12 key questions on STAR Trusts in the Cayman Islands

The Cayman Islands is renowned for its sophisticated financial services sector, offering a variety of trust structures to cater to clients’ diverse needs. One noteworthy option is the STAR trust.

In this article, Simona Watkis, Head of Private Client in the Cayman Islands, answers 12 essential questions surrounding STAR trusts, their benefits, and how Ocorian can support the establishment of these structures.
 

1. What is a STAR Trust?

A STAR trust is a unique trust structure exclusive to the Cayman Islands, formed under the Special Trusts Alternative Regime.  It allows for the establishment of trusts for both charitable and non-charitable purposes, or a combination of both, without the requirement for beneficiaries. Initially, STAR trusts were formed under the Special Trusts (Alternative Regime) Law enacted in 1997. They are now governed by Part VIII of the Trusts Act of the Cayman Islands (the Trusts Act).

2. How does a STAR Trust differ from a traditional trust?

Unlike traditional trusts, STAR Trusts can have both charitable and non-charitable purposes and are not limited by the rule against perpetuities. They also use "enforcers" rather than beneficiaries to oversee compliance with the trust terms.

3. Who can benefit from using a STAR Trust?

STAR trusts are ideal for individuals, families, corporations, and institutions looking for flexible and perpetual solutions in complex financial planning, succession, asset protection, philanthropy, and corporate structuring.

4. Who or what is an "enforcer"?

An enforcer is an appointed individual or entity responsible for ensuring the trustees fulfil their duties according to the trust's stated purposes. This role takes over the traditional function of beneficiaries in enforcing the trust.

5. What are some common uses of STAR Trusts?

Common uses of STAR trusts include family estate planning, asset protection, business succession planning, philanthropic ventures, and serving as holding vehicles for private or family-owned businesses.

6. Can STAR Trusts exist indefinitely?

Yes, STAR trusts can exist indefinitely, making them particularly suitable for long-term wealth preservation. From their inception, STAR trusts were not subject to the general rules on perpetuity. In 2024, legislation in the Cayman Islands disapplied the rule against perpetuities for ordinary trusts governed by Cayman Islands law, allowing such trusts to last indefinitely, similar to STAR trusts.

7. Are STAR Trusts confidential?

Yes, the Cayman Islands provides a strong legislative framework for confidentiality, ensuring the privacy of STAR trust arrangements and their purposes.

8. Who can establish a STAR Trust?

Any individual, corporation, or entity, whether resident in the Cayman Islands or elsewhere, can establish a STAR trust.

9. Can the purpose of a STAR Trust be changed?

Typically, the purposes of a STAR trust are fixed at its creation. However, the trust deed may include provisions for changing the trust's purposes, provided specific conditions and processes are clearly defined at the time of establishment.

10. What legislation governs STAR trusts?

STAR trusts are governed by Part VIII of the Trusts Act and benefit from the robust and transparent legal framework of the Cayman Islands.

11. Why choose a STAR Trust over other offshore structures?

STAR trusts provide unparalleled flexibility, longevity, confidentiality, and the ability to tailor trust purposes precisely, making them ideal for complex wealth management, asset protection, and specialised family or philanthropic planning.

12. Why choose a STAR Trust over a regular trust?

STAR trusts offer a flexible solution when traditional trusts are too restrictive or unsuitable for the intended purpose.

How can the Ocorian Cayman Islands team support in establishing STAR Trusts?

Ocorian's private client team in the Cayman Islands offers expert services in establishing, managing, and maintaining STAR trusts. They provide tailored solutions ensuring regulatory compliance alongside experienced oversight, giving you peace of mind that the trust structure aligns with your specific needs.