The beneficiaries and/or objects of a STAR trust may be persons, purposes or a combination of the two. There may be any number of beneficiaries, and the purposes may be of any kind – charitable or non-charitable – provided that they are lawful and not contrary to public policy in Cayman.
One of the key features of STAR is that it facilitates separation of the right to benefit under a trust from the right to enforce the terms of the trust.
This means that a beneficiary of a STAR trust will not be able to sue the trustee or obtain information concerning the trust. Instead, the only person or persons who have such standing are the person or persons appointed as the “enforcer” under the trust deed or by order of the court. There are no prescribed criteria or qualifications for an enforcer who may be resident anywhere and may be an individual, a committee or corporate entity.
Every STAR trust must have an enforcer. If the position falls vacant, the trustee is under a statutory duty to ensure that a replacement is appointed. Generally, the powers and duties of an enforcer are held in a fiduciary capacity.
The ability to restrict beneficiaries’ rights of enforcement can be useful in preventing frivolous and costly challenges being mounted by disaffected beneficiaries. Any enforcement action may only be brought by the enforcer who, generally, will be under a duty to ensure that only proceedings which have actual merit are commenced.
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A Practical Guide to Cayman Islands Star Trusts
1 STAR trusts were introduced in Cayman by the enactment of the Special Trusts (Alternative Regime) Law, 1997, which is now contained in Part VIII of Cayman’s Trusts Act (2021 Revision)