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Asset Protection: Statute of Elizabeth Versus The Fraudulent Disposition Laws on Cayman Islands Tru |
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Settling a trust in the Cayman Islands as a form of asset protection has provided settler’s with comfort and security against creditor claims. The business environment in the U.S. is well known for litigations and lawsuits by creditors against companies who failed to fulfill their obligations due to bad business.
A creditor protection trust in the Cayman Islands has provided a very satisfactory offer on safeguarding your assets when things like this happens. But this was not always the case. Before the creation of the Fraudulent Disposition Laws of 1989, most financial centers that were or are still British colonies were subjected to the statute of Elizabeth. Under the old law, the settler does not have enough protection against claims by creditors. At the same time, the trustee also suffers from expenses and damages caused from defending the trust. In most cases, the creditors claiming obligations from the trust do even not yet exist before the creation of the trust.
With the creation of the Fraudulent Disposition Laws, this has begun to change. The effect of the new law is to render avoidable any disposition made with an intent to defraud and at an undervalue. With this law, unless it is proven that a trust was created with an intent to escape an obligation from a creditor, the trust is not subject to the claim of the said creditor. So in essence, a trust created before the existence of such creditors is not subject to the claim. And even if it is proven that the creditor has a valid claim on the trust, it is done so at an undervalue, meaning, the trust is not liable to pay the full obligation of the settler.
With the enactment of this law, the settler is then protected from any external claim coming from a creditor, and at the same time the trustee could invoke the trust as a source of expenses for its defense thereof.
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