The Perpetuities (Amendment) Act, 2024 (the “Act”) has taken effect in the Cayman Islands, providing for the disapplication of the rule against perpetuities for Cayman Islands ordinary trusts. This legislative development aims to provide greater flexibility for trusts and aligns the Cayman Islands with other leading international financial jurisdictions which already allowed for the creation of dynastic trusts which can last indefinitely.
Previously, the position in the Cayman Islands was:
- Ordinary trusts established on or after 1 August 1995 were subject to a statutory maximum perpetuity period of 150 years plus a “wait and see” period, whereby the rule does not affect an interest in property unless and until it becomes certain the interest will not vest within the perpetuity period (i.e. the trust will not fail because it neglected to specify an appropriate perpetuity period);
- STAR trusts (a special statutory non-charitable purpose trust unique to the Cayman Islands) are not subject to any rule against perpetuities and so can exist in perpetuity; and
- Charitable trusts and pension funds were also not subject to any rule against perpetuities.
The Act permits the settlor of a new trust (provided such trust does not hold any land or any interest in land in the Cayman Islands) to choose whether or not to disapply the rule against perpetuities for a new Cayman Islands ordinary trust and to create a trust with an unlimited duration. However, if the settlor does not expressly disapply the rule against perpetuities, the rule will continue to apply and the trust will therefore have a maximum perpetuity period of 150 years.
The Act does not automatically apply to trusts established before the Act came into force meaning that the perpetuity period for any existing trusts will remain as it was. However, the Act does allow settlors, enforcers and trustees of existing Cayman Islands law governed trusts to apply to the Grand Court for the disapplication of the rule against perpetuities so that those trusts can last indefinitely.
The Act further provides that the rule against perpetuities will not be applicable where a foreign trust changes its governing law to Cayman law if the rule was not previously applicable under the trust’s former governing law.
The new legislation further strengthens the Cayman Islands position as a leading trust jurisdiction catering for the needs of global high net worth clients and their families, many of whom are seeking to establish dynastic multi-generational trusts.
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