The Cook Islands an English speaking sovereign state in the south pacific comprising some 15 islands and is a world leader in the field of Asset Protection Trusts. A self-governing state with a British based legal system in the mid1980′s the Cook Islands became the first ”Offshore” jurisdiction to create comprehensive asset protection trust legislation. Its asset protection trust law has now been implemented in one form or another in thirteen countries and eight U.S. states (and is famous for having resisted attempts by US Authorities/Courts to tap into assets held by a US resident settled Cook Islands Trust see FTC vs. Affordable Media, LLC, 179 F. 3rd 1228, U.S. Ct. of Appeals, 9th Cir. 1999).
Features & Benefits of the Cook Islands Trust
Registration of a Cook Islands International Trust affords a number of benefits including that a trust will not have any taxation liability in the Cook Islands. It is a relatively simple procedure for a trust to be registered in the Cook Islands eg it is not necessary for a copy of the trust deed to be filed with the Registrar of International Trusts.
The Register of Trusts which is administered by the Financial Supervisory Commission is not open to public inspection, where any such inspection or release of information can only be achieved with a court order and subject to the International Trusts Act 1984.
The Cook Islands is still considered the leading Asset Protection jurisdiction in the world, and can boast a long line of judicial precedent which upholds the integrity of the International Trusts Act 1984 (“ITA”). The Cook Islands can distinguish itself as one of the few jurisdictions where US Government Authorities have failed in their attempts to upset a Cook Islands International Trust.
Exemption from Taxation
An international trust has no taxation liability in theCook Islandsand no requirement to file any returns, reports, or records.
Modification of Common Law Rules
The ITA alters the common law rules relating to:
- the rule against accumulations
- the rule against perpetuities, removing the perpetuity period.
- the rule against double possibilities
- the rules restricting the extent of charitable purposes
- the rules against purpose trusts
The trust can provide for an express power of revocation otherwise it will be deemed to be irrevocable.
Retention of Control and Benefits by Settlor
An international trust shall not be declared invalid or a disposition declared void or affected in any way if the Settlor retains or acquires:
- a power of revocation of the Trust;
- a power of disposition over Trust property;
- a power to amend the Trust Deed;
- any interest in the Trust property.
A disinherited heir cannot challenge an international trust on the basis that it interferes with his or her right to succeed to assets or property.
An international trust can provide that an interest in property given to a beneficiary for life or a lesser period shall not be alienated or pass from the trust by bankruptcy or be taken in execution by process of law.
An international trust is not void or voidable in the event of the Settlor’s bankruptcy, notwithstanding any law of the Settlor’s domicile or place of residence and notwithstanding that the Trust is voluntary, without valuable consideration and made for the benefit of the Settlor, the Settlor’s spouse or children.
Comprehensive rules provide when an international trust may be challenged on the grounds of fraud.
- Where a creditor proves that an international trust was settled:
- with the principal intent of defrauding a creditor, and
- the settlement rendered the Settlor insolvent or without property by which the creditor’s claim could have been satisfied;
the settlement is not void or voidable but the trust is liable to satisfy the claim of the creditor out of property, which, but for the settlement, would have been available to the creditor.
- An international trust and a disposition to a trust is not deemed to be fraudulent against a creditor of a Settlor:
- if the settlement or disposition takes place after the expiry of 2 years from the time the creditor’s cause of action arose; or
- the creditor fails to bring his action before the expiry of 1 year from the date of such settlement or disposition; or
- the settlement or disposition takes place before the creditor’s cause of action arose.
A term of an international trust expressly selecting the laws of theCook Islandsto govern the trust is valid, effective and conclusive regardless of any other circumstances.
Foreign judgments are not enforceable against an international trust. Any claimant must commence new proceedings in theCook Islands, subject toCook Islandslaw.
Exclusion of Foreign Law
An international trust governed by the laws of theCook Islandsor disposition of property held by the trust will not be void, voidable, liable to be set aside or defective by reason that the laws of any foreign jurisdiction prohibit or do not recognise the concept of a trust, or that the laws of theCook Islandsare inconsistent with any foreign law.
Commencement of Proceedings
Any proceedings to be commenced in the High Court of theCook Islandsto set aside the settlement of any international trust or disposition to such trust must be brought within 2 years of the settlement of disposition.
Statutory Rights of Delegation
A trustee has a statutory right to delegate its powers and functions, such as management of trust property, including investment management, and to employ professionals to act in relation to the affairs of the trust.
Custodian and Advisory Trustees
A Custodian trustee may be appointed to hold trust property and an Advisory trustee to advise the trustee in relation to the trust property.
Guarantee against Expropriation
TheCook Islandsgovernment guarantees that there will be no compulsory acquisition or expropriation of trust property except in accordance with due process of law.
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