Registration of trusts in Kenya has been a very long and detailed process mostly due to lack of a clear legislative framework. Good governance of trusts was not sufficiently catered for in the law. The new Trustee (Perpetual Succession) Amendment Act 2021 provides additional provisions which will hopefully fill out some of the legislative gaps.
A trust is a legal body that allows an independent person known as a trustee to manage assets on behalf of another person known as a beneficiary. The settlor is the person or entity that forms the trust body. Trusts are often used for many purposes. They can be used for charitable purposes whereby individuals or entities form a trust body on behalf of a group of people known as beneficiaries.
Many charitable organisations have a trust nature in that the settlor forms the trust body and appoints trustees to run the organisation on behalf of the beneficiaries. Other types of commonly used trusts are corporate ones for undertaking corporate social responsibility activities and lastly, family trusts which are often used in managing personal succession.
Prior to the new Act, the process of registration of trusts was unclear. The former Act had provisions which were not sufficient to meet changing needs. For example, many organisations have now adopted corporate special responsibility and charitable objects however would want to separate those activities from the main business of the company.
Many people are now aware of the need to have in place proper succession planning for the benefit of their loved ones. Prior to the enactment of the new Act, trusts did not have sufficient accountability and transparency structures. Good governance was often left to the goodwill of trustees in upholding their fiduciary duties. Where trustees failed to uphold good governance, it was left to beneficiaries to seek court intervention to enforce good governance.
The new Act provides for an independent party known as an enforcer, a person or body corporate whose main role is to monitor the administration of the trust on behalf of the beneficiaries. In my own understanding, an enforcer in a trust is what an auditor is to a company.
A trustee cannot be an enforcer of a trust. This means that the trustees will now be accountable to an independent party whose authority is statutory. An enforcer in my view, ought to be a professional like a lawyer, an auditor or even your bank.
The inclusion of enforcers in trust management means that the administration of trusts will be more transparent and trusts will be better managed. In one of Kenya’s leading succession cases, the beneficiaries and trustees have been embroiled in long court battles and this has affected the estate’s value. Hopefully, the introduction of enforcers will minimise disputes between beneficiaries and trustees.
Family trusts have finally found legislative expression thanks to this new Act. The definition of a family trust has been given as an entity formed for the benefit of beneficiaries with the object of preserving wealth. However, family trusts shouldn’t be trading and should not be formed with fraudulent objects for example evading creditors.
Family trusts are a very attractive tool of estate planning. The attraction is not only in the bequeathing aspects but also in the perpetual nature of the trust. Beneficiaries can be designated as your entire heritage in a discretionary trust.
While drafting the trust, care ought to be taken to have very clear objects and terms, otherwise the trust risks invalidation. Your lawyer should assist you in the process.
https://www.businessdailyafrica.com/bd/lifestyle/society/new-law-fill-gaps-trusts-governance-3650414
–>