As a recognised global centre of excellence for trusts, Cayman's financial sector has serviced international clients for decades with what is the most flexible instrument for wealth structuring and estate planning within a common law framework.
The Cayman Islands Monetary Authority's (CIMA) regulatory framework covers a range of licences for the trust sector, allowing for the provision of trust services to individuals, families and organisations. An unrestricted Trust Licence authorises the undertaking of business acting as a trustee, executor or administrator for private wealth, corporate, collective investment schemes or charitable structures. There are also categories of licences for Restricted Trust and Nominee Trust business, which allow for operating in a specific role only. In addition, CIMA regulates private trust companies, which are companies established for the sole purpose of engaging in trust business, effectively as a corporate trustee to either a trust or a group of 'connected' trusts, usually within the same family and typically utilised by high net worth families. Finally, there is a further licence category for trust services involving a Controlled Subsidiary where there is a desire for a licensed provider to operate a certain category of clients under a specific entity without requiring an additional full license.
In addition to traditional wealth planning, Cayman's trust companies are used extensively in capital markets transactions and structured finance deals, by major institutional investment managers, financial institutions and investment banks. Japanese investors, for example are very familiar and comfortable with Cayman unit trusts to structure hedge fund investments. As with other sectors, trust legislation in Cayman has evolved to meet the rapidly changing needs of the industry. The innovative STAR Trust regime, developed in 1997, significantly expanded trust planning capability, providing for trusts to be established for any purpose, provided it is lawful and not against public policy.
With steady and dependable growth, trusts have remained an important component of the financial services industry in Cayman, where there are currently 140 licensed trust companies, confirming the jurisdiction's status as a leading centre for global wealth management and planning.
Produced with kind assistance from The Society of Trust and Estate Practitioners (STEP)
Originally published in Cayman Finance Magazine, 2015-2016, Issue 2
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