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In order for a Cayman Islands Will to be valid it must be both ‘essentially’ valid and ‘formally’ valid. HSM’s Head of Private Client and Trusts, Robert Mack, explores this structure and what’s new for 2019. Essential Validity For a Read more +
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The HSM Group congratulates Partner William (Bill) Helfrecht for his recognition by Chambers and Partners. For the second consecutive year, William is featured in the Band 3 ranking in the 2019 Chambers Global Guide for dispute resolution: trusts in the Cayman Islands. William’s practice primarily Read more +
Greater Willpower – The Cayman Islands Enhances Its Wills Regime For Foreign Testators
In order for a Cayman Islands Will to be valid it must be both ‘essentially’ valid and ‘formally’ valid. HSM’s Head of Private Client and Trusts, Robert Mack, explores this structure and what’s new for 2019.
For a Cayman Islands Will to be ‘essentially’ valid, the person creating it must possess the fundamental power derived from the law of their domicile1 to dispose of their property by Will. Persons who are suffering from a loss or a diminishment of mental capacity for example would typically, under most legal systems, be incapable of disposing of the property by Will or otherwise until such time (if any) as they regain a sufficient degree of their mental faculties.
Legal systems themselves can sometimes impose restrictions on its citizens concerning the disposal of property on death. This typically occurs in ‘civil’ law jurisdictions in Europe and Latin America, Islamic law-influenced jurisdictions, and in some common law jurisdictions,2 where such legal systems prescribe that a deceased person’s property or a portion a deceased person’s property must pass to certain people in certain prescribed shares. Typically those people are comprised of spouses3, children, and other close blood relations of the deceased.
In relation to real/immovable property, it is usual that the legal system of the country where the real/immovable property is situated will be the legal system which governs how such real property will pass on the death4. Therefore, any attempts to use a Cayman Islands Will to control the devolution of foreign5 real property may fail if the succession regime of the foreign country differs from that of the Cayman Islands. In such circumstances it is usually preferable to have a separate Will (if possible/permissible) governed by the law of the country in which the real property is located and to take advice from local attorney in that country regarding the local laws and procedures governing the devolution of real property on death.
The Cayman Islands, in contrast to many other legal systems in the world, offers complete freedom of testamentary disposition, meaning that so long as the Will is ‘essentially’ valid and ‘formally’ valid (see more below), a testator or testatrix may dispose of his or her own property6 as they see fit, and it is extremely difficult for disappointed heirs to challenge an otherwise valid Cayman Islands Will.
Formal validity refers to the legal formalities which must be observed in order to perfect an ‘essentially’ valid Will. For a Will to be formally valid in the Cayman Islands, it must be (1) in writing, (2) signed at the foot of the Will by the testator or testatrix and (3) be witnessed by two witnesses who must be present at the moment the Will is signed by the testator or testatrix and must attest as such by way of signature on the Will.
If any one of the above three elements are missing, the Will cannot be formally valid as a matter of Cayman Islands law, even if the Will is essentially valid.
So what’s new?
On 1st February 2019, The Formal Validity of Wills (Persons Dying Abroad) Law, 2018 (the “Law”)7 came into force. The Law seeks to simplify the formal validity process by allowing Cayman Islands governed Wills, which are executed by foreign domiciled individuals, from being declared invalid on the grounds that they fail to satisfy the formal validity procedures prescribed by the testators or testatrix’s place of domicile.
The Law states that so long as the Cayman Islands requirements for formal validity are satisfied, the Will should not be declared invalid simply because the testator or testatrix failed to observe the formal validity requirements imposed by the legal system of their place of domicile8.
So for example, if a testator is domiciled in a jurisdiction which requires that Wills must be executed in the presence of a Notary Public and that does not in fact happen, so long as the Will is expressed to be governed by Cayman Islands law and it conforms to the Cayman Islands formal validity requirements, it will be considered valid as a matter of Cayman Islands law.
It’s important to note that the Law doesn’t attempt to modify the requirements for the ‘essential’ validity of a Will.
Why is this important?
Given the Cayman Islands is a magnet for international investment and asset structuring, many people from around the world routinely own valuable assets in the Cayman Islands and often utilise Cayman Islands holding companies to hold such valuable assets. As such, the well-advised client is usually encouraged to put a Cayman Islands Will in place to govern how their Cayman Islands property, including shares in a Cayman Islands company, should devolve upon death. Before the Law came into force, simply adhering to the Cayman Islands test for formal validity might not be sufficient to guarantee the validity of a Cayman Islands Will where a foreign domiciled testator or testatrix was involved — a critical point which is sometimes overlooked.
In a nutshell, the Law provides a safety net in such circumstances to make an otherwise formally invalid Will valid, so long as the Cayman Islands requirements regarding formal validity are observed.
Helpfully, the Law is drafted such that it covers Wills made prior to the introduction of the Law, so it appears to have retrospective effect. This is great news for all of the Cayman Islands Wills floating around the four corners of the Earth, as the Law increases the chances of Wills made prior to the 1st of February 2019 being considered formally valid as a matter of Cayman Islands law even if prior to the 1st of February 2019 they may have been formally invalid.
The Law has improved the odds that Cayman Islands Wills for international clients whether past, present or future will be found to be formally valid as a matter of Cayman Islands law, regardless of any contradictory laws, policies, or procedures which may exist in other parts of the world. This will certainly provide an extra layer of comfort and protection for international clients who utilise or have utilised the Cayman Islands as a planning and structuring base.
This article can also be seen on Mondaq – March 2019.
1 The method of establishing a persons’ domicile is outside of the scope of this article, however, it can be quite complex and requires a careful examination of the personal history of the testator or testatrix.
2 England, for example, has in place The Inheritance (Provision for Family and Dependants) Act 1975, which allows persons closely connected with a deceased testator or testatrix, such as a child or spouse/civil partner, or other dependants to make a claim for financial provision against an estate even where the Will is otherwise valid if such aggrieved individual believes they are entitled to a share or a greater share of the estate by reason of a close relationship with the deceased.
3 Often civil or common law partners are included in this definition.
4 Section 5(1)(b) of the Law specifically states that in relation to foreign real property, the execution formalities regarding the devolution of such real property must conform with the laws of such foreign territory rather than those of the Cayman Islands.
5 Meaning outside of the Cayman Islands.
6 Assuming the property is unencumbered, and is not jointly owned for example.
7 Despite the name of the Law, the Law is meant to cover persons who are not domiciled in the Cayman Islands at the time of their death. A person may be domiciled in the Cayman Islands and yet die abroad, but the Law is not intended to address that situation.
8 Section 4(1)(a) of the Law.