holds and manages these assets for the benefit of designated individuals or groups, called beneficiaries. The terms and conditions of this arrangement are all laid out in a legally binding document called a trust deed.

The Process of Putting Real Estate on a Trust in Kenya

The process of establishing a real estate trust in Kenya requires careful planning and legal guidance. It is crucial to work with a qualified legal professional to ensure all steps are correctly followed and the trust is legally sound.

Step 1. Consultation and Planning

Before anything is drafted, you need to clearly define your goals for the trust. This involves:

• Identifying the specific real estate assets you want to place in the trust.

• Determining the purpose of the trust (e.g., family succession, asset protection).

• Selecting trustworthy individuals or a corporate entity to act as trustees.

• Clearly defining the beneficiaries and their entitlements.

 

Step 2. Drafting the Trust Deed

This is the most critical step. The trust deed is the governing document and must be meticulously drafted by a legal expert. It will contain:

• The name and objectives of the trust.

• Details of the settlor(s), trustees, and beneficiaries.

• A comprehensive list of the assets being transferred to the trust.

• The powers and duties of the trustees.

• The rules for administering the trust and distributing assets to beneficiaries.

• Whether the trust is revocable or irrevocable.

   

Step 3. Registration and Stamping of the Trust Deed

Once the trust deed is drafted and signed by all parties, it must be submitted for stamping and registration. In Kenya, this can be done in two primary ways:

a. Registration under the Registration of Documents Act

 This is a simpler and faster process, but it does not give the trust a separate legal personality. The trustees, therefore, hold the property in their own names.

b. Incorporation under the Trustees (Perpetual Succession) Act

This process creates a body corporate with its own distinct legal identity. This allows the trust to hold property in its own name, enter into contracts, and sue or be sued. This is the most recommended route for real estate trusts.

 

Step 4.  Transfer of the Real Estate

After the trust is formally registered or incorporated, the real estate assets must be legally transferred from the settlor to the trust. This involves a formal transfer process at the relevant Land Registry. The trust will be registered as the new legal owner, and a new title deed will be issued in its name. This process will also involve the payment of relevant fees and taxes, though registered family trusts may be eligible for specific exemptions.

 

Step 5. Ongoing Management and Compliance

A trust is not a one-time affair. The trustees have a fiduciary duty to manage the assets prudently and in the best interests of the beneficiaries. This involves:

• Maintaining accurate records and financial statements.

• Regularly reviewing the trust deed to ensure it aligns with current circumstances.

• Fulfilling all tax obligations, including obtaining a KRA PIN for the trust and declaring any income.

By following these steps, individuals can leverage the benefits of a trust to ensure their real estate assets are protected, their legacy is preserved, and their family’s future is secure.