The Curaçao trust offers a mechanism for structuring and protecting assets. A key feature is that trust assets form a separate estate, distinct from the private assets of the trustee. This means that, in principle, creditors of the trustee cannot recover against trust assets, provided the trustee clearly acted in that capacity.

The separation of assets has different implications for creditors depending on the parties involved:

Trustees: If the trustee acts in its capacity as trustee, liability is generally limited to the trust assets. However, personal exposure may arise if there is a breach of trust or improper conduct.

Settlors: While legal remedies such as the actio pauliana remain available, they are subject to strict conditions and do not always provide an effective redress vis-a-vis the settlor.

Beneficiaries: Creditors of beneficiaries cannot, in principle, attach trust assets directly. They may instead seek recourse against the beneficiary’s rights under the trust, where these potentially qualify as transferable claims or transferable property rights.

A distinctive feature of the Curaçao trust is that it can only hold assets (and not liabilities). For clients, this means that while trusts are effective for asset protection and estate planning, they are generally less suitable for operating businesses or holding active investments with liabilities.

Looking ahead: the potential introduction of protected cell companies

Partly to address these limitations, legislation is currently being developed in Curaçao for a company with separated estates, or a ‘protected cell companies’.  This structure would allow both assets and liabilities to be allocated to distinct compartments within a single entity, offering a more balanced framework which may be suitable for companies with business activities.