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Cayman Islands Trust

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Cayman Islands Trust

Introduction

The Cayman Islands, a British Overseas Territory, possess considerable self-governance, despite the appointment of a UK Governor. While the UK oversees defense, internal security, and foreign policy, it also selects key public officials, such as judicial members. The Cayman Islands are known for their well-established and highly experienced judicial system, which has been rigorously tested in intricate trust and commercial disputes.

Government policy allows litigants to choose their legal representatives, and it is common to see prominent King’s Counsel from London appear before the Cayman Grand Court. The ultimate appellate authority is the Privy Council in London.

The jurisdiction benefits from a robust professional services sector, with legal and accounting firms employing experts from major global financial hubs, ensuring top-tier trust administration. Furthermore, numerous trust companies in the Cayman Islands are subsidiaries of leading financial institutions, including major Canadian, British, and Swiss banks.

Thanks to cutting-edge communication networks, advanced information technology, and highly automated systems, the Cayman Islands facilitate seamless interaction with onshore clients, removing potential delays when collaborating with offshore service providers.

Trust Concept

A trust is a legally recognized arrangement where an individual, referred to as the settlor, transfers assets to a trustee. The trustee holds legal ownership of these assets, not for personal benefit, but for the advantage of specified individuals (the beneficiaries, who may include the settlor) or for a particular purpose.

The settlor’s instructions on how the trust assets should be managed and distributed are usually documented in a formal trust instrument. This document outlines the rights and duties of all parties involved, ensuring transparency between the settlor, trustee, and beneficiaries. It also empowers the trustee to manage the trust assets in accordance with the trust’s provisions and legal requirements.

In addition to the trust instrument, a settlor may provide informal instructions about how the trust assets should be administered or distributed in the future, typically through a letter of wishes. While not legally binding, this letter is often considered influential and may be taken into account by the trustee when making decisions, such as asset distributions.

The legal framework for trusts in the Cayman Islands is primarily established by the Trusts Act (2021 Revision), along with the Fraudulent Dispositions Act (1996 Revision) and the Perpetuities Act (1999 Revision).

Under the Trusts Act, Cayman courts are authorized to modify a trust under certain circumstances and have supervisory jurisdiction over trusts that are governed by Cayman law. Additionally, English case law is often regarded as a persuasive reference in legal matters in the Cayman Islands.

Setting up a Trust in the Cayman Islands
Key Components of a Cayman Islands Trust

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The Settlor

Once a BVI trust is established, the settlor relinquishes legal ownership of the trust’s assets. The settlor can also be a beneficiary and, in certain cases, may serve as a co-trustee. They may retain some level of control over the trust, such as the power to approve distributions, appoint or remove trustees, or revoke the trust. However, for the trust to remain valid, the settlor must genuinely give up ownership of the assets and cannot simultaneously be both the sole trustee and the sole beneficiary.
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The Trustee

The legal ownership of the trust assets is transferred to the trustee, who is responsible for managing and administering the trust. Trustees must act solely in the best interests of the beneficiaries. The assets held in trust are considered a separate entity and do not become part of the trustee’s personal estate. BVI’s legal framework offers considerable flexibility regarding trusteeship. A trustee does not need to be a BVI resident, and unless otherwise stated in the trust’s terms, there is no requirement for a minimum number of trustees, though the maximum is capped at four.
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The Beneficiaries

Beneficiaries are those entitled to benefit from the trust’s assets. As noted, the settlor can also be a beneficiary. To ensure the trust is valid, the beneficiaries’ identities must generally be clearly defined. However, the trust document may allow for additional beneficiaries to be added over time. Beneficiaries may receive equal or unequal benefits, as specified in the trust deed or at the trustee’s discretion in the case of a discretionary trust. Additionally, the trust instrument may exclude certain beneficiaries from future benefits.
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The Trust Fund

After the trust is initially funded, more assets can be added at any time. It is common to start a trust with a nominal amount and later add substantial assets. The BVI trust fund can include a wide range of real and personal property, except in the case of VISTA trusts, where assets are restricted to shares in specific BVI companies.
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The Protector

The law explicitly allows for the appointment of a protector in the trust document. The protector’s consent is often required before the trustees can exercise certain powers or discretion. Trustees are protected from liability for losses if they act with the protector’s consent. A protector may also hold powers such as determining the trust’s governing law, changing its jurisdiction, removing or appointing trustees, excluding beneficiaries, and granting or withholding consent for specific trustee actions. Unless the trust deed states otherwise, a protector is not liable to beneficiaries for their decisions and is not considered a trustee, even with the authority they hold.

