Perpetuities (Amendment) Bill 2024 moves forward in Cayman Islands parliament
During the July 2024 parliamentary session in the Cayman Islands, the Perpetuities (Amendment) Bill 2024 successfully passed its second reading without amendments and is now set for a third reading. This significant legislative development aims to modernise the Perpetuities Act (1999 Revision) by providing greater flexibility for trusts that do not involve Cayman land, aligning the jurisdiction with other leading financial services centres that have already abolished the rule against perpetuities. Currently, for Cayman Islands trusts other than STAR Trusts, the maximum perpetuity period is 150 years.
The rule against perpetuities is a long-standing legal principle that limits the duration of trusts to prevent them from lasting indefinitely. However, many modern financial services jurisdictions have moved away from this rule to provide more flexibility for trust arrangements, especially those used for estate planning and wealth management. The Perpetuities (Amendment) Bill 2024 proposes several key changes to the existing legislation to address this issue.
Key provisions of the Bill
1. Disapplying the rule against perpetuities for non-land trusts
The amendment will disapply the rule against perpetuities for dispositions that do not relate to trusts holding land or any interest in land in the Cayman Islands. This change will apply to instruments that come into effect on or after the commencement of the amendment legislation.
2. Court applications for disapplying the rule
Trustees, settlors, enforcers, persons on whom powers are conferred, or those with beneficial interests can apply to the Grand Court for an order disapplying the rule against perpetuities. This provision, however, does not apply to trusts relating to land in the Cayman Islands.
Dispositions can still relate to trusts holding interests in entities owning Cayman land for business purposes. The Court must be satisfied that granting the order would not be detrimental to the beneficiaries before disapplying the rule.
3. Changing governing law to Cayman law
If a trust of unlimited duration, which is not subject to the rule against perpetuities under its current governing law, decides to change its governing law to Cayman law, the dispositions of the trust will not be subject to the rule against perpetuities under Cayman law.
These provisions are designed to enhance the attractiveness of the Cayman Islands as a jurisdiction for establishing and managing trusts, providing greater flexibility, and aligning with international standards. By allowing parties to contract out of the rule against perpetuities, the Bill seeks to accommodate the needs of modern trust structures that require longevity and flexibility, especially those used in complex financial and estate planning.
The successful second reading of the Perpetuities (Amendment) Bill 2024 marks a critical step towards its enactment. Once passed, it will represent a significant shift in the legal landscape for trusts in the Cayman Islands, providing trustees and beneficiaries with more options and greater certainty in their trust arrangements.
Trustees, legal practitioners, and those involved in estate planning should closely monitor the progress of this Bill, as its enactment will bring about important changes to the management and structuring of trusts in the Cayman Islands. This development underscores the Cayman Islands’ commitment to maintaining a competitive and modern financial services sector, in line with global trends and best practices.
Harneys’ dedicated trust professionals possess the deep knowledge and expertise to guide clients through significant legal changes and ensure their trust deeds are aligned with the latest developments. Contact the Private Wealth team today to discuss how we can assist you.
We look forward to helping you navigate these important changes and providing the support you need to manage your trusts effectively.
