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Cook Islands Trust

The most secure asset protection structure available

Introduction

A Cook Islands Trust can be set-up for a number of reasons and offer a number of benefits such as financial privacy, estate planning and tax planning. However, Cook Islands law makes a Cook Islands Trust an extremely valuable asset protection vehicle and is probably the most secure asset protection option available worldwide.

The principle involved is that it is highly advisable nowadays to separate yourself from your assets with the intention of protecting them from future claims from creditors or frivolous lawsuits to name but two examples. A 'discretionary trust' can make it possible for the 'Settlor' to be the protractor and a beneficiary, thereby benefitting from the trust's assets, without actually owning them, thereby making them unavailable to creditors.

Advantages of a Cook Islands Trust

It splits the beneficial element of trust assets from their legal ownership

• The beneficiary(ies) of the trust are the effective ´owners´ of the equitable interests but do not hold the legal title to the assets.

Irrevocable trusts

• An irrevocable trust is essential as it removes the settlor´s power to revoke, and therefore the settlor cannot be ´pressured´ into revoking the trust in order to reveal the assets as he/she has no power to do so.

Spendthrift Clause

• A key feature of Cook Islands trust law is that the settlor of a trust may establish a spendthrift clause in which the settlor is the beneficiary
  

´Impossibility to act´ legal position

• Asset protection trusts in the Cook Islands can be set-up so as to make sure the trustee is prevented from releasing funds when the beneficiary is acting under court pressure. The beneficiary can fully co-operate with the court order but be powerless to act further. This creates an ´impossibility to act´ situation which is a perfectly valid legal defense.

Cook Islands Law

The Cook Islands has often broken new ground in international finance terms and was, in fact, the first country to enact an explicit asset protection law in its 1989 International Trusts Act. Strong asset protection vehicles in the Cook Islands are helped by the existence of a shortened 2 year (the norm is 4 years) statute of limitations on fraudulent transfer claims. When dealing with Cook Islands law, creditors will find it very difficult to challenge the solvency or legitimacy of a financial structure in the Cook Islands, while after 2 years creditors will not be able to touch funds regardless of its origin.

Cook Islands financial law is also akin to criminal law in that the evidence being presented must be considered ´beyond reasonable doubt´ - leaving the onus on the creditor to prove there was specific intent to avoid the law when a transfer was made.

Attempts have been made to penetrate this law, a couple of well-known cases by the U.S. Government and the most famous of which was The Anderson Case (1999) where a U.S. court order was issued demanding the repatriation of funds in a Cook Islands Trust. The trust refused to comply and the U.S. was legally beaten hands down.

A Cook Islands trust is a customized structure designed to benefit an individual. As such there is no ´standardized´ structure which will help everyone, but all structures will benefit from strong Cook Islands financial protection laws.