Quote from Lawyer on June 10, 2025, 10:01 am

Estate planning is a critical process that ensures your assets are distributed according to your wishes after your passing, providing peace of mind for you and your loved ones. In Kenya, the two primary tools for estate planning are wills and trusts. Each serves a unique purpose, offering distinct benefits and considerations in terms of privacy, tax implications, and asset distribution. This article explores the differences between wills and trusts, their advantages and drawbacks, and how to choose the right option for your estate plan in Kenya, with a focus on the legal framework, including the Law of Succession Act (Cap. 160) and the Trustees (Perpetual Succession) Act (Cap. 164).

What is a Will?

A will, as defined under Section 3 of the Law of Succession Act (Cap. 160) in Kenya, is a legal declaration of a person’s wishes regarding the distribution of their property after death. It is a written document, signed by the testator (the person making the will) in the presence of at least two independent witnesses who are not beneficiaries. A will takes effect only upon the testator’s death and is subject to the probate and administration process under Kenyan law. It allows the testator to specify beneficiaries, appoint guardians for minor children, and outline how debts and taxes should be handled.

What is a Trust?

A trust is a legal arrangement where a settlor transfers assets to a trustee, who manages them for the benefit of designated beneficiaries. In Kenya, trusts are governed by the Trustees Act (Cap. 167) and the Trustees (Perpetual Succession) Act (Cap. 164). Trusts can be created during the settlor’s lifetime (living trusts) or through a will (testamentary trusts) and can be revocable or irrevocable. The Trustee (Perpetual Succession) (Amendment) Act of 2021 has modernized trust law in Kenya, making family trusts an increasingly popular estate planning tool due to their flexibility and protective features.

Comparing the Benefits of Wills and Trusts

1. Privacy

Wills

Wills in Kenya are subject to the probate process, which is overseen by the courts under the Law of Succession Act. Upon the testator’s death, an application for a Grant of Probate is published in the Kenya Gazette, making the will’s contents and the estate’s details a matter of public record. This lack of privacy can be a concern for individuals with significant assets or sensitive family dynamics, as anyone can access the will’s details, including asset distribution and beneficiary information. Additionally, the public nature of probate can invite challenges from family members or third parties, potentially leading to disputes, as seen in high-profile Kenyan cases like the Mbiu Koinange estate, which has been in litigation for over 40 years.

Trusts

Trusts offer a significant advantage in terms of privacy. Unlike wills, trusts do not go through the probate process, and their details remain confidential. The trust deed, which outlines the terms and beneficiaries, is not filed with the court or published publicly. In Kenya, trusts must be registered with the Registrar of Companies under the Trustees (Perpetual Succession) Act, but this process is administrative and does not expose the trust’s contents to public scrutiny. For individuals with complex estates or privacy concerns, such as business owners or high-net-worth individuals, trusts provide a discreet way to manage and distribute assets.

2. Tax Implications

Wills

Assets distributed through a will in Kenya are subject to estate taxes and other liabilities, depending on the estate’s value and the nature of the assets. Kenya does not currently impose a specific inheritance tax, but other taxes, such as Capital Gains Tax (CGT) and Stamp Duty, may apply to certain asset transfers. For example, transferring real estate through a will may incur Stamp Duty, which is typically 4% for urban properties and 2% for rural properties. Additionally, if the testator dies intestate (without a will), the estate is distributed under the intestacy rules of the Law of Succession Act, which may not be tax-efficient and could lead to higher administrative costs.

Trusts

Trusts, particularly family trusts, can offer significant tax advantages in Kenya, especially following the 2021 amendments to the Trustees (Perpetual Succession) Act. Assets transferred to a registered family trust may be exempt from Capital Gains Tax and Stamp Duty, provided the trust complies with legal requirements. For instance, transferring property to a family trust during the settlor’s lifetime can reduce the taxable estate, potentially lowering tax liabilities upon death. However, trusts are not entirely tax-free. Income generated by trust assets may be subject to Income Tax, and certain trust distributions may attract CGT, particularly if assets are sold or transferred out of the trust. Irrevocable trusts can provide additional tax benefits by removing assets from the settlor’s estate, but they require the settlor to relinquish control, which may not suit everyone.

3. Asset Distribution

Wills

Wills provide a straightforward way to distribute assets upon death. The testator can specify how assets, such as real estate, bank accounts, or personal property, should be divided among beneficiaries. Wills are particularly effective for simple estates or when the testator wants to appoint guardians for minor children. However, the probate process in Kenya can delay asset distribution, often taking months or even years, especially if the will is contested or the estate is complex. For example, the estate of JM Kariuki, a prominent Kenyan politician, has faced succession battles for nearly 38 years due to disputes among family members. Additionally, wills offer limited control over how beneficiaries use their inheritance, which can be a concern if beneficiaries are minors or financially irresponsible.

