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How Does a Cook Islands Asset Protection Trust Protect Me?
A Cook Islands Asset Protection Trust is one of the most secure asset protection solutions in the world today. It can help keep your wealth and valuable assets out of the reach of potential lawsuits and creditors. This article will explain what you need to know about using a Cook Islands Trust to keep your hard-earned assets safe.
The Cook Islands’ legal system is very favorable towards individuals defending themselves in legal proceedings, such as seizures and forfeitures, and it is widely considered to be amongst the most protective in the world. The offshore asset protection trust statutes on the Cook Islands are among the most formidable asset protection laws. Even lawsuits or judgments originating from powerful countries such as the United States won’t be able to reach assets placed in trust there. In order to be protected by these statutes, the assets must first be placed in a Cook Islands Asset Protection Trust.
While your assets are in the trust, you can still retain full ownership and can transact with them or transfer them in or out of the company under the trust. However, if there’s a legal proceeding against you, your trustee in the Cook Islands will immediately take over the management of the trust, effectively keeping them out of reach. The point of this? If a U.S. court orders that you must turn over your assets, you must comply. Failure to comply with a court order is considered contempt of court and generally carries heavy penalties, including fines and incarceration. However, since the assets are now under the administration of a trustee outside the U.S., the jurisdiction of a court in the U.S. doesn’t reach a Cook Islands Trustee. Thus, you will not have the ability to hand over any assets assigned to a Cook Islands Trust, which will defeat the purpose of the court order.
To demonstrate to the court that you are cooperating with a court order, you can instruct the trustee to obey and hand over the assets. However, because the laws of the Cook Islands prevent trustees from surrendering assets from a Trust when the settlor (you) is under duress from a court order, the trustee can legally refuse to release the assets.
Advantages of a Cook Islands Offshore Trust
Here are some of the benefits of a Cook Islands Trust:
- Protection for assets and investments, keeping them out of the reach of creditors, banks, or any court orders originating from outside the Cook Islands
- A two-year statute of limitations on all creditors that bring an action against you or the trust
- The Cook Islands do not charge taxes on assets held under a trust
- The Cook Islands’ judicial system is considered “defendant friendly” and there are several barriers to litigation already in place via the Cook Islands Asset Protection Trust Act
- A Cook Islands Trust can protect assets that aren’t located within the islands and you can transact with them electronically
- Several types of trust arrangements are available and none of the trust deeds have to be publicly registered
- A flexible trust structure that creates several investment opportunities
Top uses of a Cook Islands Trust
You can take advantage of a Cook Islands Trust to achieve the following:
- Protect various types of liquid and tangible assets, such as intellectual property, investment portfolios, life insurance policies, and other types of financial assets.
- People in high-risk professions, like business vendors, bankers, lawyers, doctors, and others can use a Cook Islands Trust to protect their assets during an economic or political crisis.
- You can also use the trust for wealth preservation, sharing wealth among family members, estate planning, retirement planning, diversifying assets, reducing estate taxes, lawsuit protection, and holding stock options.
Structure of a Cook Islands Trust
The structure of a Cook Islands Trust is simple, consisting of four parties to the trust:
- Settlor: He/she is the one who creates a trust and places assets under it—that’s you.
- Trustees: There can be more than one trustee. The trustee(s) is the one who holds the assets’ legal title and administers the trust. Also, all trustees are legally bound to protect a settlor’s assets on behalf of the trust’s beneficiaries.
- Trust Protector: He/she is responsible for appointing trustees and overseeing their activities. The settlor appoints the protector to supervise the trust and to ensure that the trustee is acting in the settlor’s best interest. The protector may be an attorney, family member, or some other trustworthy person.
- Beneficiary: He/she is the one who benefits from the trust. For most Cook Islands Trusts, the beneficiary and the settlor are the same person. But the settlor may add other persons (such as family members or other loved ones) to the trust.
What Can a Cook Islands Trust Protect?
There are various assets that you can use a Cook Islands Trust to protect. That said, the trust is most effective for protecting cash in a safe foreign bank account. Any funds on deposit with a U.S. bank could potentially be reached by the U.S. court system. In order to take full advantage of the protections offered by a Cook Islands Trust, it is best practices to deposit monies in a non-US account, such as Switzerland or Luxembourg.
Aside from cash in a foreign bank account, you can use the trust to protect the following:
- Stock market portfolios
- Investment portfolios
- Intellectual property
- Company stocks or shares
- Real estate
And various other tangible and liquid assets.
