Where There's Smoke There's A Fire(Wall)

Trust practitioners will be all too familiar with the fact that, in recent years, there has been a significant increase in judgments issued from onshore jurisdictions that creditors seek to enforce against the assets of trusts established in offshore jurisdictions. In some instances, such proceedings also challenge the validity of an offshore trust (validity proceedings). Fundamental to these proceedings is an allegation that the sole purpose of establishing the trust was to put assets beyond the reach of another party (usually a divorcing spouse, a creditor or insolvency practitioner). Forced-heirship laws also continue to feature in these types of claims.

This article focuses on the offshore jurisdictions of the British Virgin Islands (BVI), the Cayman Islands, Guernsey and Jersey (the Jurisdictions), which have statutory provisions designed to protect trust assets from being susceptible to such attacks. Colloquially, those provisions are known as