Inheritance tax and law
October 04, 2013
The Global Property Guide looks at inheritance from two angles: taxation, and what inheritance laws apply to foreigners leaving property in Cayman Island: what restrictions there are and whether making a will is advisable.
No inheritance tax or gift taxes are levied in the Cayman Islands. However, inheritance of property is considered a transfer of land or property and will be subject to stamp duties.
Stamp Duty on Transfer of Property
The Financial Secretary must approve transfer of property in "consideration of natural love and affection" to qualify for minimal payment of stamp duty. A stamp duty of KYD150 (US$183) and a registration fee of KYD150 (US$183) is payable by the beneficiary.
What inheritance laws apply in Cayman Island?
Cayman Islands law governs inheritance of immovable property.
Succession to immovable property in the Cayman Islands is governed by lex situs (the place where the property is located). The law of the place of last domicile of the deceased governs succession to movable property.
The Succession Law governs the administration and distribution of the estate of the deceased person. No person may take possession of, administer, distribute or otherwise deal with any part of the estate unless a grant has been obtained from the Grand Court. This rule applies to all forms of property situated in the Cayman Islands at the time of death of the deceased, and may apply to property subsequently brought into this jurisdiction, e.g. if the law of a deceased foreigner refers inheritance issues back to the Cayman Islands. The Succession Law applies regardless of whether the deceased was domiciled in or a national of the Cayman Islands or elsewhere.
Persons interested in an estate which includes property in the Cayman Islands have two courses of action available to them: (i) to apply for a domestic grant, or (ii) to apply for the re-sealing of a foreign grant. It makes no difference if a person has authority to deal with the estate in a foreign jurisdiction, or if a foreign court has made a grant of representation or an equivalent order; however, a foreign grant may, subject to certain conditions, be re-sealed by the Grand Court, and confers the same authority as a domestic grant. The re-sealing of a foreign grant is generally the swiftest, simplest and least expensive option. To effect a re-sealing, the foreign grant must have the same effect as probate and letters of administration in English law. The grantee(s) take possession of the deceased's property and are authorized to discharge the deceased's liabilities and distribute the estate to entitled persons.
Grant applications are subject to the following rules:
- The application must be made within six months of the date of death, or within two months of the termination of any dispute over the right to a grant. Otherwise, special leave of the Court is required.
- No grant is issued to more than four persons or to any person under eighteen years of age. A company acting as a personal representative may require to be licensed under the Banks and Trust Companies Law.
- Grant applications by persons who are not named as executors in a valid will must be advertised in the Court House for three weeks before a grant can be made. The court may also require an application for re-sealing to be advertised.
- A bond from the administrator is required for the grant of letters of administration and may be required in the case of a re-sealing. No bond is required in the case of an application for probate of a will.
- Within one year of the grant the personal representative is required to file in the Grand Court receipt and distribution accounts supported by affidavit. These are open to the inspection of persons beneficially interested.
The process generally takes approximately two to three months, assuming that there are no objections or other difficulties.
A grant is required to adminster intestate succession.
The Succession Law provides for the distribution of the estate between the surviving family members and/or dependents of a deceased person who did not make a will. There are no reserved portions or forced heirs. The Succession Law also applies to the grant of letters of administration or to the resealing of a foreign grant as applicable.
It is normal to make a Cayman Islands will.
A foreigner can make a will to deal with his/her property in the Cayman Islands separately from his/her estate elsewhere. This does not relieve the executors from their duty to declare the property owned in Cayman by the deceased, if called upon to pay duty or taxes.
In the case of movable property the provisions of a Cayman Islands will may be overridden by the law of the last domicile of the deceased. A testator should take advice from legal advisors in the country where he/she is resident or domiciled outside the Cayman Islands, prior to executing a Cayman Islands will which includes provisions for movable property.
The Wills Law provides very specific formalities for the declaration of a valid will in the Cayman Islands, and it is advisable to consult a local Attorney for advice. It is not necessary for the will to be executed locally.
No reserved portion.
The testator may leave his property to anyone; there is no reserved portion in the Cayman Islands.
The owner may give property to anyone prior to death.
Gifts of real property are subject to a transfer in the form prescribed by the Registered Land Law. Ad-valorem stamp duty is payable on transfers of land or when the shares of a land holding corporation are transferred. Exemptions and abatements with regard to the payment of stamp duty can be applied for in limited circumstances (e.g. a transfer done for love and affection between spouses, or between a parent and child, or a transfer by a company to its majority shareholder).
Gifts may be subject to challenges by creditors if the donor was insolvent at the time of the gift under the Bankruptcy Law, or if the gift was done with the intent to defraud a creditor under the provisions of the Fraudulent Dispositions Law.
Ownership of land is determined by the Land Register.
The Cayman Islands have a system of registered land which is maintained by the Registrar of Lands through the Government Lands and Survey Department. There is no community property regime in the Cayman Islands. The ownership of land is determined by reference to the proprietor recorded on the Land Register. There are no restrictions in the Cayman Islands on the ownership of local real estate by foreigners.
A guardian must be appointed to represent minors.
A minor may be registered as the owner of land in the Cayman Islands but this does not permit him/her to manage the land. If the Registrar of Lands has knowledge that the land is held by a minor, then a restriction is entered in the Land Registry. A guardian or other appointed person may act for and represent the interests of the minor for the purposes of the Registered Land Law. This is subject to providing satisfactory evidence of guardianship or other right to legally represent the minor to the Registrar of Lands.