An asset doesn’t need to be on the Cook Islands for it to be protected. That said, due to jurisdiction, judgments against real estate assets in the U.S. may not be fully protected.
Who Can Set Up a Cook Islands Trust?
Provided the trust is established for legitimate reasons, almost anyone can set up a Cook Islands Trust. Our firm can help establish a comprehensive asset protection plan that fits needs and offers dependable offshore asset protection.
Is a Cook Islands Trust Revocable or Irrevocable?
A Cook Islands Trust is irrevocable. However—with the trustee’s assistance—a settlor can change the beneficiaries of a trust. Being irrevocable is important for asset protection purposes. If the settlor has the authority to change the trust without the trustee, a judge could make the settlor change a trust’s terms for the court to access assets under the trust. But with the trustee’s cooperation being a prerequisite to change the terms of the trust, there’s a safety buffer for both the settlor and his assets.
Taxation of a Cook Islands Trust
As long as an asset is under a Cook Islands International Trust, the islands will charge no taxes on it. That means any assets that you have on the Cook Islands (and under a trust) won’t be liable for gift tax, estate tax, income tax, capital gains tax, or any other local taxes imposed by the Cook Islands. That makes the islands a safe place to store assets without worries about taxes. But note that transactions done in the Cook Islands or elsewhere could produce tax consequences in your home country.
Cook Islands Trust FAQ’s
It is the duty of a trust protector to oversee the activities of the trustee regarding the Cook Islands Trust. While having a trust protector isn’t necessary, a settlor can appoint one as an extra security measure to look out for his/her interests and to veto any unsatisfactory/suspicious actions taken by the trustee on behalf of the settlor.
A trustee manages assets on behalf of the settlor. The trustee must legally reside in the Cook Islands to ensure that he/she is under the legal jurisdiction of only the Cook Islands and no other country. A trustee is legally bound to protect the trust assets for the benefit of the beneficiaries. He holds the legal title to the trust’s assets and must not act in any way that could compromise the trust assets. If a settlor is under legal duress and required by a court to hand over his assets, the trustee acts as the failsafe that blocks the court’s access to the assets. That’s because the trustee is a Cook Islands resident and isn’t under the jurisdiction of any court outside the islands.
Also, during times of legal threat, a trustee can make payments from the trust or transfer funds on the settlor’s behalf, per instructions. That means you can still access your assets even though the courts can’t force you to retake control of it from the trust.
A Cook Islands Trust is one of the safest offshore asset protection solutions. It has three primary safety features in place to protect your interests.
First, foreign courts and governments have no jurisdiction over assets on the Cook Islands. In order to compel a trustee in the Cook Islands to act, the plaintiff would need to litigate (or re-litigate from the beginning, if the proceedings have already started in the U.S.) the entire issue at law before a court in the Cook Islands.
Secondly, a licensed and bonded professional fiduciary regulated by the Financial Supervisory Commission serves as the trustee. Only a firm or person that has undergone comprehensive and thorough background checks can become a licensed trustee. And since the trustee is bonded, your funds are insured against any wrongful actions by the trustee.
Thirdly, the trustee cannot benefit from the trust. He/she can only step in when courts from outside the Cook Islands attempt to reach the trust assets. That is, a trustee can only behave in accordance to the laws of the Cook Islands, the terms of the trust, and your instructions as grantor.
Statute of Limitations on Fraudulent Conveyance
Statute of limitations is what the law prescribes regarding how long a person has to bring legal action regarding a specific case. If the statute of limitations for a case passes, the plaintiff is generally barred from bringing his/her lawsuit.
Fraudulent conveyance means transferring assets with the deliberate intention of putting the assets beyond a creditor’s reach, especially when the creditor has a legal claim to the asset. That means after the statute of limitations passes, a creditor can no longer bring a case to legally seize a debtor’s assets.
Actions of fraudulent transfer are a civil matter, not a criminal one. When you transfer your assets to a Cook Islands Trust, there is a two-year statute of limitations for the creditor to bring an action against you or the trust. The statute of limitations starts counting from the day of the cause of action. Cause of action is the origin of why a person is bringing legal action against you and your assets.
Offshore Asset Protection after a Lawsuit
If a creditor manages to obtain a court order authorizing to seize trust assets before the statute of limitations expires, there are still several barriers in the Cook Islands legal and financial system that could frustrate these attempts.
The first barrier is having to litigate in the distant Cook Islands. While the U.S. legal system makes it easy to file a lawsuit, and contingency fees mean plaintiffs can often sue others without paying a dime, the legal system in the Cook Islands is not so considerate towards plaintiffs. Bringing a lawsuit in the Cook Islands is an expensive and lengthy process. Another barrier is the fact that the legal burden will lie on the person bringing the lawsuit to prove beyond a reasonable doubt that assets were placed in the Cook Islands Trust with the objective to defraud. In most cases, meeting such standard of proof is quite challenging, considering that there are multiple legitimate reasons to set up an offshore trust.
As an established asset protection law firm, we’ve set up numerous asset protection trusts for clients. Moreover, as of the date this article was published, we have never seen a client lose any of their assets placed in a Cook Islands Trust. This is strong proof that protecting your assets under a Cook Islands Trust is safe. You can also confirm this yourself by researching available case law.
Cook Islands Trust Formation Cost
When forming a Cook Islands Trust there are a number of items that add to the cost of the trust formation such as trustee expenses, bank account fees, brokerage fees, trust protector fees, IRS reporting requirements, and annual fees. Taking this into account, an offshore asset protection trust formation will usually cost between $30,000 and $50,000 to set up plus the annual fees that will range from $5,000 to $10,000 per year. However, at Blake Harris Law we have established longstanding relationships with our Cook Islands service providers that allow us room for negotiations on trust formation fees to which we can offer competitive pricing and affordable annual fees on a Cook Islands Trust. Contact us via phone at 833-ASK-BLAKE or via email at email@example.com for a no-obligation consultation and trust formation pricing to suite your asset protection needs.
Requirements of Cook Islands Trust Formation
The formation of a Cook Islands Trust has multiple moving parts, contractual agreements and parties involved. The best way to ensure that your Cook Islands Trust is formed properly is to hire an experienced asset protection attorney who has reputable relationships with trust companies in the Cook Islands like the attorneys at Blake Harris Law.
That being said, there are a number of documents and contracts required to establish a Cook Islands Trust. Documents needed to establish a Cook Islands Trust include,
- Passport or Driver’s License – A copy of your certified passport or driver’s license is needed for identification purposes.
- Evidence of Funds and Banking Reference Letter – A Cook Islands Trust is generally set up by high-net-worth individuals who want to preserve their wealth and are in high-risk professions (e.g., doctors, bankers, lawyers, etc.). In order to form a Cook Islands Trust, Trustees will require evidence or funds and banking reference letters to see that the settlor has the funds and can transfer those funds to the trust when the time comes. The trustee will also want to see this proof of funds and conduct a financial background check to ensure the finances and structure of the trust do not violate regional trust laws and comply with international money laundering regulations.
- Proof Address – The settlor will need to provide a proof address, which can be a recent and original credit card or bank statement, or utility bill that shows evidence of the physical address.
- Trust Deed – A Trust Deed is a document that sets the trust guidelines of the powers, responsibilities and duties of the settlor, trustee, trust protector, beneficiaries, and other sited parties involved.
- Deed of Indemnity – A Deed of Indemnity is a contract that is designed to protect the trustee from the risk of litigation and/or financial liabilities.
- Letter of Wishes – A Letter of Wishes is not always necessary in the formation of a Cook Islands Trust nor is it always legally binding. A Letter of Wishes is written by the settlor to the trustee that describes information (or wishes) beyond that of which is outlined in the trust. It is up to the trustee to consider this information/wishes and move forward with that information/wishes in mind.
- Sworn Affidavit of Solvency or Solvency Certificate – A Sworn Affidavit of Solvency is a sworn affidavit signed by the settlor. With this sworn affidavit, the settlor is swearing they can meet all financial obligations—existing and anticipated. Similarly, a Solvency Certificate may be required by the trustee of the settlor to show the financial stability of the settlor. These documents are generally required as a way to protect the trustee and international financial institution therein.
In addition to the requirements of a Cook Islands Trust, there are structural aspects to the formation of the trust. There are four parties needed for the structure of the trust: settlor, trustee, trust protector and beneficiary. See the Structure of a Cook Islands Trust section of this page to learn more about the structural requirements of the Cook Islands Trust.
Common Problems When Setting Up a Cook Islands Trust
With a trusted asset protection law firm, like the team at Blake Harris Law, we will help you navigate issues surrounding establishing a Cook Islands Trust. We have seen some of the following problems arise throughout the offshore asset protection industry.
