A STAR trust is a form of trust exclusive to the Cayman Islands and one that has a wide variety of practical applications. Its unique features provide clients with structuring options often not possible with ordinary trusts, making it particularly useful in both private wealth planning and commercial transactions. For families and institutions in the Middle East, STAR trusts offer a secure, flexible, and confidential vehicle for managing wealth across generations, safeguarding family businesses, and supporting philanthropic goals.
Key Features
Beneficial Objects
The beneficiaries and/or objects of a STAR trust may be persons, purposes, or a combination of the two. There may be any number of beneficiaries, and the purposes may be of any kind—charitable or non-charitable—provided they are lawful and not contrary to Cayman public policy.
For Middle Eastern families, this means a STAR trust can combine family beneficiaries with philanthropic or religious purposes, ensuring that legacy, wealth distribution, and charitable commitments are aligned in a single vehicle.
Enforcement
A distinguishing feature of STAR is the separation of the right to benefit under the trust from the right to enforce its terms. Beneficiaries cannot sue trustees or demand information. Instead, only an appointed enforcer has that authority.
This arrangement reduces the risk of family disputes escalating into costly litigation—a challenge sometimes faced in large family groups in the region. The enforcer ensures that only legitimate claims are pursued, maintaining the trust's stability.
Confidentiality
Beneficiaries' rights to information about the trust are restricted, protecting sensitive financial and family information. For high-profile families, entrepreneurs, and business owners in the Middle East, this confidentiality is often critical to preserving privacy and personal security.
Trustees
The trustees of a STAR trust must be (or include) a trust corporation (or its controlled subsidiary) licensed under the Banks and Trust Companies Act (2021 Revision) or a private trust company registered under the Private Trust Companies Regulations, 2020. This statutory requirement aims at ensuring the proper administration of STAR trusts by suitably qualified and experienced trustees.
Trustees must maintain detailed records in Cayman such as the terms of the trust, the identity of the trustee and the enforcer(s) and all settlements of the property upon trust and the identity of the settlor, ensuring accountability and compliance with international standards.
For Middle Eastern clients, the use of professional trustees provides reassurance that family wishes are carried out with independence, oversight, and discretion.
Unlimited Duration
The rule against perpetuities does not apply to STAR trusts, allowing them to exist for unlimited duration. This makes them highly attractive for Middle Eastern families wishing to establish dynasty structures that preserve wealth for generations, in keeping with cultural emphasis on long-term legacy.
Certainty
Unlike ordinary trusts, a STAR trust is not automatically void if the beneficiaries or purposes become uncertain. Trustees and/or enforcers can resolve ambiguities, or failing that, the Cayman court may assist. This certainty enhances reliability for families navigating complex multi-jurisdictional wealth planning.
Planning Uses
Commercial Use
STAR trusts are frequently used in corporate and financing transactions. They can hold shares in special purpose vehicles (SPVs) to create "orphan" structures, useful for securitisations, bond issuances, and asset-backed financing.
For Middle Eastern corporates and sovereign wealth entities, STAR provides a tax-neutral, internationally recognised platform for global investments, particularly where independence and ring-fencing of assets are required.
Family Business Succession
A STAR trust can act as an effective succession planning tool for family businesses, a cornerstone of the Middle Eastern economy. By limiting beneficiaries' rights to challenge the trust deed, STAR helps maintain unity and prevents disputes that could jeopardise business continuity.
This ensures that the ownership and management of family enterprises remain stable, while still allowing future generations to benefit.
Philanthropic Trusts
Philanthropy is deeply embedded in Middle Eastern culture. A STAR trust may be used as an alternative to a charitable trust where the settlor wishes to include non-charitable or religious purposes, or retain influence over who enforces the trust.
This flexibility allows families to design philanthropic strategies that combine global giving with regionally focused initiatives, reflecting both tradition and innovation in charitable planning.
Why Cayman?
For Middle Eastern families, entrepreneurs, and corporates, the Cayman Islands offer several advantages:
- Firewall legislation: Protects Cayman trusts from forced heirship claims and challenges based on personal relationships, highly relevant when coordinating with Sharia inheritance regimes.
- Tax neutrality: Ensures efficient cross-border structuring for regional and international investments.
- Global recognition: Cayman is a trusted and familiar jurisdiction for banks, investors, and regulators worldwide.
- Judicial sophistication: Cayman's courts are experienced in complex trust disputes and provide a reliable legal framework.
- Ease of establishment: Setting up a STAR trust is efficient and cost-effective compared with other offshore structures.
How Conyers Supports Middle Eastern Clients
Conyers has a long history of advising high-net-worth families, wealth funds and corporates across the Middle East on Cayman Islands law. Our team works closely with clients in the Gulf and wider region, delivering bespoke trust solutions that balance family values, cross-border investment needs, and international compliance.
Through our affiliated Conyers Client Services, we also provide licensed trust and corporate administration, allowing us to deliver a seamless service from structuring and establishment through to ongoing management.
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.
