A Cayman Islands trust is a legal vehicle used for holding assets that can be structured to fit a series of investments or personal needs. This allows for a convenient manner of managing the assets placed therein. Our team assists investors who set up a Cayman Islands company and we also provide solutions for those interested in opening a trust. This will allow them to maintain a flexible solution for asset management and protection.
| Quick Facts | |
|---|---|
| Relevant laws | The Trust Law in the Cayman Islands, and the Special Trusts (Alternative Regime) Law |
|
Restrictions |
No restrictions apply to the accumulation of income. |
|
Manner of setting up a trust in the Cayman Islands |
Through a trust deed |
| Trust deed type | It can be drawn up to allow for fixed or discretionary interest. |
| Where is the trust registered |
With the Registrar of Trusts |
| Taxes on Cayman Islands trusts |
Not applicable |
| Types of trusts |
Exempted trusts, special trusts (under the Alternative Regime Law) |
| Trust registration fee |
CI$ 500 |
| Trust annual fee in the Cayman Islands |
CI$ 500 |
| Trust founders | The settlor (there are no restrictions on nationality), he/she can also be a beneficiary. |
| Settlor powers |
In some cases, a settlor can also act as a co-trustee. |
| Trustee |
The individual (or company) entrusted with administering the trust. |
| Trust beneficiaries |
The individual(s) who will benefit from the assets included in the Cayman Islands trust. |
| Cayman Islands trust advantages |
Highly flexible, exempt from the rules against perpetuities (in some cases), no taxes for trusts. |
| Assistance for trust creation | Our Cayman Islands company formation specialists provide complete assistance for the registration of trusts. |
| Purposes for a trust |
– asset management, – estate planning, – wealth preservation, – commercial activities, etc. |
|
Trust components |
– settlor, – trustee, – enforcer, – beneficiary, – trust fund |
|
Fixed trusts – characteristics |
Beneficiaries receive income and capital according to predetermined terms; It is generally used for estate planning or pension management. |
| Accumulation and maintenance trusts – characteristics |
Allow for savings to grow over time; Often used for children or grandchildren of beneficiaries and can be used to distribute funds for their education and needs. |
| Discretionary trusts – characteristics |
Flexibility for both the settlor and beneficiaries; The trustee can decide over distributing income and capital among beneficiaries. |
| Charitable trusts – characteristics |
Benefit charitable purposes rather than specific individuals; Are overseen by the Cayman Islands Attorney General; Can exist indefinitely. |
| STAR trusts – characteristics |
Can exist indefinitely; Offer flexibility in their structure; Settlor must appoint an enforcer; Must have at least one trustee who holds a trust company license. |
| Trustees duties |
Must act honestly and in good faith; Must comply with the trust deeds; Must maintain accurate records and accounts; Must comply with local regulations, etc. |
| Trust confidentiality |
No public registration or disclosure obligations |
| Tax exemption guaranteed for exempted trusts | No estate or inheritance tax in Cayman for up to 50 years from trust creation |
| Commercial uses for trusts |
– providing benefits to employees, – administering pension funds, – facilitating investment funds, – securing assets for lenders, etc. |
| The Cayman Islands “firewall” legislation |
Trust assets in Cayman Island are protected by not accepting foreign judgments that go against Cayman law. |
| Cayman trusts maximum duration |
150 years, with the exception of charitable and STAR trusts |
| Trust name |
Must be unique, identifiable, and reflective of its purpose |
| Additional services offered by our team | We can also help in opening a Cayman Islands exempted company or you can seek our immigration lawyers for relocation matters. |
Table of Contents
The uses of a trust in the Cayman Islands
As a legal vehicle, a trust has a simpler setup process, when compared to the general procedure for company formation in the Cayman Islands. Some of the common purposes of a trust include the following:
- asset management and protection;
- estate planning;
- the preservation of wealth;
- commercial uses.
The parties to a Cayman Islands trust are the following:
- The settlor: the individual who creates the trust and owns the assets; he may if he chooses to, retain a certain level of control;
- The trustee: the party invested with the power to administer the trust and distribute the assets according to the wishes of the settlor; there is no legal requirement for the trustee to be a Cayman Islands resident;
- The beneficiary: a trust can have one or more beneficiaries, the persons entitled to receive the funds of the trust.
The trust is set up by concluding a trust deed, which clearly sets out the terms of administration and distribution of assets.
Types of trusts in the Cayman Islands
Before deciding to open a Cayman Islands trust, investors should understand the most common forms. Our team highlights these below:
- fixed interest trusts;
- accumulation and maintenance trust;
- discretionary trust;
- revocable trust;
- charitable trust;
- “STAR” trusts (please see below).
The Cayman Islands General Registry keeps a Trusts Register for the following types of trusts:
- exempted trusts.
