If you’re researching trusts that are used to protect your assets, you’ve likely seen a few mentions of the Cayman Islands trust. This Caribbean island nation just south of Cuba is famous for financial services, so it’s little wonder that people would turn to it for asset protection as well. However, despite the islands’ long history as an offshore financial center, the benefits offered by a Cayman Islands asset protection trust pale in comparison to those offered in other offshore jurisdictions.
In this article, we’ll take a closer look at Cayman Islands trusts and offer a few alternative solutions to protect your wealth:
- What Is a Cayman Islands Trust?
- Key Parties in a Cayman Islands Trust
- Core Features and Limits of a Cayman Islands Trust
- Why Cook Islands, Belize, and Nevis Trusts Are Stronger
- Comparing Cayman Islands Trusts to Other Offshore Trusts
- What to Do Instead of Setting Up a Cayman Islands Trust
- Cayman Islands Trust FAQ
What Is a Cayman Islands Trust?
A Cayman Islands trust is a common law trust formed under Cayman Islands legislation, typically using the Trusts Act and, in some cases, the special STAR regime for more flexible or purpose-based structures.
These trusts are also irrevocable offshore trusts. In practice, this means that the person who creates the trust (known as the settlor or grantor) cannot make changes to the trust at will. This irrevocability is what makes the trust capable of protecting assets, as a creditor cannot force the settlor to make a withdrawal.
Cayman Islands trusts work similarly to other offshore asset protection trusts. You transfer assets to a professional trustee in the Cayman Islands who manages them for you and your chosen beneficiaries under the terms of the trust deed. The assets you transfer then go through a waiting period of six years before they are fully protected. Once that period passes, however, the assets are generally considered beyond the reach of creditors, even if you lose a lawsuit to one.
Key Parties in a Cayman Islands Trust
A Cayman Islands trust is made up of three key parties:
- Trustee: Trustees manage the trust and all the assets inside it in a manner that is consistent with the instructions laid out in the trust agreement. The trustee is usually an individual but can also be a company based in the Cayman Islands.
- Settlor/Grantor: The settlor is the person who creates and funds the trust. Once the trust is created, the settlor does not have the ability to make at-will withdrawals from it. This protects them from judgment creditors who have the power to force withdrawals from easily accessible accounts.
- Beneficiaries: Any person or entity who receives some form of benefit from the trust is considered a beneficiary. Common examples of benefits include regular distributions and inheritances.
Core Features and Limits of a Cayman Islands Trust
A Cayman Islands asset protection trust can offer privacy, tax neutrality, and some protection against judgment creditors.
However, the Cayman Islands do not generally allow a classic self-settled trust where the settlor is also a discretionary beneficiary who enjoys asset protection. Its laws offer less protection against foreign court orders and bankruptcy claims than stronger OAPT jurisdictions. The fraudulent transfer lookback period is also longer in the Cayman Islands than it is in other popular offshore trust jurisdictions.
Why Cook Islands, Belize, and Nevis Trusts Are Stronger
Cook Islands, Belize, and Nevis trusts are drafted from the ground up with asset protection in mind. Cayman Islands trusts were simply another financial service that the Cayman Islands added to attract more investors to its shores.
As a result, jurisdictions such as the Cook Islands and Nevis offer stronger asset-protection safeguards than those provided by Cayman Islands trusts when creditors pursue claims. These jurisdictions typically combine very short statutes of limitations on fraudulent transfer claims with high burdens of proof and have a much stronger record of non-compliance with foreign court orders.
By contrast, the Cayman Islands’ six-year fraudulent transfer period and more creditorfriendly laws give opponents more avenues and time to attack your trust.
Comparing Cayman Islands Trusts to Other Offshore Trusts
View the following table to see how the Cayman Islands compare to the best offshore asset protection trust jurisdictions.
| Feature | Cayman Islands trust | Cook Islands trust | Belize trust | Nevis trust |
| Primary focus | Wealth and estate planning | Asset protection | Asset protection | Asset protection |
| Self-settled APT allowance | Limited / constrained | Yes | Yes | Yes |
| Foreign judgment recognition | Can recognize foreign judgments | Does not recognize foreign judgments | Does not recognize foreign judgments | Does not recognize foreign judgments |
| Fraudulent transfer lookback period | Often 6 years | 1 year from transfer, 2 from cause of action | Very short or effectively none for some trust transfers | Short periods plus bond requirements in many cases |
| Burden of proof on the creditor | Less demanding than “beyond a reasonable doubt” | Beyond a reasonable doubt | Beyond a reasonable doubt | Beyond a reasonable doubt |
What to Do Instead of Setting Up a Cayman Islands Trust
If you’re seeking high-quality asset protection, the Cayman Islands are not the best place to establish an offshore trust. Instead, consider setting one up in a more trusted jurisdiction like the Cook Islands or Nevis.
Both of these locations have allowed for the creation of offshore asset protection trusts for decades and have built up significant case law history that proves how effective they are at holding up against creditor challenges. In fact, the case law history in the Cook Islands is so strong that we have yet to see a single one of our Cook Islands trusts breached by a creditor.
Set Up a More Effective Trust With Help From Asset Protection Planners
Asset Protection Planners can help you compare jurisdictions side by side and choose the one that truly fits your risk profile, goals, and timeline. Don’t settle for a Cayman Islands trust that only offers “okay” protection. Count on our team to design and implement a more effective offshore asset protection trust structure in a jurisdiction with a strong history of protecting settlors.
Get the high-quality asset protection you deserve! Schedule a free consultation with one of our team members today.
Cayman Islands Trust FAQ
How do I decide between a Cayman Islands trust and other offshore trusts?
When deciding between a Cayman Islands trust and other offshore trusts, focus on a few core questions. Consider how aggressive your creditors might be, how quickly you need protection, and whether you want a self‑settled asset protection trust. You should also weigh cost and privacy concerns.
If, in answering those questions, you realize that you need a significant amount of asset protection, then a Cayman Islands trust isn’t the right choice for you. In that case, you’ll want to turn toward a trusted offshore jurisdiction, such as Nevis or the Cook Islands.
Ultimately, there are very few scenarios in which a Cayman Islands trust makes sense as an asset protection tool. But if you’re still not sure if another jurisdiction meets your needs, you can follow these steps to make your decision:
- Clarify your primary goals and how closely they relate to asset protection.
- List your major risks, including professional liabilities, business claims, divorce concerns, or creditor pressure.
- Decide whether you need assets protected quickly or can wait out a longer lookback period like Cayman’s six years.
- Determine whether you want a self-settled trust where you can still be a discretionary beneficiary.
- Review how each jurisdiction treats foreign judgments and whether creditors must relitigate locally.
- Examine the burden of proof required for creditors. For example, the Cook Islands require creditors to prove actual fraud beyond a reasonable doubt, while the Cayman Islands impose a lower burden of proof.
- Consider the legal track record of each jurisdiction. Places like the Cook Islands and Nevis that have decades of case law upholding strong protection offer greater security.
- Compare setup and maintenance costs across Cayman, Cook Islands, Nevis, and Belize to see what fits your budget.
- Evaluate privacy rules and reporting obligations, choosing a jurisdiction that limits public disclosure consistent with your comfort level.
- Hire an asset protection planner for help making a final decision.
- Stress test scenarios with your planner to see how each jurisdiction would respond if a large judgment is entered against you in your home country.
- Once you identify the best fit, work with your experienced asset protection planner to draft and fund the structure before there is a claim on the horizon.
