By Sue Nickason
L-R: Sue Nickason And Bernadette Carey
The Dart Family Office was established on Grand Cayman over two decades ago, attracted by the attributes of close proximity to the United States, British Overseas Territory status, stable government and economy, and tax neutrality. Since then, many other family offices have recognised the benefits of having a presence in the Cayman Islands and the jurisdiction is now a preferred address.
Whilst the benefits are readily evident, the types of structures available to family offices are less well known. Carey Olsen recently produced an overview of different family office structures in the Cayman Islands.
We chatted with Bernadette Carey, a partner at the law firm, to learn more about the options available.
Q. You have observed that “With its modern legislation, robust judicial system, extensive infrastructure and sophisticated service providers, the Cayman Islands represents an ideal location to establish or relocate a single or multi-family office.” Can you share some specific examples of the legislation and robust judicial system that make Cayman a desirable locale for family offices?
In terms of desirability, the Cayman Islands is well known for offering legislation that is modern, innovative, and flexible. But perhaps most importantly given the pace at which changes comes to us these days, the legislation is always evolving (with the input of industry experts) to meet local needs, global standards, and industry requirements. Our laws offer structures and vehicles that appeal to family offices (such as special purpose trusts, reserved powers trusts, and foundation companies) because they can be established with ease, be administered by experienced professionals, and allow families to continue to have involvement and give directions as to the distribution of family wealth. Our judicial system is renowned for also being at the forefront of developments in trusts law and presided over by a highly skilled and considered judiciary that produces leading judgments – many of which are regularly cited by courts in other jurisdictions that are considering similar issues. And, procedurally, family offices can also be assured of an expeditious resolution of any applications that may need to be presented to the Grand Court – our systems recognise the need for early and practical solutions, particularly for private clients.
Q. Family offices, like families themselves, are constantly growing and expanding. What advantages do the Cayman Islands offer to family offices in this regard?
There are the obvious advantages – such as a short commute to the office along a stunning coastline, and weekends spent on award-winning beaches – but the islands offer family offices so much more than the perks associated with a traditional Caribbean vacation. Our infrastructure is among the best in the Caribbean – high speed internet, new and modern office space, experienced service providers, and (hopefully in the near future) a return to ease of travel to major international hubs. On the island, our construction sector and property market is booming, and the service industry continues to expand the nature and extent of offerings available to make island life efficient and enjoyable. Professionally, and with a particular spotlight on the financial services industry, Cayman offers highly experienced and skilled professionals who are well-versed in meeting the many and varied needs of family offices. But it is also worth noting that it is a jurisdiction that is evolving and growing without losing sight (and in fact being careful to protect) it’s heritage and uniqueness – and the elements that attracted newcomers to the islands in the first place.
Q. Family offices value privacy and security. The STAR Trust model is unique to Cayman and well suited to families seeking constraints on access to their information. Can you share some insights into that legislation and how it compares to other forms of trusts offered elsewhere in the world?
The STAR Trust is a fantastic, and very well-used, option for family offices. Traditional family trusts in common law jurisdictions like Cayman follow a relatively standard form and are usually discretionary in nature for family members and administered by trustees who have wide powers over distribution and investment of the assets. Beneficiaries of those trusts have many rights to information about, for example, trust assets. The STAR Trust, on the other hand, is a special form of trust available in Cayman that can be for charitable or non-charitable purposes, and for either individuals or for defined purposes (such as business or investment) or both – drafting can be very bespoke. Unlike other trusts, a STAR Trust operates to restrict the rights of the beneficiaries to obtain information about the trust from the trustee or to attack the trust. So, as a structuring vehicle it is an exceptionally flexible, robust and private option. A STAR Trust must have a licensed trust company (or registered private trust company) in Cayman as one of its trustees, and an appointed “enforcer” who is the only person with rights to enforce the trust. Private trust companies (with family members on the board of those companies) are regularly established in Cayman and appointed as trustees of STAR Trusts, in order to increase privacy and allow for family involvement in administration of the structure to be maintained.
Q. Your firm has produced an excellent guide to the types of structures that family offices use in the Cayman Islands. The pros and cons outlined for each option are particularly useful. As you reflect on the family offices you have worked with in the last five years, and as you look ahead to the next five years following the impact of COVID-19 on family wealth preservation, do you see a particular type of structure emerging as the most common one to use in Cayman?
As our guide shows, family offices come in all shapes and sizes and with different levels of complexity (which generally depends on the “age” of the family office). The most interesting aspect for us in recent times is how many of our matters now involve helping family offices set up a presence in Cayman. Five years ago, most family offices we worked with had just one or two companies or trusts with a Cayman connection and their structures were already very mature. Now, we are working to help with the physical relocation of family members to Cayman, the establishment of brand new structures to manage relatively new wealth, and wealth management and succession plans that are designed to ensure the smooth transition of wealth between generations. So, the most common structure for these more modern families is a structure that provides for all aspects of family life from business interests to investments to “concierge” services. This is quite the contrast from the more traditional family dynasty trusts, which mainly operated to provide regular lump sum distributions to family members, that were most common ten or twenty years ago.
Q. For family offices considering expanding or relocating to Cayman, what advice can you give them as they start the diligence process? What do you feel a family office who is now established here would say, “I wish we had known this before we moved/expanded to Cayman.”
My most important piece of advice is to begin the process of establishing and growing good relationships with service providers well before moving or expanding to Cayman. A fantastic aspect of professional life in Cayman is that those of us in the industry all work closely together and are hugely supportive of recommending and referring the best person for any particular job. This means that family offices will always have easy access to, for example, immigration or property specialists in our networks and a relatively seamless service across the board. As events across the globe over the past 12 months have shown us, we can now build these relationships virtually and with relative ease. The ability to have trusted advisors on the ground, with knowledge and connections to make the move or expansion as efficient and cost-effective as possible before it happens is invaluable. Our goal is always to establish strong support networks for family office representatives, and to be in a constant dialogue with them, even before they arrive. That way, when the time to move comes, they already feel like they’re coming home.
For more on why you might consider relocating your family office to the Cayman Islands click here.