More families turn to trusts to preserve generational wealth

Experts argue that wills, long considered the cornerstone of estate planning, are proving inadequate in today’s complex financial environment. While they facilitate distribution, they offer little control over how wealth is used once it changes hands.

Wills vs Trusts

“A will was never designed to preserve wealth. It was designed to distribute it,” says Moses Mathini, Head of Private Wealth at Liaison Group. “Distribution without structure is often insufficient.”

Unlike wills, trusts impose conditions on the management and purpose of inherited assets. Beneficiaries cannot simply repurpose wealth at will, reducing the risk of dissipation. “Once you bequeath property using a will, you cannot put preconditions,” Moses explains. “With trusts, you can.”

This distinction, between distribution and preservation, is emerging as the defining issue in wealth management. Wills transfer ownership but lack mechanisms to guide how assets are used. Trusts, by contrast, allow families to embed rules, values, and long-term vision into the inheritance process, thereby protecting generational wealth from erosion.

Moses estimates that 70 percent of family wealth is depleted by the second generation, and 90 percent by the third—a phenomenon often described as “shirtsleeves to shirtsleeves in three generations.”

“In Kenya, we see family-owned empires such as supermarket chains collapsing barely a few years after succession, ”notes Moses, attributing this wealth erosion to various factors, including spendthrift heirs, weak financial literacy, external interference, and life events such as divorce.

Even adult heirs, he emphasises, may lack the maturity to manage estates responsibly. “If the heir is an 18-year-old who has just cleared high school, what do they know about managing assets?”

However, this erosion is not unique to Kenya. Globally, family wealth often dissipates when structures are absent. But in emerging markets, where financial literacy and governance frameworks are still developing, the risks are particularly acute.

Trusts offer a fundamentally different approach: consolidation, control, and continuity. Rather than fragmenting estates into smaller portions, trusts preserve economic power.

“If a family has Sh100 million, subdividing it among beneficiaries reduces its bargaining power,” Moses notes.

Trusts also allow conditional access, ensuring assets are used in ways that align with a family’s long-term vision. “It’s an instrument whereby you can consolidate assets and manage who benefits, when, and to what extent,” he says.

This consolidation is especially critical for business-owning families, where scale determines competitiveness. By keeping assets intact, trusts help families maintain influence in markets that reward size and stability.

Shifting mindsets

For many families, the move toward trusts reflects a broader change in mindset—from short-term distribution to multi-generational stewardship. “With wills, inheritance gets dispersed. It doesn’t even reach the third generation,” says Preeyanka Shah, co-founder and COO of Arvocap Asset Managers.

Preeyanka adds that wealth is no longer defined solely in financial terms. “Wealth can mean freedom in time, access to help, or social capital,” she says. Younger investors, globally connected and technologically savvy, are driving this shift.

“I see a lot of young investors now investing; they have a different perspective on actually growing wealth. We are also seeing a lot of global diversification, a lot of use of tech, people want transparency and people want access,” says Preeyanka .

Traditionally, trusts were viewed as tools for the ultra-wealthy, but with increased financial literacy, that perception is fading.

“We are seeing quite a lot of investors take it up, or at least get the information they need,” she points out.

However, Moses observes that cultural dynamics, such as age and gender roles, have limited the adoption of trusts in Kenya.

“The clients of trusts demographics are people in their 30s to 50s. Women engage as potential clients since they have to consult their husbands. However, when husbands come in, it’s easier taken upon without a lot of procedure since they make the decisions. I believe our economy is still very patriarchal.”

This dynamic highlights the intersection of wealth planning with gender roles. While women increasingly participate in financial decision-making, patriarchal norms continue to shape outcomes.

As trust structures become more common, they may also serve as vehicles for greater inclusivity, ensuring that wealth preservation reflects the interests of all family members. This is why Preeyanka emphasises that setting up a trust is not merely a legal exercise. It requires careful alignment of family interests and expectations.

“You need inclusion of the whole family and clarity on goals,” she says. Flexibility is essential, given evolving family dynamics, but rigidity is equally important to preserve structure.

How they go about it

One approach is to separate ownership from benefit—retaining capital within the trust while distributing income based on need. “You’re not distributing the capital assets. You’re distributing the income,” Moses explains.

This model ensures that wealth remains intact while providing liquidity for beneficiaries. It also reduces the temptation to liquidate assets prematurely, preserving the estate’s long-term viability.

Behind the rise of trusts is a deeper shift in how individuals think about money. “The distinction lies in the moment your lifestyle doesn’t stop even though your income dies,” Preeyanka says. That transition—from earning to building wealth—requires deliberate planning.

Trusts and financial discipline

However, Moses cautions that even with the right structures, discipline remains the foundation.

“Without conscious expenditure, you cannot have savings. Without savings, you cannot have investments. Without investments, you cannot have passive income and freedom.”

Trusts can provide structure, he argues, but they cannot substitute for financial discipline. Families must cultivate values alongside wealth if they hope to sustain prosperity across generations.

Kenya’s embrace of trusts is part of a broader global trend. In developed markets, family offices and trusts have long been used to preserve wealth. The diffusion of these practices into emerging economies reflects both globalisation and the democratisation of financial knowledge.

Trusts consolidate assets, impose discipline, and align inheritance with long-term vision. They provide a framework for families to navigate the complexities of modern wealth.

As Moses puts it: “Wills distribute wealth but do not defend it.” In an era where fortunes can vanish within a generation, defense may matter more than distribution.

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