Trusts Law Reform

Description

The Law Reform Commission (“the Commission”) was tasked with conducting a comprehensive review of the Trusts Law (2011 Revision) (“the Law”) in light of comparative developments in offshore and common law trust jurisdictions. The review examined whether certain provisions of the Law should be
amended to strengthen trust administration and modernise the Cayman Islands’ legal framework for trusts.

Terms of Reference

The Commission examined whether reform was necessary in the following areas:

  • the clarification and formal setting out of trustees’ duties;
  • the operation and scope of the Hastings-Bass rule;
  • the variation of trusts (both judicial and extra-judicial); and
  • the use of alternative dispute resolution (ADR) in trust disputes.

The review also examined:

  • section 6(c) – the definition of a “trust corporation”;
  • section 91(b) – protection against foreign laws based on personal relationships; and
  • miscellaneous issues – the Commission invited stakeholder input on other areas where amendment of the Law should be considered.

Outcomes

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On 5th April, 2017, the Commission published its Discussion Paper titled “Trusts Law Reform”.

The Paper provided an overview of trusts legislation in England and Wales, Jersey, Guernsey, Bermuda, the British Virgin Islands, and the Bahamas, and examined whether there was scope for improvement in the Law. The Commission also welcomed submissions on any other areas where amendment of the Law should be considered.

Following public consultation, on 1st May, 2018, the Commission submitted its Final Report, titled “Trusts Law Reform” to the Attorney General, accompanied by a proposed Trusts Law (Amendment) Bill, 2018.

The key findings and recommendations of the Commission were as follows:

(a) there is no need to include trustee responsibilities in the statute, since the current common law framework is sufficient;
(b) courts should have power to correct trustee mistakes without requiring a breach of duty;
(c) trust variation rules should be more flexible, replacing the “benefit” test with a “no detriment” test to better protect minor and unborn beneficiaries;
(d) no reform should be made allowing extra-judicial variation of trusts;
(e) the Cayman Islands will continue to rely on the Grand Court to resolve trust disputes; 
(f) the definition of “trust corporation” should be broadened to apply to controlled subsidiaries; and
(g) section 91(b) should be amended to prevent Cayman trusts from being challenged under foreign laws based on personal relationships with any beneficiary, enhancing asset protection.
 

The Trusts (Amendment) Bill, 2019, was passed by Parliament on 10th April, 2019, received assent on 14th May, 2019, and came into force on 14 June, 2019.

Publications