- Reputable Trustees – A trustee can be a trusted individual, a lawyer, an accountant, a bank, or professional trustee company in a foreign country. Reputable trustee companies will have insurance policies by well-known insurance companies that make sure the clients are covered should loss or negligence occur within the trustee company. They will also conduct a Know Your Customer (KYC) and Anti-Money Laundering (AML)/Combating the Financing of Terrorism (CFT) checks on the settlor. The trustee company wants to make sure the person they will be doing business with is not a criminal or acquired their assets from illegal means. When looking for a reputable offshore trustee company or other entity it is important know their insurance policies, that they will conduct a type of KYC and AML/CFT check on the settlor, and their track record when it comes to satisfied clients.
- Retaining Control – Some settlors are not willing to relinquish control of their assets to a trustee and this could create a problem. If the settlor does not relinquish control of their assets to a trustee, then their assets could still be vulnerable to creditors and litigation.
- Failure to Report to IRS Filings and Federal Disclosures – If assets are placed in a Cook Islands Trust by a U.S. citizen or resident or a U.S. citizen or resident is the beneficiary of that trust that does not mean those assets should not be reported to the IRS. In some instances, the settlor and/or beneficiary will have to report on assets (and inherited assets) within a Cook Islands Trust. People who do not file with the IRS or report federal disclosures could find themselves with federal tax compliance issues.
Is the Cook Islands Trust the Best Offshore Trust?
The Cook Islands Trust is well regarded as the best offshore trust to shield assets from lawsuits, claims and creditors. One of the biggest reasons the Cook Islands Trust is regarded as the best offshore trust is the trust jurisdiction. The Cook Islands courts do not recognize foreign judgements. If creditors seek to claim a settlor’s assets contained within a Cook Islands Trust, those creditors will have to file a lawsuit in the Cook Islands before the statute of limitation expires, pay legal and court fees upfront and prove beyond a reasonable doubt the assets were placed in the Cook Islands Trust with the intent to defraud. This entire process is lengthy and expensive, plus the statute of limitation is only two years in the Cook Islands, which would make filing a lawsuit an urgent matter. Because of these factors, creditors will not fight what will likely be a losing battle thus keeping a settlor’s Cook Island Trust safe.
An Offshore Asset Protection Trust is a trust that is formed under the laws of an offshore jurisdiction, generally the management of the trust is carried out overseas and the trust assets are also deposited in an offshore jurisdiction. An Offshore Asset Protection Trust can protect a variety of different assets such as business inventory and equipment, cash, intellectual property (IP), real estate, recreational assets (e.g., private jets, cars, yachts), and securities. People who generally seek an Offshore Asset Protection Trust at Blake Harris Law are business owners, real estate investors, medical professionals or people who believe they may be at risk and are looking to protect these various types of liquid and tangible assets.
The Titanium Trust is Blake Harris Law’s proprietary Asset Protection Trust that takes a traditional domestic asset protection trust and offshore trust one step further. Like titanium metal—strong and lightweight—the Titanium Trust has nearly bulletproof strength in that it protects your assets in the U.S. but with the added advantage of agility to move your assets through a network of international trust companies, protectors, and bankers who work together to safeguard your assets. Our clients who opt for the Titanium Trust are usually people with higher incomes or six figure saving accounts and wish to safeguard assets such as cash; securities; business interests; IP; real estate; and various cryptocurrencies, tokens, and coins.
The Caribbean island of Nevis has become one of the world’s most favorable locations to establish limited liability companies (LLC) for both privacy and asset protection. The small island country’s commitment to providing safe legal arrangements for overseas residents has been proven since the passage of the Nevis Business Corporation Ordinance in 1984. While establishing an offshore LLC sounds like it would be a long and arduous process it is rather uncomplicated with the assistance of an asset protection lawyer. At Blake Harris Law, our clients who seek a Nevis LLC are generally individuals who want to shield their assets from creditors and lawsuits. The benefits of privacy and discretion; minimal maintenance; a stable, business-friendly political environment; and at an affordable price point has made the Nevis LLC a desirable offshore asset protection option.
Contact a Cook Islands Trust Attorney
If you would like to learn more about how you could secure your assets and keep your hard-earned wealth out of reach from potential creditors or lawsuits, contact us today for a no-obligation consultation. Blake Harris Law can help you set up a Cook Islands Trust that protects your fortune without compromising your access to your wealth.