Cayman Islands: The Cayman Islands - First Choice For Trust Business

Last Updated: 14 March 2000
The number of persons who seek an offshore solution to their financial requirements continues to grow and with this growth has come not only an increase in the number and quality of service providers but also an upturn in the number of offshore centres from where financial services can be provided.

Competition of this nature is of course welcome as it has provided all of the offshore centres (as well as the various service providers) with an ideal opportunity to take a close look at the features and benefits which they have to offer clients and how those features and benefits compare with rival locations.

In this article I shall cover why a person might want to choose the Cayman Islands as the centre in which to create and base his/her offshore trust.

The Legal System

The Cayman Islands are a British dependent territory and although the British Parliament retains the right to pass legislation we have our own Legislative Assembly which generally decides on the laws which will prevail here.

Our laws are based on English common law and although many of our trust statutes are similar in nature to those which are found in the United Kingdom we have made certain changes to some of the more 'traditional' trust provisions. We believe that these changes not only reflect the changing needs of the market place but have also served to enhance the appeal and uses of the common law trust as a financial planning vehicle for international clients.

Let us now look at some of the enhancements to the trust laws which the Cayman Islands' draftsmen have implemented.

The Perpetuity Period

It is a widely accepted principle that assets can't be held in trust indefinitely and the perpetuity period (as it is often termed) will set out just how long assets can be retained in a private trust without infringing this principle.

In many locations the perpetuity period (or the maximum trust duration period as it is sometimes referred to) will be a life in being plus 21 years or in some cases a term of years not exceeding 80 or 100. However, under the Perpetuities Law 1995 the perpetuity period of a Cayman Islands trust can be as long as 150 years.

Accumulation of Income

Trust income can be accumulated (added to the capital) for the duration of a Cayman Islands trust. In some jurisdictions there may be a restriction in place preventing income being accumulated beyond say, 21 years from the creation of the trust.

Creditor Protection

The Fraudulent Dispositions Law 1989 provides the settlors of a Cayman Islands trust with an element of protection against claims which may be made against them by future or unknown creditors. A simple enough enhancement but one which has sparked an enormous amount of debate since the enactment of this Law.

Before we look at what this Law attempted to do I should perhaps emphasise what it was NOT designed to do. In simple terms, this Law was not intended to be used as a means to defeat the claims of, or hide assets from, the current or anticipated creditors of a settlor. The intention of this law was to remove some of the doubt which surrounds the validity of a transfer of property into a trust by the settlor. Let me explain this in more detail.

Under the laws of some jurisdictions, a transfer into a trust can be set aside if a creditor makes a claim against the settlor or if the settlor becomes bankrupt within a certain period of time. If a claim is made within that time frame the trust could be declared invalid, even if the claim was less than the amount placed into the trust. This could therefore mean that the settlor of a trust might have to wait as long as 10 years before he is sure that the transfer which he made into his trust will remain unchallenged and that his trust will be considered valid. In addition, if a claim was made the settlor would have to prove he was not attempting to defraud the creditor making the claim.

Under the Fraudulent Dispositions Law 1989 much of the doubt surrounding the settlor was removed yet at the same time the legislation also respected the rights of persons to make a claim after property had been transferred into trust. Basically, the onus of proving the settlor was attempting to defeat the creditor passes to the creditor concerned. In addition, the creditor must demonstrate that he/she had suffered a loss as a result of the transfer and he/she must also bring proceedings in the Cayman Islands within 6 years of the date of the transfer. If the creditor misses the 6 year period his claim will not be recognised in the Cayman Islands.

A number of offshore centres have modelled their asset protection laws (which these provisions are often termed) on our law and some offer even greater protection against claimants. However, we in the Cayman Islands believe that our legislation provides an acceptable mix of protection both for the settlor as well as for the legitimate claimant.

Forced Heirship Protection

Under the Trusts (Foreign Element Law) 1989, which is now consolidated under the Trusts Law 1996, the position relating to foreign individuals who settle a Cayman Islands trust was clarified. In general terms, if a settlor of a Cayman Islands trust chooses the law of these Islands to be the proper law of their trust our local law will govern such matters as the capacity of the settlor to create the trust, the validity of the trust as well as the powers and provisions which are contained in the trust deed.

A foreign judgement would not, therefore, be recognised if it attempted to attack the settlor, the trustee or the trust property on any of the aforementioned grounds.

These provisions can be particularly appealing to settlors from civil law countries which recognise the claims of certain family members against a person's property. The family members who have these rights under local law are often referred to as forced heirs.

Exempted Trusts

In addition to offering what we call an 'Ordinary Trust', which is the basic common law trust offered by other centres, we also have Exempted Trusts which are unique to our shores. There are 2 types of exempted trust which are available.

For both types the Registrar of Trusts has to be satisfied that none of the beneficiaries will or can be resident or domiciled in the Cayman Islands. The Registrar must also be sent a copy of the trust deed and usually copies of trust accounts plus any other information which the Registrar may feel is appropriate. In return for this, and payment of a registration fee of US$500 and an annual fee of US$120 the trust will receive an undertaking from the Governor of the Cayman Islands that it will be exempt from local tax (if any should be introduced) for up to 50 years.

However, a Section 79 Exempted Trust (as it is commonly called) extends the principle of tax exemption. The parties of a proposed trust (which would usually be the trustees and the settlor) must submit details to the Registrar of Trusts before the trust is created and if the application is accepted, the rights and remedies which would otherwise pass to the beneficiaries of the trust would instead pass to the Registrar of Trusts. This would mean that the beneficiaries could not enforce the terms of the trust and would generally have no right to receive information relating to the trust or the trust property.


Although not part of our trust statutes, the Confidential Relationship (Preservation) Law is worthy of mention as an attraction of the Cayman Islands as a centre in which to create a trust as this Law places severe penalties on those practitioners who disclose information relating to their clients to outside parties. Most centres offer confidentiality, but in the Cayman Islands we have specific legislation in place which all but guarantees it.

However, that is not to say that confidential information can't or won't be released in certain circumstances. All service providers have a legal obligation to report situations where clients are using a trust (or any other type of entity) to launder money or traffic drugs and the protection afforded by our confidentiality provisions will not (and were never intended to) extend to such illegal activities.


Unlike many offshore centres which are low tax centres, the Cayman Islands is a no tax centre. The income and capital gains of a local trust will not, therefore, suffer any local taxation. However, transfers into and distributions out of a Cayman Islands trust may create taxation implications for the transferee or the beneficiary concerned in their country of residence.

Regulation of Trustees

If a corporate entity wishes to provide trust services it must apply for a licence from the Inspector of Financial Services in accordance with the provisions of the Banks and Trust Companies Law. The regulations apply a 'fit and proper' test to such entities as well as to the senior officials of such entities, thus providing a level of control over trust companies which doesn't exist in a number of other offshore centres.

Purpose Trusts

Although not on the statute books as yet, we should soon be able to provide non-charitable Cayman Islands purpose trusts.

The Trust Industry in the Cayman Islands

If you take a look at the various business directories in this Yearbook and read down the list of the names of the organisations and practices which are present in the Cayman Islands one word should come to mind, and that word is 'quality'. The Cayman Islands has a first class trust industry with first class service providers and practitioners.

Another reason why the Cayman Islands should be the first choice for trust business.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions