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Please click the plus sign or the actual question in order to view the answer. |
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 What is a trust? | In simple terms, a trust exists when someone directs certain assets to be held by a third party (the
Trustee) for the benefit of a particular person or group of persons chosen by them. A trust, sometimes
referred to as a settlement, is created by the execution of a written trust document known as a trust
deed, which legally binds the Trustee to the responsibilities which are set out in the Deed. |
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| | How is a trust different from a company or corporation? | A company or corporation exists as a legal entity. It can undertake all the activities of a natural
person, which means it can open bank accounts, purchase property and can be sued.
A trust on the other hand is not a legal entity, it simply represents a relationship in which the Trustee
holds property for the benefit of persons called beneficiaries. The Trustee (not the trust) is the legal
owner and therefore would be the only one party to a legal action involving the trust property. This is
not however the case in the United States, where a trust is regarded as a legal entity. |
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| | What is the minimum asset value needed for the bank to take on a trusteeship? | The bank has set a minimum threshold level of $1 million. |
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| | Would the bank act as trustee if the assets are to be managed by someone else? | As Trustee, the bank has a duty to invest trust assets prudently. Conversely, the bank is usually given
the power to appoint agents to assist it in realising its investment objectives. The bank therefore
would not be opposed to using some other organisation to manage trust assets. |
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| | Does the trust deed have to be prepared by a Cayman lawyer or does the bank have a standard trust deed that I can complete and sign? | Although the bank's preference is to have the trust deed prepared by a Cayman lawyer, it is not
mandatory. The bank does have trust deeds, however, these are expected to be used by your lawyer
as a guide in developing your own trust deed. |
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| | Does the company have to be formed by a lawyer? | The incorporation process for a new company need not be done by a lawyer and can be undertaken
by the bank. |
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| | How long does it take to set up a Cayman company and what does it cost? | It normally takes between seven to ten days after all documentation has been submitted for a new
company to be incorporated. The cost would be approximately US$2,500 including Cayman Islands
Government fees and bank fees. |
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| | Can I be the sole owner of my company during my lifetime and leave a letter with the bank indicating that ownership of the company will pass on my death to whomever is listed in my letter? | A letter, or some other form of direction addressed to the bank by the owner of a company in which
there are instructions to be followed in the event of the owner's death, is not acceptable to the bank
and would not be followed.
A will or trust would be the best way of transferring benefit to someone else. |
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| | Do I have to visit the bank in person before a trust or company will be established? | While a personal visit is preferred, it is not mandatory. |
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| | Can a company issue bearer shares, ownership of which can be passed on my death to a family member? | Bearer shares cannot be held by anyone other than the bank or another approved custodian. A will or
trust would be the best way of transferring benefit to someone else. |
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| | Since there are no taxes in the Cayman Islands, does that mean if I own a Cayman company I will be automatically exempted from all taxation relating to the company’s activities? | This is not an accurate statement as the only tax exemption is that granted by the Cayman Islands
Tax Concessions Law for a period of 20 years. Activities undertaken outside of Cayman would be
subject to the tax laws of that country. |
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| | A Glossary of used trust terms |
- Settlor/Grantor - The person who creates the trust.
- Protector - Someone or a committee responsible for overseeing the Trustee to make certain the wishes of the settlor are carried out.
- Perpetuity Period - The period for which the trust will exist.
- Discretionary Trust - A trust where it is left entirely to the Trustee to decide who is to receive
benefit.
- Letter of Wishes - A non-binding private letter of direction from the Settlor to the Trustee intended
to offer guidance to the Trustee in the carrying out of its responsibilities.