Trusts

Trusts offer greater flexibility and control over asset distribution. A settlor can specify conditions for distribution, such as releasing funds to beneficiaries at a certain age, for specific purposes (e.g., education or healthcare), or in installments over time. This is particularly beneficial for protecting vulnerable beneficiaries, such as minors or individuals with special needs, or for ensuring assets are used responsibly. For example, a family trust can be structured to provide for a child’s education while preserving the principal for future generations. Trusts also bypass probate, allowing for faster and more efficient asset distribution. In Kenya, living trusts created during the settlor’s lifetime can distribute assets before or after death, while testamentary trusts, established through a will, take effect post-death but still avoid direct probate for trust assets.

Additional Considerations

Cost and Complexity

• Wills: Creating a will is generally simpler and less expensive than setting up a trust. A basic will can be drafted with the assistance of a lawyer for a relatively low cost, though legal fees may vary depending on the estate’s complexity. However, the probate process can incur significant costs, including court fees, legal fees, and executor fees, which can be up to 7% of the estate’s value.

• Trusts: Establishing a trust is more complex and costly, involving legal fees for drafting the trust deed, registering the trust with the Registrar of Companies, and ongoing administrative expenses, such as trustee fees. However, trusts can save money in the long run by avoiding probate costs and potentially reducing tax liabilities. The complexity of trusts requires professional guidance to ensure compliance with Kenyan laws and to avoid unintended consequences, such as beneficiary disputes or tax liabilities.

Asset Protection

• Wills: Assets distributed through a will are not protected from creditors or legal claims against the estate. During probate, creditors can sue the estate to recover debts, potentially reducing the inheritance available to beneficiaries.

• Trusts: Trusts, particularly irrevocable ones, offer robust asset protection. Once assets are transferred to an irrevocable trust, they are no longer considered part of the settlor’s estate and are generally shielded from creditors, lawsuits, or divorce settlements. For example, a family trust in Kenya can protect assets from creditors of both the settlor and beneficiaries, provided the trust is not deemed fraudulent under anti-avoidance provisions.

Flexibility

• Wills: Wills are relatively easy to update or revoke during the testator’s lifetime, provided the testator is mentally competent. However, they offer limited flexibility for managing assets during the testator’s lifetime or controlling distribution after death.

• Trusts: Revocable trusts allow the settlor to retain control and make changes during their lifetime, while irrevocable trusts provide less flexibility but greater tax and asset protection benefits. Trusts can also accommodate complex financial arrangements, such as managing family businesses or real estate portfolios, making them ideal for high-net-worth individuals.

Choosing Between a Will and a Trust in Kenya

The decision to use a will, a trust, or both depends on your financial goals, estate complexity, and family circumstances. Here are some scenarios to guide your choice:

• Choose a Will If:

  • You have a straightforward estate with limited assets.

  • Your primary goal is to outline asset distribution and appoint guardians for minor children.

  • You are comfortable with the probate process and do not prioritize privacy.

  • You want a cost-effective solution with minimal upfront expenses.

• Choose a Trust If:

  • You have a complex estate with significant assets, such as real estate, businesses, or investments.

  • You value privacy and want to avoid the public probate process.

  • You seek greater control over how and when assets are distributed to beneficiaries.

  • You want to protect assets from creditors, lawsuits, or family disputes.

  • You aim to minimize tax liabilities through strategic estate planning.

• Consider Both: A comprehensive estate plan often includes both a will and a trust. A will can cover assets not placed in a trust and address guardianship, while a trust can manage specific assets, avoid probate, and provide tax and protection benefits. For example, a pour-over will can transfer any residual assets into a trust upon death, ensuring a cohesive plan.

Legal and Practical Considerations in Kenya

1. Legal Framework: Ensure your will or trust complies with Kenyan laws. Wills must meet the requirements of the Law of Succession Act, including proper witnessing, while trusts must adhere to the Trustees (Perpetual Succession) Act and be registered appropriately to benefit from tax exemptions.

2. Professional Guidance: Consult a qualified estate planning attorney familiar with Kenyan law to draft and execute your will or trust. This is particularly important for trusts, which require precise structuring to avoid legal or tax issues.

3. Cultural Sensitivities: In Kenya, cultural attitudes toward death can make estate planning a sensitive topic. Engaging with family members and explaining your intentions can help reduce potential conflicts, especially in cases involving multiple spouses, children from different marriages, or extended family members.

4. Regular Updates: Review your will or trust periodically (every 3–5 years) or after significant life events, such as marriage, divorce, or the birth of a child, to ensure it reflects your current wishes and complies with any legal changes.

Conclusion

Both wills and trusts are powerful estate planning tools in Kenya, each with unique benefits. Wills offer simplicity and clarity for straightforward estates but are subject to probate, which can be public, time-consuming, and costly. Trusts provide privacy, flexibility, and potential tax savings, making them ideal for complex estates or those seeking asset protection, but they involve higher upfront costs and complexity. By understanding the differences in privacy, tax implications, and asset distribution, you can make an informed decision that aligns with your financial goals and family needs. For many Kenyans, a combination of a will and a trust offers the most comprehensive solution, ensuring assets are protected, taxes are minimized, and loved ones are provided for according to your wishes.

For personalized advice, contact us on +254 706 108 404 or info@lawguide.co.ke to guide you through the process. Plan today to secure your legacy for tomorrow.