All Things Offshore Asset Protection With Matthew Smith

In this podcast, Blake interviews Matt Smith, the general manager at SouthPac in the New Zealand office. They discuss the benefits of using SouthPac for asset protection and why the Cook Islands is considered a premier jurisdiction for asset protection trusts.

Blake:
It’s great to be here today with Matt Smith, the general manager at SouthPac in the New Zealand office. Matt, thanks for coming on the show.

Matt:
No, pleasure, Blake, and thanks for coming to New Zealand to visit us. It’s really great to have you here in our office.

Blake:
It’s a lovely country, first time in New Zealand in quite a while it’s been about 10 years. I just got back from a week in the Cook Islands. Beautiful country, I did give myself a little bit of a sunburn. But I just consider that a souvenir. So jumping right into it.

Blake:
Why SouthPac? If a client is looking to protect their assets, why should they consider using SouthPac?

Matt:
Yeah, well, we’ve been around forty years now. We celebrated our 40th anniversary this year, after setting up in the Cook Islands in 1982. During the 80s SouthPac worked with US asset protection specialists to develop what is, you know, now the gold standard in the international asset protection trusts law in the Cook Islands. It’s become, you know, in that time a premier jurisdiction and one of the best and most protected places that you can place your assets via trust.

Blake:
And why is the Cook Islands the most protected jurisdiction? I certainly agree with you but for all of our watchers today. Why would you recommend the Cook Islands for someone looking for asset protection?

Matt:
Yeah, so the laws that are in place in the Cook Islands, they are very protective to anyone who’s placing assets into a trust, who doesn’t have a creditor, doesn’t have anyone who’s looking to sue them for any reason. Any assets they place into a trust in that situation are going to be protected from day one, no creditor in the future can touch those assets. Even if that person does have a current creditor who may be looking to sue them but hasn’t yet started suing them, hasn’t yet brought proceedings, there are still a lot of protections that they can get. And it’s still going to be very, very hard for a creditor to access any assets in the trust, they will have to show a current court in the Cook Islands, beyond reasonable doubt that the settler has placed those assets into the trust with the principal intent to defraud them, that particular creditor, and that placing those assets into the trust meant that the settler couldn’t pay what they owe to the creditor. So, there’s a number of hurdles that need to be cleared. It’s a tremendously difficult process for a creditor to break into a Cook Islands trust. And that’s why so many cases settle.

Blake:
In addition to beyond a reasonable doubt being the standard of proof, they also don’t recognize foreign court orders, someone who went through the entire process in, let’s say, the United States, would have to start that process again in the Cook Islands.

Matt:
Yep.

Blake:
And on top of that, contingency fees are prohibited in the Cook Islands. Most cases in America, or lots of cases America, are bought in a contingency, a client doesn’t have to pay anything in order to bring their case when they find out that they want to try this case in the Cook Islands, they’re gonna have to get some skin in the game, and often quite a bit because it can be quite expensive to litigate in the Cook Islands as well.

Blake:
So, can you talk to me a little bit about the Nevis LLC, this is a common addition to a Cook Islands trust, why our clients setting up a Nevis LLC is in conjunction with a Cook Islands trust.

Matt:
So, a lot of clients like to use a trust in LLC structure, because you’ve got the protective umbrella of the trust that holds them at the interest in the LLC. And the client, as long as they’re not under some kind of duress, can manage the LLC, manage the assets there. We do need clients to remember that the trustee owns that LLC, it’s the trustee’s company, the clients managing it for the trustee. So, the client needs to keep the trustee in the loop. But generally has, you know, will have day to day control over those assets. So long as they don’t go, you know, distributing assets out to themselves treating those assets as if they own them themselves, then the trust structure will be respected and it will still provide that protection. So, that’s why a lot of clients use an LLC. The reason clients like a Nevis LLC is because Nevis has got a very, very protective LLC jurisdiction. It wrote, it developed it’s laws in the mid 90s. It’s still a very popular product. One of the key features of the Nevis LLC, is that the only remedy available to a creditor, who has to go through a Nevis court to get it, is that they can get a charging order over a portion of the assets.