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| Will I lose control of my assets? |
- Although legal ownership is transferred to the Trustee, Butterfield Bank (Cayman) Limited
("Butterfield Bank"), the trusts are structured in a way that allows you to continue to "enjoy" and
"benefit from" those assets
- You can continue to make investment decisions or you can choose to give that authority to another
person
- You can remain the beneficiary during your lifetime and receive distributions
- You can amend the trust agreement's beneficiaries and provisions
- You can revoke the Trust Agreement
- You can change the Trustee
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| | Why the Cayman Islands? |
- The Cayman Islands are the world's 5th largest banking centre - with over $500 billion in deposits
- The Cayman Islands have been a British Crown Colony - now an Overseas Territory - for over 300
years
- The Cayman Islands have a strong tradition of trusts and strong trust legislation
- Over 500 banks and trust companies have registered offices in the Caymans - and 47 of the
world's top 50 banks
- European clients may not realise that the Cayman Islands are a much larger trust centre than the
Channel Islands
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| | Why should I choose Butterfield Bank SELECT Trust Services over some other private bank (who is also large, financially secure and Cayman-based)? |
- A common source of client dissatisfaction with trusts provided by most banks is the quality of
investment services and performance of assets
- While a trust can help protect your wealth, it's equally important to increase that wealth through
effective management of trust assets
- We do not take a custodial view of your finances like other private banks might, but you may
choose our investment resources and expertise to focus on growing your trust
- Many private banks and trust companies want significant asset minimums before they provide this
sort of service
- We give our clients substantial flexibility in continuing to take an active role in managing and
enjoying trust assets
- You can continue to make investment decisions, receive income, request distributions, pledge
assets, etc. You may also be able to see your account activity over the internet, depending on your
chosen custodian
- Of course, if you are interested in private banking services, trust assets can also be held directly at
Butterfield Bank, a Swiss bank or other bank of your choice. At these institutions you may choose
to arrange for multi-currency deposits, offshore asset management, as well as lending facilities
using trust assets as collateral
- Even if your assets are held at a Swiss bank (or held in another country), the control and ultimate
distribution of the assets will still be governed by Cayman Islands law
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| | But I already have a Will |
Wills:- Do not allow your estate to continue after your death - distribution of assets takes place at death
- Distribution of assets must follow forced heirship rules of your resident jurisdiction
- Probate is a public process which may be time intensive and costly
- Assets may be frozen upon death. A family may not have immediate access to funds they need
- A will does nothing about U.S. estate tax for international clients
A Trust is Better than a Will:
- Trusts avoid a lengthy and costly probate process, especially if multiple jurisdictions are involved
- Trust can eliminate U.S. estate taxes and may reduce local taxes
- Trusts remove any doubt as to which jurisdiction's laws apply in distributing the deceased's assets
and can override forced heirship
- Trusts ensure assets are distributed as the client intended
- Trusts allow greater privacy.
- A trust better consolidates international assets - Unless a will is very specific, property could be
potentially overlooked by the beneficiaries and eventually revert to the government
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| | But I already have an offshore Private Investment Company (PIC). Why do I need a trust? |
If you establish an offshore PIC without a trust to own its shares, at your death either: 1) the shares
of the PIC pass to your heirs or 2) the PIC is liquidated and the assets pass to your heirs.
- As PIC assets become part of your estate they must be distributed to heirs at your death according
to the forced heirship rules of your country
- You don't control the distribution of these assets
- PIC assets could be subject to probate
- In some jurisdictions, there may be favourable local income and estate tax treatment for
distributions from a trust, rather than from a simple PIC
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| | How can I trust the Trustee? |
- The Trustee is required by law to follow the terms of the Trust Agreement. You are hiring the
Trustee to manage the trust in the way YOU have determined
- Butterfield Bank (Cayman) Limited is a wholly owned subsidiary of The Bank of N.T. Butterfield &
Sons Ltd., which was the first bank established in Bermuda in 1858. Butterfield Bank has been
looking after trust clients since 1967
- Independent of Butterfield Bank's reputation, you would always have recourse in the case of fraud
or mismanagement. The Cayman Islands have a strong legal tradition of trusts and strictly protect
the rights of the beneficiaries
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| | What does this cost? |
- Let's compare price and cost - 37.5 basis points per year (a little over 1/3rd of 1%) is the price.