Cayman Islands Trust

A Trusted Jurisdiction with Robust Legal Systems, Global Expertise, and Seamless Offshore Services

Cayman Islands – Types of Trusts

The Cayman Islands offers a wide range of trust structures to cater to various estate planning, asset protection, and business goals. Below are some of the most commonly utilized trust types in the jurisdiction:

Discretionary Trust

A highly flexible trust structure, where trustees have broad discretion over how income and capital are distributed among beneficiaries.
Beneficiaries do not have a fixed entitlement but are instead considered when trustees make distribution decisions.
This trust is often used for wealth management, succession planning, and asset protection.

Fixed Interest Trust

Beneficiaries are given specific rights to income or capital distributions. Trustees have limited discretion in managing the distributions. This structure is commonly employed in estate planning to ensure the smooth transfer of wealth according to predefined terms and is often used for pension schemes or family inheritance planning.

STAR Trust (Special Trusts Alternative Regime)

Introduced through the Special Trusts (Alternative Regime) Law in 1997, this trust allows for both beneficiary and purpose-based trusts, including charitable and non-charitable purposes.
A designated enforcer ensures that the trustees fulfil the trust’s objectives.
This trust is frequently used in commercial transactions, private wealth structuring, and securitization.
Unlike traditional trusts, it can continue indefinitely without being affected by the rule against perpetuities.

Charitable Trust

Created exclusively for charitable purposes, such as poverty alleviation, education, religion, or other public benefits. It must meet the public benefit requirement to be recognized under Cayman law. These trusts can exist perpetually, as they are exempt from the rule against perpetuities. Charitable trusts are commonly used for philanthropic efforts and corporate social responsibility (CSR) initiatives.

Trusts with Protectors

A protector (which can be an individual, committee, or corporate entity) is appointed to oversee the actions of trustees.
The protector may have various powers, including:

Approving trustee decisions

  • Appointing or removing trustees
  • Vetoing distributions or changes to the trust
    This structure adds an additional layer of oversight and is often used in family wealth planning and corporate trusts.
  • Reserved Powers Trust
    In this structure, the settlor retains certain powers, such as:
  • The ability to amend or revoke the trust
  • The right to make investment decisions
  • The power to appoint or remove trustees and beneficiaries

This type of trust offers the settlor more control while still benefiting from asset protection and tax planning advantages. Careful structuring is necessary to avoid potential tax issues in other jurisdictions.

Exempted Trust

Required to be registered with the Registrar of Trusts in the Cayman Islands.
It receives a tax exemption certificate, ensuring that the trust is not subject to estate duty or inheritance taxes for up to 50 years.
This trust is commonly used in offshore investment funds, unit trusts, and international estate planning.

Private Trust Companies (PTCs)

A corporate entity set up to act as a trustee for a specific family or business trust. PTCs offer greater control and confidentiality in the administration of the trust. These are typically used by high-net-worth families or for complex business succession planning and must be registered under the Private Trust Companies Regulations (PTCR).

Cayman Trusts

Applications and Uses

A trust is a legal structure through which an individual, known as the settlor, transfers ownership of assets (referred to as the trust fund) to appointed trustees. These trustees legally hold and manage the assets on behalf of beneficiaries or for a specified objective.


Trusts established in the Cayman Islands are frequently employed for a broad range of purposes, including personal, financial, estate, and corporate planning. The jurisdiction is favored globally due to its solid legal infrastructure, strong asset protection measures, and tax-neutral environment. Typical applications include:

 

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Estate Planning & Wealth Management

Trusts offer a strategic means of passing wealth to future generations, ensuring orderly succession and bypassing the need for probate. They also serve to safeguard family assets from forced heirship rules prevalent in many civil law countries.

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Asset Protection

Trust structures provide a layer of defense against potential claims from creditors, legal disputes, and political or economic instability in the settlor’s home country. The Cayman Islands’ Fraudulent Dispositions Act limits challenges to trust assets, provided the trust wasn’t established with the intent to deceive creditors. Trusts may also offer protection in divorce situations, within certain legal parameters.

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Tax Planning & Efficiency

Cayman trusts are often structured to reduce exposure to estate, inheritance, capital gains, and income taxes in applicable jurisdictions. They benefit from the absence of local taxes on income, capital gains, or distributions, making them an effective tool in international tax planning for wealthy individuals and corporations.

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Philanthropy & Charitable Trusts

Charitable trusts allow donors to support causes they care about in a legally compliant and enduring way. These structures are tailored to meet recognized charitable standards under Cayman Islands law.

