Asset Protection: Essential Structures of a Cayman Islands Trust

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Asset Protection: Essential Structures of a Cayman Islands Trust

The Cayman Islands trust is a very powerful tool for asset protection. But for a settler to ensure that the trust has been given sufficient protection under the laws of the Cayman Islands, all essential aspects regarding its structure should be taken into consideration.

The trust to be well protected should be to all possibility placed under the jurisdiction of Cayman Law. Doing this will ensure that once a claim has or a suit has been placed against the trust for whatever reasons it will be protected to the full extent of Cayman Law. One way of doing this is for the settler to transfer the property subject to the trust to a Cayman company. All the settler has to do is to incorporate with a company based on the Islands then process a transfer before settling the trust.

For maximum asset protection, the settler should see to it that a purpose beyond asset security should be manifested in the creation of the trust. It is a good reason to state that the trust is made to ensure that the settler’s family will then be taken care of in the event that misfortune falls on the settler. This will support the defense of the trust in an event of a creditor claim by stating that the trust was made in good faith. It is also necessary for the trust to be created before the existence of such creditors.

It is also ideal that the trust should be irrevocable. In cases that the trust is revocable, make sure that the revocability is voided on the event of the settler’s bankruptcy. A trust that is revocable by the trustee in the event of the settler’s bankruptcy defeats its purpose.

The trust should also possess a discretionary trust. This means that the trust should be protected from the attacks of the trustee in case of bankruptcy.

At the same time, it is vital that the trustee acts independently and does not grant every wish of the settler with regards to the trust. These arrangements are often not considered as valid trust but mere shams. The trustee must see to it is solvent upon the creation of the trust and is not aware of any claims by the time of the creation.

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