Adapting to Cayman Islands perpetuities changes

The Cayman Islands last year introduced The Perpetuities (Amendment) Act, 2024, a piece of legislation that allows for the removal of the rule against perpetuities for ordinary trusts, permitting these to last indefinitely (if desired by the settlor).

This change of August 2024 has substantial implications for trust practitioners, particularly those involved in long-term family wealth planning for high net worth (HNW) and ultra high net worth (UHNW) clients.

It is important to note that this legislative change does not affect Cayman Islands STAR trusts, which were already exempt from the perpetuity rule allowing them to last indefinitely, if desired.

Previously, the law in the Cayman Islands imposed a 150-year perpetuity period on most trusts, requiring the distribution of all trust assets within this time frame. The ability to now disapply the perpetuity period for new trusts is a notable shift, offering greater flexibility for estate planning and making the Cayman Islands more competitive with other offshore trust jurisdictions (such as Guernsey and Jersey) that have already removed the rule against perpetuities.

For new trusts

Moving forward, the draftsman for any new trust should disapply the rule against perpetuity expressly in the trust deed. The following wording is an example provision that could be included in situations when a settlor would like the trust to continue in perpetuity: 

"Pursuant to the Perpetuities (Amendment) Act, 2024, the Cayman rule against perpetuities does not apply to this Settlement or any disposition made in respect of this Settlement."

Although the amendment is not retroactive, existing Cayman law trusts can apply to the Grand Court for approval to either disapply the rule or extend their duration.

For existing trusts

To make an application to remove or extend the trust period for an existing trust, the procedure is likely to be as follows:

1. a short ex parte summons would be prepared on behalf of the applicant, accompanied by a supporting affidavit explaining the basis for the application. This affidavit would also need to include letters of support from other interested parties
2. the Court would be requested to issue directions on the papers including service, confidentiality, and representation, accompanied by a letter setting out the bases for those orders
3. an affidavit showing service on the interested parties would be produced, and submissions and court bundles would be prepared. Finally, a request would be made for the Court to decide the matter on the papers

Key takeaways

This reform enhances Cayman Islands' trust law, catering to the needs of global clients and offering significant advantages for long-term succession planning. Cayman Islands' law now offers the ability to establish true dynastic trusts (outside of the STAR Trust regime).

The amendment will now allow foreign trusts (non-Cayman trusts) of unlimited duration to adopt Cayman Islands law. Specifically, subject to the terms of a trust, if it is of unlimited duration and its governing law is changed to that of the Cayman Islands, it will continue to be of unlimited duration, even if it predates the Amendments.

While the new law allows for the abolishment of the previous 150-year trust period, there is nothing preventing a limited trust period from being kept if there is a good reason to do so. For instance, a settlor might want to bring a trust to an end within a specific timeframe. A shortened trust period can be beneficial in cases where the settlor wants a clear endpoint for the trust, and a defined default trust period can facilitate this. Essentially, the new perpetuity regime in the Cayman Islands is an opt-in regime that can be applied according to the client’s specific needs.

How Ogier can help

We can assist with navigating these changes and ensuring compliance with the new law. Our experienced team can help prepare applications for the Grand Court and give comprehensive advice on long-term trust planning. We are here to support you in using the benefits of the new perpetuities framework while addressing any potential challenges.

This article was first published in STEP Journal (Issue 3, 2025). Read the full article ‘In perpetuity?’

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Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

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