By Lee Hart From Saffery Trust

Thanks to its robust legal framework and flexibility, the Cayman Islands has long been a popular jurisdiction for establishing (“settling”) trusts, and the upcoming removal of perpetuity for trusts is set to make it an even more attractive option for high-net-worth individuals and corporate clients alike.

Traditional trust structures in the Cayman Islands are subject to a perpetuity period of 150 years, meaning that the trust would automatically end and distribute its assets at the end of this period. Settlors who were uncomfortable with this limitation may previously look to an alternative jurisdiction without perpetuity, such as Hong Kong, Singapore or the Channel Islands, including Guernsey.

For settlors who are set on the Cayman Islands as their jurisdiction of choice, the introduction of The Perpetuities (Amendment) Act, 2024 (the “Act”) provides a modernised solution and demonstrates the Cayman Islands willingness to be flexible, adapt and align with other regions as it continues to build on its reputation as a leading financial services jurisdiction, which has been growing over the last fifty years.

What will change? 

The Act – which will come into effect following royal assent, following the passing by the Cayman Islands Parliament – will allow settlors to disapply the perpetuity on anew traditional trust structure. Unless the step to actively disapply is taken, then the 150-year perpetuity period will remain in force on established trusts, and automatically apply to new trusts.

For any ordinary trust established before the date the Act comes into effect, a trustee, Enforcer, or anyone with powers, or a beneficial interest under the trust, can apply to the Grand Court to remove the existing perpetuity. It is likely that this request will be granted as long as it is not to the detriment of any current or future beneficiaries.

Benefits of the Act

The ability to remove the perpetuity period from a trust offers settlors and beneficiaries greater flexibility, particularly in refining their succession plans.

Given that the global average life expectancy over 70 years, a 150-year perpetuity period may only accommodate two or three generations of beneficiaries. Once this period ends, the trust’s termination and distribution (“vesting”) clauses are automatically triggered, which, if not carefully considered, could lead to unintended outcomes, such as unfavourable tax consequences or assets being passed to unintended individuals and organisations.

The Act also significantly enhances the flexibility available to settlors within the Cayman Islands to design trust structures that better preserve and manage their wealth across multiple generations. By removing the constraints of the perpetuity period, the Cayman Islands become an even more attractive destination for sophisticated trust planning and complementing the established and popular Cayman Islands STAR trust.

The role of a trustee

Whether a settlor has an existing trust (or trusts), or is looking to establish their first structure, the value of an experienced trustee, cannot be overstated.

Trustees play a crucial role in ensuring that the trust operates smoothly and in accordance with the settlor’s wishes, often alongside the trusted Protector or Enforcer. They provide essential oversight, support the management of the trust’s assets, and ensure compliance with legal and regulatory requirements.

Moreover, trustees often work in close collaboration with specialist intermediaries, such as lawyers, accountants, and tax advisors, to provide a comprehensive approach to wealth management. The strength of a trustee’s network, a reflection of the stellar expertise available in the jurisdiction, will be particularly important in the process of disapplying the perpetuity period.

At Saffery Trust, we have spent decades building a global network of top-tier professionals who support our delivery of a first-class client service. We also have a comprehensive understanding of the legislative framework in the Cayman Islands, as demonstrated by the exceptional feedback we received from the Grand Court of Cayman, who described our approach as “an example of a trustee looking beyond the textbook” in attaining a blessing for a momentous decision.

The safe hands of a reputable trustee offers settlors peace of mind that their assets are protected, and their legacy is preserved. In this way, trustees not only safeguard the trust’s integrity but also help navigate complex decisions and adjustments that may be required over time, making them indispensable advisors.

Contact us to find out more about Saffery Trust can help you, or your clients, optimise personal and business wealth to create lasting legacies.

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