Maximizing Value with Asset Protection Planning

Jurisdiction of Preference

 

Cook Islands – A stable democracy with modern infrastructure

cook islands

  • Constitutional Legal system: incorporating English common law, certain British and New Zealand statutes and customary laws
  • Formally part of New Zealand Gained independence in 1964
  • Highly respected New Zealand judges
  • Competent professionals to provide backup services to offshore financial services industry
  • Highly educated English speaking labor force
  • No FX controls
  • Boast the highest GDP per capita amongst the South Pacific small island nations

ci courthouse

So why the Cook Islands?

  • Pioneering Trust laws:
  • In the 1980s, the Cook Islands codified the concept of Asset Protection Trusts through the enactment of the International Trusts Act
  • modifies certain common law trust principles, which were contrary to asset protection
  • Result:
  • Considered the leading asset protection jurisdiction in the world
  • Legislation has been copied by other jurisdictions
  • Long track record and case-law that has provided certainty

Cook Islands International Trusts Act

  • Foreign judgments NOT enforceable
  • Self settled Trusts permitted
  • Settlor permitted to retain powers and benefits in a trust
  • Spendthrift provisions – an interest in trust property cannot be alienated or pass from the trust by bankruptcy of, or process of law relating to beneficiaries
  • Bankruptcy – an International Trust is not void or voidable in the event of the Settlor’s bankruptcy

ci raurotonga

Cook Islands International Trust

  • Trust can only be challenged on the grounds of a fraudulent transfer
  • Comprehensive fraudulent transfer rules
  • Limited time to commence action against trust

2 step test: 
a) Did the transfer occur within two years of a cause of action arising, and if so;
b) were proceedings commenced in the Cook Islands within 1 year of the settlement or transfer to the Trust?

Test to establish Fraudulent Transfer

  • Must prove beyond reasonable doubt that the transfer was with the principal intent to defraud a specific creditor AND it rendered the Settlor unable to pay that creditor
  • Fraudulent intent negated under circumstances in which such intent would almost certainly be found under USA fraudulent transfer/conveyance laws.
  • Privacy is guaranteed
  • Foreign process – a strong deterrent to creditors
  • Security for costs
  • Contingency fees not permitted
  • Finding a lawyer that hasn’t already been conflicted by the trustee….
  • Highly regulated jurisdiction; Trustee Companies subject to strict monitoring and supervision
  • Professional Indemnity insurance is a pre-requisite for licensing
  • No Cook Island tax on assets and income of offshore vehicles