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Thanks to social media influence in Uganda, it is not uncommon to hear about “trust fund babies.” Essentially, children born into wealth that guarantees their future financial needs. On the face of it, they have no need to work or earn. The reality in the Ugandan context, however, is that “trust fund babies” might be more virtual than real. Not for the lack of “children born with a silver spoon in their mouth”, but because our laws constrain the optimal use of trusts as a wealth preservation tool.
28 April 26
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Background
The law on trusts in Uganda is a collection of outdated laws, going back to the pre-independence era, namely: the Trustees Act, Cap 270, the Trustees Incorporation Act, Cap 271 and the Trust Corporations (Probate and Administration) Act, Cap. 269. The only amendment since the 1950s has been the addition of the beneficial ownership disclosure requirement, which requires a trust with a beneficial owner to keep a register of the beneficial owners and their particulars. This amendment requires a trust, acting through its trustees, to notify and share a copy of the register of beneficial owners with the Minister of Lands, Housing and Urban Development (the “Minister”). Considering that this requirement was introduced as a result of pressure on Uganda in 2022, to get off the Financial Action Task Force’s grey list, it does not address the pending overhaul of the trust law to align with existing realities.
There have been various attempts to reform the law on trusts, such as the Trusts Bill, 2017, which sought to consolidate and reform Uganda’s trust laws, repeal existing laws, and codify the principles of common law and equity relating to trusts. The most recent initiative was the issuance of a paper on the reform of Uganda’s trust laws by the Uganda Law Reform Commission in 2023, which also held a consultation with stakeholders. However, to date, these efforts have not yielded results. The lack of urgency in creating a relevant legal framework on trusts is telling of our appreciation of trusts, and their benefit to our economy.
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Should you have any questions regarding this article, please do not hesitate to contact Fiona Nalwanga