By James Bolton, Country Delivery Director, Cayman Islands
The Cayman Islands continues to shine as a premier jurisdiction for sophisticated wealth structuring, and the Special Trusts (Alternative Regime) Law (“STAR”) is one of the Cayman Islands’ most distinctive offerings. Designed for maximum flexibility and longevity, STAR trusts unlock planning opportunities that simply aren’t available under traditional trust law.
In this article, we’ll explore the defining features of STAR trusts, including what makes them so attractive for both private and institutional investors. We’ll also reveal why they’ve become a go-to vehicle for clients who want a degree of control, privacy and flexibility in their wealth planning structures.
What is a STAR trust in the Cayman Islands?
The Cayman Islands STAR trust is a statutory trust vehicle introduced by the Special Trusts (Alternative Regime) Law, 1997. STAR trusts were established to offer a trust vehicle that can be utilised for a vast range of purposes. Today, they’re widely used by family offices, institutional investors, and SPVs.
A STAR trust can be created for the benefit of any number of individuals or any number of purposes, allowing for charitable and non-charitable uses. Unlike many traditional trusts, a STAR trust may include no identifiable beneficiaries at all. This makes them particularly valuable in creating property arrangements that for practical reasons would not be available under and other regimes.
Key features of a STAR trust
- Separate legislative regime: STAR trusts are governed by a stand-alone regime under Part VIII of the Trusts Act (2021 Revision), which provides flexibility not available under traditional trust law
- Enforcers: STAR trusts are also defined by their use of “enforcers.” Enforcers are individuals or entities empowered to ensure the trust is administered in line with its purposes and are legally empowered to hold trustees accountable
- Purpose-focused: They can exist solely to fulfill a specific purpose or purposes, with or without named beneficiaries. These can include philanthropic, business or personal objectives, such as holding shares or managing assets
- Unlimited duration: Unlike many common law trusts, STAR trusts can exist indefinitely, making them ideal for multi-generational succession planning or long-term holding structures
- Professional trustees: At least one trustee must be a licensed Cayman Islands trust company to provide an added layer of oversight and professional governance
- Confidentiality: Beneficiaries of STAR trusts have no automatic right to information unless the trust deed explicitly states otherwise. This higher level of privacy makes STAR trusts especially attractive for families or corporates who desire discretion
- Flexibility: For the reasons mentioned above, so long as the trust complies with basic legal requirements (e.g. having at least one Cayman-based trustee and an enforcer appointed at all times), the STAR trust regime is highly flexible
How STAR trusts support family and institutional goals
Private trust companies (PTCs)
STAR trusts are often used to hold shares in a PTC, allowing families to retain a degree of control over trust administration.
Management of voting shares
They’re also highly effective for holding management shares in operating companies, separating control from economic benefit.
Family business succession
STAR trusts support intergenerational wealth planning by allowing families to establish custom governance structures, define objectives, and plan for continuity over decades (or even longer).
Special purpose vehicles (SPVs)
For institutional clients, STAR trusts serve as neutral holding vehicles in structured finance, securitisations, and investment platforms because they can hold assets for non-charitable purposes.
The benefits of using a STAR trust
STAR trust structures offer a rare combination of legal certainty, customisation and privacy. Whether you’re managing a family legacy, holding alternative assets, or structuring a corporate entity, a STAR trust offers flexibility and long-term durability that few other trust regimes can match.
At IQ-EQ Cayman, we have decades of experience in the Cayman trust sector and have acted as trustee for hundreds of STAR trusts. Contact our IQ-EQ Cayman team today to learn how a Cayman STAR trust could support your long-term objectives.