- special trusts under the Alternative Regime Law (STAR).
The Special Trusts Law (the Alternative Regime or STAR) complements the existing Cayman Islands trust law and it was designed to respond to the in-demand non-charitable trusts. Under the STAR regime, trusts can be created for any purpose, as long as they are used for lawful purposes and do not contravene to public policy.
Some of the special features of a STAR Cayman Islands trust are its high level of flexibility and the exemption from the rule against perpetuity. Enforcers are designated for this type of trust.
Our team can give you more information on particular issues addressed in the Cayman Islands trust law.
When looking for legal advice and solutions for your business and individual matters in the Cayman, our local legal experts can answer your questions and offer adequate and efficient solutions. We also assist clients who have questions concerning other important legal issues, such as immigration to the Cayman Islands.
Fixed interest trusts
Fixed interest trust mean that beneficiaries have predetermined rights to receive income and capital from the trust, with limited discretion given to the trustees.
Opening this trust in the Cayman Islands is often used for estate planning. It ensures that certain property or assets pass to designated family members according to specified terms and schedules. This arrangement allows for an orderly transfer of assets.
Many modern pension trusts are structured as fixed interest trusts. In this context, the trustee holds a fixed share of the pension fund for each member or beneficiary of the pension scheme. This ensures that pension benefits are distributed according to predetermined terms, providing stability and predictability for individuals saving for retirement.
Opening a trust in the Cayman Island as fixed interest can be customized to align with the specific planning objectives of the settlor. For example, a settlor can include provisions in the trust to restrict beneficiaries from selling or disposing of their inherited assets too quickly.
If you are interested in learning more about this type of trust or about Cayman Islands company formation, our team can provide guidance. We also invite you to watch a video about Cayman Islands trusts:
Exempted trusts in Cayman Island
If you want to open a trust in the Cayman Island, you can opt for the exempted trust that is popular especially among individuals and entities looking to protect and manage their assets, as well as take advantage of the local tax benefits.
The exempted trust is officially registered with the Registrar of Trusts in the Cayman Islands. The details of this trust and its trust deed are not publicly accessible. This is to maintain privacy.
There is one significant benefit of establishing a trust in the Cayman Islands in this structure. Upon making an application to the Registrar of Trusts, the trust can be exempted from paying all taxes that may be introduced in the Cayman Islands for a period of up to 50 years.
Exempted trusts in the Cayman Islands are not only used by residents, but are also popular among international investors and businesses. This is due to the jurisdiction’s reputation for financial stability and its well-established financial services industry. It is also not uncommon for individuals or entities to use both exempted trusts and a Cayman Islands exempted company in their financial and estate planning strategies. We can give you more details about opening an exempted company if you are interested.
Essential compliance for a Cayman trust
The general requirements for trust creation in the Cayman Islands allow for a significant level of flexibility, as well as privacy in many cases. However, a trust needs to comply with the registration fees, as well as the annual fees set forth by the Cayman Islands General Registry. Trusts established in the Cayman Islands must adhere to the Cayman Islands Trusts Law.
Below, our team lists some of the most important fees applicable to a Cayman trust:
- a $500 registration fee;
- the annual trust fee of $500;
- a $75 filing fee;
- trust certificate for $125;
- express registration is possible for a fee of $400.
Please note that the fees above are in Cayman Islands Dollars, and they can be subject to change. Our team provides complete assistance for the set up of trusts, as well as for company incorporation in the Cayman Islands. You can confidently reach out to us as soon as you decide to set up a trust or open a company.
Advantages of opening a trust in the Cayman Islands
There are several advantages of opening a trust in the Cayman Islands. Trusts offer flexibility in managing and preserving wealth, while maintaining confidentiality. The legal ownership of assets is held by a trustee, and the trust’s terms are determined by the settlor.
Trusts can be used to preserve the continuity of ownership of assets, such as a family business, within a family. They help prevent fragmentation of ownership among multiple beneficiaries across generations, ensuring that assets remain intact for future generations.
If you want to open a company in the Cayman Islands or already have one, trusts can be utilized to hold shares in companies that own real estate located outside the Cayman Islands.
Opening a trust in the Cayman Islands protects assets from various risks. They can safeguard assets in stable political environments and shield them from potential liabilities.
If you wish to learn more about trusts in Cayman Islands, our team of specialists in company incorporation in the Cayman Islands has selected some statistics about the number of trusts in the country:
- There are 2,335 active trusts in the Cayman Islands as of 2023;
- Until October 2023, 63 new trusts were registered that year;
- Most trusts were registered in January (12 trusts);
- 10 trusts were opened in July 2023.
Contact our team for complete assistance with the creation of a Cayman trust. You can rely on our expert solutions for all matters concerning trust formation, as well as for Cayman Islands company formation. We can also assist in matters related to immigration to the Cayman Islands.