If you’re looking to protect your assets from lawsuits or creditors, the Cook Islands is one of the most “defendant friendly” places to set up an Asset Protection Trust, and a Cook Islands Trust provides some of the strongest asset protection in the world. In this article I discuss some of the hurdles that a creditor will face if they try to seize assets inside a Cook Islands Trust.
1. The Cook Islands courts do not recognize foreign judgement
If you get a judgement against you in a Canadian court, the Cook Islands courts will not recognize it. Creditor’s trying to seize assets inside a Cook Island Trust will have to incur the expense of travelling to the Cook Islands, hiring local Cook Islands lawyers, and commencing a lawsuit in the Cook Islands courts and re-litigating the claim there.
2. Limitation periods for bringing claims against the Cook Island Trust
If your assets are located outside of Canada in a Cook Island Trust, there are strict time limits (called limitation periods) for any creditor to commence legal proceedings against you or the Cook Island Trust.
If a creditor brings a claim outside of the times prescribed in the Cook Islands Statute of Limitations, then they are out of time and their claim will be dismissed.
First, any lawsuit commenced after two years from the date the assets are transferred into the Trust are not allowed and the assets are fully protected.
Secondly, if a plaintiff / creditor has a claim against you, and the assets were transferred into a Cook Islands Trust within two years of the cause if action accruing, then that plaintiff/ creditor must commence legal proceedings against you within one year from the date the assets were transferred into the Cook Islands Trust. A cause of action is the fact(s) or event(s) that give you a basis for suing in the first place. They will have then have to prove beyond a reasonable doubt that the assets were transferred to the Cook Islands trust with the “principal intent” to defraud that particular plaintiff/ creditor and that the transfer left you insolvent. This the criminal standard of proof and is very difficult to prove since there are many reasons that you may want to establish a Cook Islands Trust.
3. Protection of a wide range of assets
A Cook Islands Trust can be used to protect many kinds of assets. These can include cryptocurrency, cash in international bank accounts, stock portfolios, yachts, cars, real estate, insurance policies and intangible property such as intellectual property rights.
4. The ability to control your assets
A typical asset protection structure is that you set up an offshore LLC company with a bank account in Switzerland. You transfer assets to the LLC. You are named the initial manager of the LLC and the signatory on its bank account. The Cook Island Trust owns the LLC, and the Trust is managed by the Trustee. That way, you don’t legally own anything, the Trust does, but you have day-to-day control as the manager of the LLC. If a lawsuit is commenced against you, then the Trustee removes you as manager and becomes the manager of the LLC until the lawsuit is resolved. It’s a bit more complicated than that, but you get the idea.
5. There is no “21-year rule”
In Canada, family trusts created during someone’s lifetime are deemed to dispose of their property every 21 years. This can result in capital gains liability. A Cook Islands Trust can exist in perpetuity. This can provide for multi-generational wealth transfer and multi-generational wealth transfer. It also avoids probate fees in Canada.
6. Anonymity
The identity of the settlor and beneficiaries of a Cook Island Trust, or the assets or income of the Trust are not open to the public. This makes it difficult for a creditor to find out about you.
In Summary
While no Asset Protection Trust is “bullet proof”, the Cook Islands provides more obstacles for any potential creditor seeking to attack your assets than any other jurisdiction. This is why a Cook Islands Asset Protection Trust is regarded as the best Asset Protection Trust to protect your assets against lawsuits and creditors.
If you would like more information about setting up a Cook Islands Asset Protection Trust Click Here