Now consider the financial and emotional cost were you to die without a trust. For example,
possible probate costs, possible U.S. estate taxes, and most importantly, how your estate will be
distributed -- or not -- to your family
- Our trusts are priced to be very competitive with other private banks offering this service
- Many international individuals may not be aware that the United States may charge U.S. estate
taxes on many U.S. assets owned at the time of their death (unless their country has a treaty with
the U.S.). And the exemption amount for non-resident aliens is only $60,000 of assets
- A trust is something you pay for now which has its primary benefits later. The total cost compared
with the benefits is quite a small one
Assumption: A non-resident alien holds a $1,000,000 portfolio in his name which is invested entirely
in U.S. equities - earning 8% per year - and that person dies after 10 years. The following is a
general calculation of the possible impact of those U.S. estate taxes versus the total cost of a SELECT
Trust over time*
- No Trust: Value at end of 10 years less U.S. Estate tax "bite"(on $2.2MM in 2005)* equals Net
Value of portfolio: $ 2,159,000 - $ 847,000 = $ 1,312,000
- SELECT Trust: Value at end of 10 years less U.S Estate tax equals Net value of portfolio: $
2,076,000 - $0.00 = $ 2,076,000
The compounded costs of the trustee annual fee (plus the lower amount to re-invest each year), which
would total $83,000 is much less than the potential $847,000 U.S. estate tax.
Please keep in mind that neither Butterfield Bank nor any of its affiliated companies are legal or tax
advisors*
* This information is provided for general guidance only. Neither Butterfield Bank (Cayman) Limited
nor any of its parent or affiliated companies are legal or tax advisors, and clients seeking to achieve a
particular tax or legal outcome should consult their legal or tax advisor.
The services outlined are available only to clients who are neither residents nor citizens of the United
States.
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| What is Custody Services? | We are an operational support department and we provide safekeeping, income collection, trade
settlement and pricing services for the assets held in the various types of portfolios maintained
through the Investment Services department. |
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| | Should I contact Custody Services to open an account or with any questions relating to my existing portfolio? | |
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| Can I get a refund (take my money out of the pension plan)? |
The purpose of the pension fund is to provide you with an income stream which will allow you to
support yourself once you are retired.
In general, the Pensions Law states that refunds are NOT allowed from a pension plan; however, you
may receive a lump sum payment if the value of your account is less than CI $5,000 AND ALL OF THE FOLLOWING CONDITIONS ARE TRUE:
- Your employment is terminated and / or your permit has been cancelled
- Your membership within the plan has been terminated
- You no longer reside in Cayman
- Ex-patriots – need to provide a copy of a one way ticket and certified copy of a valid passport
(pages of identification, signature and last Cayman Islands work permit) along with the completed refund request
- Caymanians – must have proof of living off island for a minimum of 6 months (example: letter
of current employment or utility bill in your name)
If the value of your account is over CI $5,000, then all of the above rules apply as well as:
- The waiting period for everyone is increased to TWO YEARS and proof of non-residency must be
supplied
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| | If I resign from my current employer and join a new company will my member number change? | NO - the employee ID number you receive when you join the Chamber of Pensions Plan belongs to
you and will never change. |
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| | Can I designate anyone I want as my beneficiary? | NO - If you are married or have a child / children Cayman Pension Laws states that upon death
benefits MUST be paid to your spouse or in event of their death to your child.
YES - If you are single with no dependents you may designate anyone you want. |
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| | How often are statements sent out? | Statements are sent twice a year; June 30 statements are sent in the last quarter of the year and
December 31 statements are sent in the first quarter of the following year. If you do not receive your
account statement during those periods contact the Chamber Pension Plan to verify your account
information. |
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| | Do I have to contribute to a pension plan? | YES – Once you are between the ages of 18 and 60 years, as stated in the response to question one,
the purpose of the pension fund is to provide you with an income stream which will allow you to
support yourself once you are retired; therefore, Cayman Pensions Laws clearly states that every
employer and every employee MUST contribute to the Pension Plan. |
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