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Commercial & Investment Applications

Trusts are widely used in financial transactions and investment structures, often acting as asset-holding entities with independent oversight. STAR trusts, in particular, are utilized in structured finance, securitizations, and private equity deals for their purpose-specific flexibility. They are also employed in joint ventures and complex financing to secure lenders’ interests.

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Employee Benefit & Pension Plans

Companies often use trusts to create employee benefit schemes such as pensions, stock ownership plans, and long-term incentive programs. These arrangements provide a structured way to accumulate and distribute retirement or benefit funds.

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Owning and Managing Specific Assets

Trusts can hold a variety of high-value assets, including real estate, intellectual property, luxury vessels, aircraft, and more.

In essence, Cayman trusts provide a discreet and organized solution for managing personal and corporate wealth, ensuring both asset protection and seamless succession planning.

How to Register a Trust in the Cayman Islands?

Establishing a Trust in the Cayman Islands
Key Steps and Considerations

Creating a trust in the Cayman Islands involves a series of important actions and decisions to ensure it aligns with both the settlor’s intentions and local legal requirements.

The following is a summary of the typical process:

Step 01
Choosing the Appropriate Trust Structure

The settlor must first identify the trust type that best serves their personal, financial, or strategic goals.

Step 02
Appointing the Main Participants

Settlor: The individual who contributes assets to the trust. 

Trustee: The party—either an individual or a licensed trust company—responsible for legally holding and managing the trust’s assets. 

Beneficiaries: The individuals or organizations intended to benefit from the trust. 

Protector (optional): A party that oversees certain trustee actions, and may be granted authority to appoint or remove trustees.

Step 03
Preparing the Trust Deed

The trust instrument is a formal legal document that establishes the framework for the trust, including:

  • The trust’s purpose and objectives.
  • Powers and responsibilities of the trustee.
  • Rights and entitlements of beneficiaries.
  • Guidelines for investment and asset management.

Additionally, a Letter of Wishes may be drafted to offer non-binding guidance to trustees regarding the settlor’s preferences.

Step 04
Transferring Assets to the Trust

The settlor transfers property—such as cash, real estate, investments, or other valuable assets—into the trust. Further contributions may be added over time.

Step 05
Compliance and (If Required) Registration

Most Cayman trusts do not require public registration. However, Exempted Trusts must be registered with the Registrar of Trusts and may qualify for a tax exemption certificate for up to 50 years.

Trustees are required to maintain detailed records and adhere to anti-money laundering (AML) and due diligence obligations.

Although a trust is generally established through a formal written instrument for clarity and legal certainty, under the Trusts Act, a trust may also be created verbally or by conduct in certain circumstances.

Written trusts can take the form of either:

  • A Settlement of Trust, signed by both the settlor and the trustee; or
  • A Declaration of Trust, executed solely by the trustee.


The trust becomes active once the initial assets are transferred (or “settled”) into it. These assets may be added to overtime. Legal advisors, such as Ogier, can assist in drafting and finalizing the necessary trust documents.

 

Step 06
Trust Administration and Ongoing Management

The trustee is obligated to manage the trust in accordance with the trust deed, relevant legal duties, and the best interests of the beneficiaries. Responsibilities include:

  • Maintaining accurate records and reports.
  • Overseeing investments.
  • Distributing assets according to the trust’s terms.

Thanks to its strong legal foundation, confidentiality safeguards, and tax-neutral environment, the Cayman Islands remains a preferred location for trust establishment. It is highly advisable to consult with qualified legal or financial professionals when setting up a trust to ensure proper compliance and structuring.

The Cayman Islands Trust

Main characteristics

Why Should You Open a Trust in the Cayman Islands?

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Versatile Trust Options – The Cayman Islands offers a range of trust structures, including discretionary trusts, fixed interest trusts, STAR trusts, and the use of private trust companies (PTCs), allowing for tailored solutions to meet diverse needs.

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Robust Asset Protection – Local laws provide strong defenses against creditor claims and do not recognize forced heirship rights, safeguarding settlors’ intentions.

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Tax Efficiency – Trusts and their beneficiaries are not subject to direct taxation within the jurisdiction, supporting efficient wealth planning.

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Well-Established Legal Framework – Trusts are governed by the Trusts Act (2021 Revision) and oversight is provided by the Cayman Islands Monetary Authority (CIMA), ensuring legal and regulatory integrity.

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High Level of Privacy – Most trusts do not require public registration, offering a discreet and confidential environment for trust arrangements.

Confidentiality

Trusts established in the Cayman Islands are generally not subject to public registration or disclosure, except where exempted trusts are involved. Nonetheless, certain information may need to be disclosed in accordance with anti-money laundering (AML) laws and international agreements aimed at promoting financial transparency.

