Let’s Build a culture of maintaining Family Investment Trusts, to protect Family wealth, distribute income and assets Equitably as well as proper succession planning
What are Family Trusts?
A family trust is a legal arrangement where assets are held and managed for the benefit of family members. It’s a flexible and tax-efficient way to:
1. Protect family wealth
2. Distribute income and assets
3. Plan for succession
4. Minimize taxes and estate costs
5. Ensure confidentiality
Importance of Building a Family Trust:
1. Wealth Protection: Safeguards family assets from creditors, lawsuits, and financial risks.
2. Tax Efficiency: Reduces tax liabilities and optimizes wealth transfer.
3. Succession Planning: Ensures smooth transition of wealth and business ownership.
4. Family Harmony: Avoids conflicts and disputes among family members.
5. Philanthropy: Supports charitable causes and gives back to the community.
Building a Family Trust through Investing in Long Term Fixed Income Securities and Equities.
Long-Term Fixed Income Securities:
1. Government Bonds (e.g., Treasury bills Bank Deposits Fixed Income Unit Trust Funds and Government bonds)
2. Corporate Bonds
3. 4. Real Estate Investment Trusts (REITs Kenyan Market)
Equity Investments:
1. Dividend-paying Stocks (e.g. UMEME, STANBIC BRITISH AMERICAN TOBACCO etc)
2. Index Funds or ETFs (e.g USE Local Share Index (LCI), USE All Share Index (ALSI)
3. Real Estate Stocks (e.g., offshore investments)
4. Growth Stocks (e.g., emerging industries, Utility, Pharmaceuticals, telecom)
Steps to Build a Family Trust:
1. Consult a Trust Attorney: Expert advice on trust structure and laws.
2. Define Trust Objectives: Clarify family goals, values, and wealth distribution.
3. Choose Trust Type: Select from revocable, irrevocable, or charitable trusts.
4. Appoint Trustees: Responsible individuals or institutions manage the trust.
5. Fund the Trust: Transfer assets, such as securities, real estate, or cash.
6. Invest Trust Assets: Implement investment strategy (e.g., fixed income, equity).
7. Monitor and Adjust: Regularly review and update the trust to ensure alignment with family goals.
Example of a Family Trust Investment Portfolio:
Asset Allocation:
Fixed Income (40%): Government Bonds (20%), Corporate Bonds (10%), REITs (10%)
Equity (30%): Dividend-paying Stocks (15%), Index Funds (10%), Growth Stocks (5%)
Real Estate (15%): Direct property ownership or REITs
Cash and Alternatives (15%): Liquidity and diversification
Investment Strategy:
1. Long-term focus (5+ years)
2. Diversification across asset classes
3. Regular portfolio rebalancing
4. Tax-efficient investing
5. Inflation protection
By building a family trust and investing in a diversified portfolio of long-term fixed income securities and equity, individuals can create a lasting legacy, protect family wealth, and ensure a secure financial future. Consult with a trust attorney and financial advisor to create a tailored plan.
