If you want to protect your assets and pave a smooth financial future, consider establishing a Cayman Islands Trust. This offshore trust can provide privacy and help safeguard your wealth from creditors. In this article, you’ll find everything you need to know about this type of trust.
What Is a Cayman Islands Trust?
The Cayman Islands Trust (sometimes known as a Cayman STAR Trust) is a form of trust accessible to various people for many purposes. STAR refers to the Special Trusts Alternative Regime Law introduced in 1997 to provide rules and regulations for a private trust company. If you’re looking for the best asset protection plan, a Cayman Island Trust may be ideal.
STAR Trusts aren’t investments in themselves but legal entities through which you can make investments. Like other offshore trusts, a trustee owns and manages the assets to benefit other people (such as your children) or entities (such as existing charitable institutions) at a set time.
Unique Features of Cayman STAR Trusts
A Cayman Islands STAR Trust is one of the world’s most flexible trusts. You can use it for several charitable and non-charitable purposes, including estate planning, tax planning, and wealth protection. You also don’t have to worry about limits on income or principal distributions.
Another unique feature of Cayman trusts is their lifespan. Other trusts can have limited durations, but a STAR Trust has an unlimited duration. STAR Trusts also include an enforcer and a licensed trust corporation as trustees.
Are Cayman Islands Trusts Safe?
Before leaving your money in a Cayman Islands Trust, you may wonder about its safety. If you set up your trust properly, you can rest assured that your assets are secure because your investments are beyond the reach of creditors, lawsuits, and other legal threats.
The trustee is responsible for the private trust company registered assets, ensuring the holdings remain secure. If trustees fail to protect your assets, they may be liable for any losses incurred by third parties. This means you can have peace of mind knowing you’re not ultimately responsible for your wealth if you establish your trust properly.
If you don’t set up non-charitable or charitable trusts correctly, your mistakes could lead to vulnerable assets and trust property being lost. Most trustee failures result from negligence or carelessness in following recommended steps. It’s critical to take your time establishing a trust fund and seek legal guidance from an experienced trust attorney.
How Do You Set Up a Cayman Islands Trusts?
You can set up an offshore trust in the Caymans by hiring an asset protection attorney. It may be challenging for an average individual to understand the tax and legal implications of creating such a fund. You should only hire an attorney who is knowledgeable about trusts and has experience working with them.
The process of working with a licensed trust company varies according to your needs and preferences, but it generally involves compiling a trust instrument or deed that spells out how you want your assets transferred upon death or otherwise used during life (if there are no provisions for death). After signing appropriate documents, your attorney will file them with the proper parties. Documentation for your non-charitable or charitable trust must abide by foreign law.
What Is the Trust Enforcer’s Role?
Cayman law trusts include a trustee and an enforcer. Beneficiaries often cannot sue the trustee if something goes wrong and they don’t receive the profit according to the terms of the trust. Instead, the enforcer maintains certain powers over the trust and ensures the beneficiaries get what they deserve according to trust law.
Enforcers don’t need to live in the Cayman Islands to enforce a trust in that jurisdiction. They can live anywhere in the world and don’t follow private trust companies’ regulations. Neither does your trust’s enforcer have to be a person—it could be a committee or corporation.
Cayman Islands Trusts must have at least one trustee, but you can appoint more than one in your trust instrument. Determining the right trustee for your Cayman Trust depends on their ability and willingness to act responsibly in their position. They also must meet the qualifications under trust law and the specific terms of the trust.
Benefits of a Cayman Islands Trust
You may wonder, “Why are the Cayman Islands Trusts better than other trusts?” With a Cayman Islands Trust, you can access many privacy and asset protection benefits. These benefits enable you to enjoy financial security now and for years to come.
Legal Ownership Outside the U.S.
Cayman Islands Trusts operate outside of U.S. court jurisdiction. This means United States laws don’t apply to your trust, and you can enjoy more freedom to invest in previously unavailable opportunities. Creditors cannot pursue those assets through a personal injury or property damage claim in the U.S.
Many people think offshore trusts are shady and semi-illegal. However, some of the savviest business people compile offshore trust instruments to maintain and grow their wealth without so many legal threats. You can obtain legal protection for your Cayman Trust by having an experienced attorney draft it following proper law.
You may lose control of your assets held by certain trusts. Cayman Trusts act differently, allowing you, as the settlor, to retain a great deal of control. With a Cayman Trust, you may have the option of:
- Maintaining authority over the trustee(s)
- Specifying what beneficiaries can and cannot have
- Controlling any company shares the trust may hold
- Establishing beneficial ownership
- Setting up a fixed interest trust
- Investing using a borrower’s assets
- Determining important asset protection functions
Private Asset Management
Privacy is a major concern for many soon-to-be trust owners. However, you can put your mind at ease with a Cayman Islands Trust. This type of trust doesn’t register with the national government, meaning your information stays private and away from the prying eyes of other entities.
If you keep your wealth in a bank or government-owned fund, you must report it to the IRS for tax purposes. The Cayman Islands Monetary Authority doesn’t impose taxes on private trust companies. In other words, you can store and multiply your assets without ever paying Cayman taxes. However, taxpayers in the U.S. and other countries that tax global income have to report their earnings to their government.
Most offshore trusts eventually close and require you to remove assets. With a Cayman Trust, you can protect your assets perpetually. There is no lifespan limitation on this type of trust.
Cayman Trust Protection Level
Cayman Islands Trusts offer some of the highest protection levels of any trust in the world. You can leave your assets in good hands and know they’ll be safe from creditors and lawsuits. In terms of protection, a Cayman Trust includes the following features:
- As a non-discretionary trust, your trustee cannot change the distribution and management of your trust assets while you’re alive unless you sign documents allowing them to do so. You can also set up restrictions during succession planning so that the trust business transfers assets evenly with fixed interests.
- It’s private and confidential—only your chosen beneficiaries (or those whom a court appoints) will have access to information about its existence and contents. You can also procure information for them if they show interest.
- It offers privacy protection for beneficiaries who live outside the Caymans, if they don’t face foreign tax laws when transferring assets from this type of trust.
Who Can Benefit From Cayman Trusts?
Don’t assume that a Cayman Trust isn’t for you because you’re not a multi-millionaire or world-famous investor. These trusts act as a security blanket for any individual looking to take care of their income and plan for a bright financial future. Here are several reasons why an individual, business owner, crypto investor, or corporate CEO may establish an offshore trust under Cayman law:
- Protect assets from creditors and lawsuits: Some people are more susceptible to lawsuits than others. If you think someone may be after your wealth, you can start a Cayman trust fund to protect your assets.
- Protect assets for future generations: Divvying out inheritance money can be tricky, but you can take control with an offshore trust. You may accept and deny beneficiaries as you see fit in your trust deed. For example, you can make certain family assets go to your children and not your siblings or ex-spouse.
- Protect against corporate liquidation or bankruptcy: Creditors may come after your personal assets if your family business liquidates or goes bankrupt. In that case, you can put investment funds in an offshore trust and keep them from seizing it.
Of course, you may have entirely different reasons for considering a Cayman Islands Trust. It could be for charitable purposes, to keep your wealth private, or to store it in a more stable political environment. We recommend having a lawyer help you establish your trust and avoid potential legal complications.
Talk to an Experienced Attorney About Offshore Trusts
If you need an asset protection plan, a Cayman Islands Trust could be the solution. Talk to our offshore trust legal team at Blake Harris Law for guidance on establishing a Cayman Trust. Contact us using the form below or call 833-ASK-BLAKE to set up your initial consultation.