The Cook Islands is located in the South Pacific. Many people may have never heard of it before, but this tiny archipelago is actually well-known for one thing: strong asset protection. 

In 1981, the Cook Islands was established as an offshore center. With the enactment of the Cook Islands International Trusts Act in 1984, the territory became the first country in the world to introduce near-impenetrable trust protection laws. 

What Are Cook Islands Trusts?

A trust is created when a settlor transfers their assets to a trustee. The latter holds these assets for a designated beneficiary. Cook Islands trusts are offshore trusts—that is, trusts established in jurisdictions outside the United States. Offshore trusts are legal arrangements designed to protect assets from lawsuits and creditors legally. 

How Do You Set Up Cook Islands Trusts?

To create a Cook Islands trust, a U.S. citizen will need to enlist the help of a domestic trust company or an assets protection attorney from firms like https://blakeharrislaw.com/ to help them with the following: 

• Determining which trust structure and trustee work best for your needs, goals, and circumstances
• Gathering and completing the documents required by the offshore trustee, including the trust information form, letter of wishes, affidavit of solvency, deed of indemnity, and other supporting documentation
• Submitting the application and the required documents, so the offshore trustee can perform a background check to confirm your identity and make sure that the trust structure isn’t violating local regulations
• Working with the offshore trustee to draft a suitable trust agreement after you pass the aforementioned background check

What Can Cook Islands Trusts Protect?

Ideally, a Cook Islands trust is most effective in protecting cash held in foreign bank accounts. If you’re using the trust to protect a domestic bank account, it may not be as effective because funds deposited in U.S. bank accounts are potentially within reach of the U.S. court system. 

Apart from cash deposited in foreign bank accounts, you can use a Cook Islands trust to protect the following assets:

• Real estate 
• Company shares or stocks
• Intellectual properties
• Investment portfolios
• Stock market portfolios
• Any other liquid or tangible assets

What Are The Benefits Of Cook Islands Trusts?

In 2007, the federal government won its case against Andrew Grossman, a real estate investor. Although the judgment added up to more than USD$10 million, the government could only recover a small fraction of that amount. Why?  Grossman had placed his assets in a Cook Islands trust.

In 2013, Northern Leasing Systems, Inc.—a credit card equipment leasing company suspected of skimming credit cards to scam small businesses—settled a multimillion-dollar case with the state attorney general. Like Grossman, two of the company’s principals protected their personal assets because they’ve set up a Cook Islands trust. 

These stories—and many others—are why so many people are choosing offshore trusts to protect their assets. Here are some of the benefits of placing your assets in Cook Islands trusts:

• Asset Protection: Cook Islands trusts are an effective way to secure your assets for various purposes, including estate planning, wealth preservation, retirement planning, asset diversification, and lawsuit protection, among others.

• Semi-Revocable Trusts: Cook Islands trusts are semi-revocable, which means that the settlor can change the beneficiaries at any time with the assistance of the trustee.

• Strong Legal System: The territory’s legal system has historically favored defendants in legal proceedings, such as forfeitures or seizures. The country’s laws offer substantial protection for assets and investments, even against judgments and settlements involving the United States government.

• Anonymity: Cook Islands trustees are required by law to protect your identity. No one outside of the country can force them to reveal if you’ve placed your assets in a trust or the value of that trust.

• Tax Benefits: While establishing an offshore trust doesn’t mean that you don’t have to pay domestic taxes, the Cook Islands won’t tax your assets or the income of these assets.

• Unenforceability Of Foreign Judgments: Judgments obtained outside the country are not enforceable in the Cook Islands. That means that if your creditor wants to collect on your debt, they’ll need to file a case directly within the territory. This case can be a lengthy and expensive process, mainly because your creditor will have to establish and prove that you intentionally created the trust to evade your obligations.  

Takeaways

Although you’ll find plenty of other foreign jurisdictions that offer offshore trusts, Cook Islands trusts remain the most formidable and secure asset protection vehicle in the world. These trusts have been tested countless times in court and have held strong.