COOK ISLANDS TRUST

COOK ISLANDS TRUST

A Cook Islands Trust is a specific type of offshore trust used for asset protection, set up within the Cook Islands—a group of 15 islands situated to the northeast of New Zealand. While these islands have historically been famous as a tropical holiday destination, they are now widely recognized for their specialized role in offering robust asset protection trusts.

The Cook Islands’ trust system began to take shape with the enactment of the Cook Islands International Trusts Act in 1984. This legal framework established the foundation for offshore asset protection trusts within the jurisdiction, clearly outlining the core benefits of such trusts, such as protecting assets, maintaining confidentiality, and providing a means to reject foreign rulings in legal matters.

In 1989, the Cook Islands legislature revised the Trusts Act to strengthen the protection of assets even further. The amendments made it possible for the settlor—the individual who establishes the trust—to also be listed as a beneficiary. Before this, asset protection laws typically required that the settlor relinquish any beneficial interest in the trust’s assets. This change set the Cook Islands apart, as it allowed for a new kind of asset protection trust that was much more favorable than those offered by other jurisdictions. As a result, places like Nevis and Belize sought to replicate the Cook Islands' successful model.

The 1989 changes paved the way for the creation of trusts that offered a higher level of asset protection than had been available anywhere else. As the first jurisdiction to offer such a law, the Cook Islands boasts an extensive case law history that has further cemented the reliability of these trusts. This legal precedent significantly enhances the security they provide.

Additionally, the Cook Islands government takes great care in ensuring that trusts within its jurisdiction are established ethically, comply with the law, and are regulated correctly. These measures are intended to prevent the misuse of the system for hiding assets, ensuring that trusts are used solely for their intended purpose: asset protection.

Due to these strict regulations, the Cook Islands enjoys an excellent reputation on the international stage as a trustworthy jurisdiction for trust establishment. This positive perception makes it nearly impossible for any reputable legal professional to argue that a Cook Islands trust is anything other than legitimate.

The combination of the Cook Islands’ strong reputation and its ability to offer comprehensive protection against various risks has made it a preferred destination for individuals looking to safeguard their wealth. According to the Cook Islands Financial Supervisory Commission (FSC), between 2,200 and 3,000 trusts are established each year, underscoring the popularity and trust placed in this jurisdiction. Since 1996, our firm has been one of the leading providers of Cook Islands Trusts, having set up more than any other organization in the world.

A Brief History of Trusts

The concept of trusts dates back to the 11th and 12th centuries during the time of the Crusades, when William the Conqueror established the Common Law of England in 1066. Under this law, soldiers heading into battle were able to transfer ownership of their land to a trusted individual, ensuring that the land would continue to generate resources for the crown while the soldier was away.

Over the centuries, trusts have been used primarily within domestic jurisdictions. Although they offered some level of asset protection, it wasn’t until the Isle of Man’s Trustee Act of 1961 that a significant leap was made. This act provided clarity on the roles and powers of trustees and outlined the limits on the ability of courts to interfere with trust-held assets. The Isle of Man quickly became the premier jurisdiction for offshore asset protection trusts due to these protections.

However, in partnership with U.S. attorneys, the Cook Islands established even more favorable conditions for creating offshore asset protection trusts. Their laws offered more extensive protections than those found in the Isle of Man. As a result, the Cook Islands became the leading destination for asset protection trusts, with experts in the field considering their statutes to be far superior to those of the Isle of Man. Subsequently, Nevis adopted and refined many of the Cook Islands’ provisions, establishing itself as another strong contender in the field.

With trusts having been in existence for almost a thousand years, the legal framework governing them is well-established. The case law surrounding trusts shows that assets placed under the control of a foreign trustee in a properly structured trust are effectively shielded from creditors and legal challenges. This solid case law history makes trusts the ideal mechanism for protecting assets from lawsuits and creditors.

Key Features and Benefits of Cook Islands Trusts

Cook Islands Trusts offer numerous advantages, primarily stemming from their legal framework, robust case law history, and stringent confidentiality rules.

Here’s an overview of the key characteristics and benefits of setting up a Cook Islands Trust:

Basic Characteristics of Cook Islands Trusts

The following table provides a brief summary of the fundamental features of Cook Islands Trusts, including information on laws, currency usage, and other essential elements:

  • Type: Asset Protection Trust
  • Law: British Common Law
  • Statute: International Trusts Act (1984) and amendments
  • Establishment Time: 3 business days after submission of due diligence documents
  • Taxation: No taxes, but individual taxes must be followed based on the settlor’s country of residence
  • Double Taxation Treaties: None
  • Currency: New Zealand Dollar (NZD), with any other currency allowed
  • Cryptocurrencies: Allowed
  • Parties Involved: Minimum of one party
  • Trust Deed: Not publicly recorded
  • Recognition of Foreign Judgments: No
  • Duration: Indefinite if desired
  • Setup Costs: Varies based on consultation
  • Annual Renewal: Varies based on consultation

Key Benefits

  • Established legal precedence for asset protection
  • Based in New Zealand, which is considered one of the least corrupt and most trustworthy nations globally
  • Refuses to acknowledge foreign court orders or judgments
  • Forces creditors to initiate lawsuits within the Cook Islands jurisdiction, where they are likely to fail
  • Provides immediate asset protection
  • Governed by debtor-friendly laws
  • Protects assets from the impact of bankruptcies by settlors or beneficiaries
  • No public record of the trust deed, ensuring confidentiality
  • Allows a broad range of investment opportunities
  • Ensures assets are shielded from forced heirship laws, allowing for personalized wealth transfer

Strengthening Protection with an LLC

A Cook Islands Trust offers a significant level of protection on its own. However, this protection can be enhanced by layering additional separation between you and your assets. One effective method is the establishment of a Cook Islands or Belize limited liability company (LLC) that is placed within the trust. With this setup:

  1. The LLC is established with you as the manager.
  2. The LLC is placed into the trust, and a bank account is opened in the LLC’s name.
  3. You can control the LLC’s bank account, making transactions as needed, while still benefiting from the trust’s protections.

In times of legal disputes, the trustee can step in to manage the LLC, and local courts have no jurisdiction over foreign entities such as a Cook Islands trustee firm. This setup ensures that your assets remain secure, even in the event of lawsuits or creditor claims.

Who Should Consider a Cook Islands Trust?

Cook Islands Trusts are particularly beneficial for high-net-worth individuals, business owners, professionals with significant exposure to legal risks, and anyone who wants to safeguard their wealth or ensure a smooth estate transition.

Common Applications for Cook Islands Trusts

While asset protection is the primary use of these trusts, they also serve other purposes, such as:

  • Pre-divorce planning
  • Estate and wealth preservation planning
  • Protection from lawsuits
  • Intellectual property safeguarding
  • Real estate protection
  • Retirement and investment planning

How to Establish a Cook Islands Trust

To set up a Cook Islands Trust, a series of legal steps must be followed, including working with an experienced professional to ensure compliance with international regulations. The process involves:

  1. Consulting with an expert for guidance
  2. Identifying the parties involved, including the settlor, trustee, and beneficiaries
  3. Drafting the trust deed to formalize the agreement
  4. Preparing necessary documentation for due diligence
  5. Transferring assets into the trust to complete the process

Costs and Ongoing Maintenance

Establishing and maintaining a Cook Islands Trust requires careful consideration of legal and administrative costs, which vary based on individual circumstances. Generally, the establishment of the entire structure (Trust + LLC) starts at $18K USD, with annual maintenance fees of $9K USD.

A bank account introduction, if necessary, will run you an extra $2K USD.