Why You Should Use a Trust When Buying Property for Your Parents

If you are buying property for your parents, your instinct may be to transfer the title directly into their names. While this is a generous gesture, it can expose the property — and your investment — to significant legal risks. A more prudent approach is to set up a trust and designate your parents as beneficiaries.

The Risks of Direct Transfer

When property is registered in your parents' names, they become the legal owners with full rights to deal with it as they wish. This means they can sell, mortgage, or borrow against the property without your consent. While this may seem unlikely, the practical consequences can be serious:

• Sibling disputes: Other family members may claim entitlement to the property, leading to costly and emotionally draining succession battles.
• Predatory lending: Older persons are often targeted by unscrupulous lenders who encourage them to use their property as security for loans they may not fully understand.
• Unintended transfers: Your parents could, whether through pressure or misjudgement, transfer the property to a third party.

How a Trust Protects the Property

A trust is a legal arrangement in which property is held by a trustee for the benefit of named beneficiaries. When you place property in a trust:

• The trust owns the property, not your parents individually.
• Your parents can live in the property, enjoy its use, and receive any income it generates — but they cannot sell or mortgage it without the trustee's approval.
• The trust deed defines clear rules about how the property is to be managed, who benefits, and under what conditions.
• The property is shielded from family disputes, external claims, and third-party interference.

Key Legal Considerations in Kenya

Kenya recognises trusts under the Trustee Act (Cap 167), Laws of Kenya. To establish an effective property trust, you will need:

1. A properly drafted trust deed specifying the trustees, beneficiaries, and the powers and obligations of each party.
2. Appointed trustees who will manage the property in accordance with the terms of the trust. You can serve as a trustee yourself.
3. Clear beneficiary designations so that your parents' rights — and any succession arrangements — are explicitly defined.

It is important that the trust deed is prepared by an experienced conveyancing lawyer. If drafted incorrectly, you may inadvertently limit your parents' rights, create tax complications, or leave the trust vulnerable to challenge.

When a Trust Is Especially Important

A trust is particularly valuable when:

• You are buying property in a rural area where family land disputes are common.
• You are part of a large family and want to prevent competing claims.
• Your parents are elderly and may be susceptible to external pressure.
• You are based in the diaspora and cannot oversee the property day-to-day.