Blake:
And that charging order expires after three years.

Matt:
It does. It expires after three years, it’s non renewable. While it’s in place, the creditor can’t use it to force a distribution. So, if the company can effectively be, you know, placed into cold storage, if you like, not have any activities, not make any distributions, the creditors are gonna get nothing as a result of that charging order and then it expires.

Blake:
So, let’s talk a little bit about the banking side. So, in addition to forming the Cook Islands trust, we recommend clients open a bank account under the trust structure somewhere outside of the United States, somewhere where their assets are not going to be threatened. We have a relationship with a bank out in the Cook Islands. But what other banking options do you see clients often use when creating a Cook Islands trust?

Matt:
Yeah, so a lot of the most popular banking options that our clients go to, with some of the banks in Switzerland, there’s some very long established banks, you know, some centuries old, that we work with over there. And, you know, Switzerland’s got a reputation for privacy, for safety, for security. And that’s attractive to a lot of clients. There are a few options outside of Switzerland, we’ve got relationships with banks in Liechtenstein, in Austria, in Nevis, and a couple of others throughout the world and are always looking to develop new relationships with other banks.

Blake:
And so there is this misconception that US individuals cannot open Swiss bank accounts. This is not true. Some Swiss banks may not want to open an account. But there’s many Swiss banks that cater to Americans. America has a big pool of money and the banks want to cater to that. So, there is the ability to open a Swiss bank account as a US citizen under a Cook Islands trust. And this gives you the best of both worlds, it gives you what I consider to be the most stable banking system, banks with the highest capital reserve ratios, and also the protection of the Cook Islands, which I consider to be the most protective jurisdiction in the world, with the situation class where the money’s safe from bank failures or as safe as possible from any issues with the bank, but also with that, their money’s safe from their home country creditors and lawsuits that could come after their assets. And the Cook Islands trust is used for two reasons I would say. One is for protecting the money if they do, if someone does get a judgment against the client, but also there are excellent tools in negotiating a settlement. The Cook Islands have a reputation as being the world’s most protected jurisdiction, and if somebody’s coming after assets and they’re held inside a Cook Islands trust, chances are that the plaintiff attorney is going to be interested in at least entertaining a settlement offer upon learning that assets are held inside of a Cook Islands trust.

Blake:
One final question for you. I work with quite a number of clients who have cryptocurrency. What can you do to protect clients cryptocurrency?

Matt:
Yeah, obviously, it’s been such a huge growth area over the last few years. So, you know, even with the knock backs that crypto has taken this year, there’s still a lot of clients that we have that are coming in and asking about crypto solutions. There are a couple of quite formal options, formal in that they’re available through banks. So there’s one bank in Liechtenstein we work with, that offers a full cryptocurrency service, the bank can hold crypto alongside cash, or gold, or your equities and securities and bonds as just as part of an investment portfolio. It’s got digital securities also got a fiscal vote for the storage of crypto wallets there. We also worked with a bank in Switzerland that can provide a similar service. That bank has been set up with, you know, very much with digital assets and currencies in mind. So those have been two really interesting options that we bought online for clients in the last couple of years. Outside of that, we’re always looking for new solutions for dealing with crypto. It can be a difficult asset to manage, because you’ve got the private key, the public key, and you know, the facts involved in that. There are other kinds of work arounds that can provide some level of protection such as holding it, you’re holding a crypto account via an LLC, that’s offshore, or you having a wallet that’s held pursuant to some sort of custodial agreement with the trustee. They’re not the most protective, but they offer something of a work around. But yeah, we’re always open to you know, looking at what new solutions come online and can be available to clients.

Blake:
And I appreciate that about SouthPac, that you’re agile and you’re adapting to the changing times. Matt, thank you so much for your time today and thank you for all that you’ve done for my clients over the years and I very much look forward to continuing to work with you in the years to come!

Matt:
Pleasure Blake, really enjoy working with you. And yeah, great to see you here in New Zealand.