Cayman Islands Trust Formation

DeltaQuest offer comprehensive trust services to support individuals and corporate entities in setting up and managing a Cayman Islands trust in accordance with the relevant trust laws. We will find you a tailored asset protection solution and will assist you in the formation of your Cayman Islands trust.

In order to proceed with the formation of the Cayman Islands Trust, please complete our Trust Application Form.

Conditions for an offshore Cayman trust formation

Legal form: The choice of Cayman law as the governing law is conclusive and any questions arising in connection with the trust will be determined according to Cayman law and application of foreign law is excluded. Furthermore, legislation prohibits the enforcement of a foreign judgment regarding a Cayman trust on the basis that it contravenes forced heirship laws because the trust concepts is not recognized in that jurisdiction.

Settlor: Once a trust is created the settlor will have divested himself of legal ownership of the trust assets. The settlor may be a beneficiary and, in certain circumstances, he may also act a co-trustee. The settlor may also retain a degree of control over the trust, such as the power to approve distributions, the power to appoint and remove trustees and the power to revoke the trust that the settlor actually dispossesses himself of the trust assets and he may not, for example, simultaneously be a sole trustee and a sole beneficiary.                                      

Protector: A settlor may include a ‘’protector’’ in the structure of the trust. The function of a protector is usually to provide some indirect control over the trustee particularly where the settlor has accepted advice that he should not attempt to exercise control himself. So a trustee may be required to obtain the protector’s consent before taking particular steps, or to act in some respects at the direction of the protector; the protector may be given power to remove and replace the trustee.

Trustees: Legal title to the trust assets is vested in the trustee under the obligations imposed by the trust and he is responsible for the administration of the trust. There is no need for the trustee to be a Cayman resident, although that will usually be more convenient where the trust is to operate in accordance with Cayman law.

Beneficiaries:  The beneficiaries are the persons entitled to benefit from the assets held in the trust. As stated above, the settlor may himself be one of the beneficiaries; in order for a trust to be valid there must generally be sufficient certainty as to the identity of the beneficiaries. An express power for the addition of further persons to the class of beneficiaries may, however, be included in the trust instrument. The beneficiaries may enjoy equal or unequal benefits, as the trust deed prescribes, or in the case of a discretionary trust, as the trustee may determine.

The trust fund: The assets constituting the trust fund may be of any type of movable or immovable property (except in the case of STAR trusts which cannot hold land in theCayman Islands directly). At any time after settlement on trust of the initial assets, further assets may be added. Indeed, a common arrangement is to establish a trust with a nominal initial amount and subsequently to add more substantial assets.

Forms of Trusts:  Various types of trusts have been developed over time and the most appropriate structure for the settlement will depend on the settlor’s particular circumstances and objectives. Some of the more common types of trust are described below.

• Fixed Interest in Possession Trust: Under the fixed interest trust the principal beneficiary will normally be granted a vested interest in the income of the trust fund throughout his lifetime and the discretion of the trustee regarding the disposition of the trust fund will be limited. For example, the trust instrument may specify that the  trustee is required to distribute  all of the income of the trust fund to a particular individual during that person’s lifetime and subsequently to distribute the capital of the trust fund in fixed proportions to named beneficiaries(such as the settlor’s children)

• Discretionary Trust: The discretionary trust provides maximum flexibility and is often the most efficient structure for both settlor and beneficiaries. Under the terms of a discretionary trust the trustee is given wide discretionary powers as to when, how much and to which beneficiaries he should distribute the income and capital of the trust. This type of trust is useful where at the time of creation of the trust the future needs of beneficiaries cannot be accurately determined. The beneficiaries are not regarded as having any direct legal rights to be considered to benefit when the trustee exercises his discretion.

• Revocable Trusts: Although for tax and other reasons it is generally desirable for a trust to be constituted as an irrevocable settlement, in certain circumstances the settlor may require the additional comfort of knowing that he has retained the power to revoke the trust and enforce the return of the trust fund. Careful consideration requires to be given to the possible consequences of a revocable trust because under the jurisdiction of the settlor’s domicile, residence or nationality, revocation may negate some of the expected benefits of creating the trust.

• Charitable Purpose Trusts: Generally, in order for a trust to be valid there must be identifiable beneficiaries. In brief, the onerous duties imposed upon trustees are owed to the beneficiaries and without ascertainable beneficiaries who may enforce these duties against the trustees a trust will not be upheld. A long held exception to this general rule has permitted trusts to be established in favor of charitable purposes. It is the Attorney General who is tasked with the role of enforcing the trustee’s duties and obligations. The Cayman STAR Trusts law permits the creation and enforcement of non-charitable purpose trusts, i.e. Trusts in which property is held by trustees on trust to carry out specific purposes which do not qualify as charitable purposes.

• ‘’STAR’’ Trusts: The special Trusts (Alternative Regime) Law 1997 (the ‘’STAR Law’’) (now part VIII of the Trusts Law (Revised). Such trusts may be established for “purposes’ as an alternative to, or jointly with provision for ‘’persons’’. The reference to ‘’purpose’’ embraces applications of trust property and income which are not directed to particular individuals or companies in the capacity of beneficiaries. The STAR law provides that no beneficiary under a STAR trust has any right to take court proceedings to enforce the accountability of the trustee or any right to be involved in, or informed about, the conduct of the trust and that all rights of that description are to be the exclusive concern of an ‘’enforcer’’, a person or persons chosen for the purpose by the settlor. The settlor may nominate a beneficiary or beneficiaries as an enforcer, where he has chosen to appoint a protector, he may combine the roles of enforcer and protector in one person.

The rule that a trust must confer enforceable rights on the beneficiaries has been abolished in regard to trust set up under the regime introduced by the STAR Law. The Trustees of a STAR trust must include the holder of a restricted trust company license in theCayman Islands.

Taxation: There are no corporation, capital gains, income, profits or withholdings taxes in theCayman Islands. Moreover the government, in exchange for registration will give an up taking that no taxes will be imposed in the Cayman Islands on the trust for fifty years and such an undertaking will usually be renewal at the end of such period. Otherwise trusts do not require registration.

Time needed for trust formation: Trusts can usually be formally established and registered within a few days.

 Print This Page