STAR gazing: A dummy’s guide to Cayman Islands STAR TrustsLeave a Comment
STAR trusts: Introduction
The Cayman Islands offers a unique form of statutory trust called a “STAR Trust,” which stands for Special Trusts Alternative Regime.
STAR Trusts, as governed by Part VIII of the Trusts Act (revised).
Overview of benefits
A STAR trust might provide increased flexibility when compared to traditional trusts. This might include in the following areas:
- wealth and succession planning,
- investment funds, and
- commercial purposes.
Key uses of a STAR trust
The key uses of STAR Trusts include:
- Trusts for non-charitable purposes.
- Mixed trusts serving noncharitable purposes and benefiting specific individuals.
- Non-charitable trusts with unlimited duration (bypassing perpetuity restrictions).
- Charitable trusts with enhanced enforcement provisions.
- Trusts that vest enforcement and information rights in an independent enforcer.
- Trusts that cannot be subsequently varied.
How to create a STAR trust
Technical requirements for STAR Trusts include explicit written creation, clear intent to opt-in to the STAR Regime, and the same legal framework as traditional trusts except where variations are introduced by the STAR Regime.
Enforcers play a unique role in STAR Trusts, with their standing to enforce the trust being reserved as a right or duty.
Enforcers have the same rights and remedies as beneficiaries under ordinary trusts, providing them with significant control and oversight.
Trustees of STAR Trusts must include at least one trust corporation, as per Cayman Trusts Act requirements.
Certainty and reform of purposes
STAR Trusts ensure certainty and reform of purposes, allowing the trust terms to confer powers to resolve uncertainties.
The Cayman court has jurisdiction to reform the trust when execution becomes impossible, impractical, or obsolete.
Can a STAR trust hold land in Cayman?
While they cannot directly own land in the Cayman Islands, they are permitted to hold interests in entities that own land for business purposes.
Practical uses for STAR Trusts include creating special purpose vehicles, orphaning private trust companies, holding operating companies with limited trustee involvement, and supporting social benefit projects.
Recognition of STAR trusts
Recognition of these vehicles outside the Cayman Islands has generally been positive, with most countries recognizing them as valid trusts.
Due to the flexibility and versatile nature of STAR Trusts, they are expected to play a significant role in offshore transactions and arrangements for the foreseeable future.
If you have any queries about this article, trusts or the Cayman Islands, then please get in touch.