Taxation and Stamp Duty

The Cayman Islands offer a tax-neutral environment, with no levies on corporate income, capital gains, profits, or withholding. For registered trusts, the government issues a formal undertaking assuring that no taxation will be applied to the trust for up to 50 years. This exemption is typically renewable upon expiration. In most cases, trusts are not required to be registered unless they seek this specific tax assurance.

Taxation and Stamp Duty

The Cayman Islands offer a tax-neutral environment, with no levies on corporate income, capital gains, profits, or withholding. For registered trusts, the government issues a formal undertaking assuring that no taxation will be applied to the trust for up to 50 years. This exemption is typically renewable upon expiration. In most cases, trusts are not required to be registered unless they seek this specific tax assurance.

The Cayman Islands Trust

Legal Requirements and Obligations

Effect of Foreign Laws

Unless the trust deed specifies otherwise, any legal matters involving a trust governed by Cayman Islands law must be determined exclusively under Cayman law, regardless of any foreign connections to the trust or its assets. This principle applies to issues such as:

  • The settlor’s legal capacity
  • The trust’s validity, construction, and legal effect, including any transfers of assets

Trust administration, including the roles, responsibilities, rights, and potential liabilities of trustees, as well as their appointment or removal

The scope and exercise of powers related to amending, revoking, or modifying the trust

A trust formed under Cayman law, or any asset transferred into it, cannot be deemed invalid solely because:

  • The concept of trusts is not recognized or permitted in another jurisdiction
  • The arrangement conflicts with forced heirship provisions in the laws of another country

Perpetuity Rules

While STAR trusts and charitable trusts in the Cayman Islands may exist indefinitely, other trusts established after August 1, 1995, fall under the Perpetuities Act, which limits their duration to a maximum of 150 years—although the settlor can opt for a shorter term. The Act also features a “wait and see” approach, meaning a trust will not be considered void for exceeding the time limit unless it is certain that the trust property will not vest within the allowed period.

    Cayman Trustees Regulations

    Licensing Requirements for Trust Companies
    Any trust company conducting business in or from the Cayman Islands must obtain a license under the Banks and Trust Companies Act (BTCA). To be eligible, applicants must meet specific minimum net worth thresholds and be managed by individuals who meet the regulatory standards of integrity and competence. The Cayman Islands Monetary Authority (CIMA) is responsible for regulating this process and offers several types of trust licenses, including unrestricted, restricted, and nominee licenses.

    This licensing system is structured to maintain the Cayman Islands’ global standing as a reputable and well-regulated financial center. Applications must be submitted to CIMA using official forms and must adhere to the jurisdiction’s regulatory criteria.

    Private Trust Companies (PTCs)
    A Private Trust Company is a specially incorporated entity that acts solely as trustee for a particular trust or a group of connected trusts.

    PTCs fall under the governance of both the BTCA and the Private Trust Companies Regulations (PTCR). Although the BTCA generally mandates that companies engaged in trust business obtain a license, PTCs may be exempt from this requirement if they meet specific conditions detailed in the PTCR.

    For more in-depth information, refer to Atrium’s guide on Private Trust Companies in the Cayman Islands.

    Establishing a Trust in the Cayman Islands

    Services offered by Atrium & Associates

    To establish a Cayman Islands trust, it can be formalized in writing either as a Settlement of Trust, which requires signatures from both the settlor and the trustee, or a Declaration of Trust, which only needs to be signed by the trustee. The trust becomes effective once the initial property is settled, with the option to add additional assets later.

    We offer comprehensive assistance with preparing all necessary documentation. Our services include:
    • Advising and coordinating with professional advisors in other jurisdictions to recommend the most effective trust structure for achieving the settlor’s goals.
    • Drafting the trust instrument, letters of wishes, and forming underlying companies to hold the trust assets.
    • Preparing and reviewing documents related to commercial transactions underlying the trust.
    • Assisting the settlor in selecting a trustee for the BVI trust and preparing and reviewing all required documentation for the proper administration and operation of the trust and its underlying companies.
    To proceed with establishing a Cayman Islands trust, please reach out to any member of our team listed at the end of this client briefing.

    Why Partner with Us?

    • Expertise: Years of experience in offshore company registration.
    • Global Reach: Support for international entrepreneurs and businesses.
    • Transparent Pricing: No hidden fees—just clear, upfront costs.
    • Dedicated Support: Guidance at every step of your offshore journey.

    Start Registering Your Trust in the Cayman Islands Still By Today

    Take advantage of the Cayman Islands business-friendly environment and establish your Trust in a thriving offshore jurisdiction. Contact us now for a free consultation and start your journey toward global business success!

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