So you’ve set up an Offshore Asset Protection Trust in the Cook Islands and transferred all of your liquid assets to the Trust.
A creditor (let’s say the Canada Revenue Agency) brings an application in a Canadian court to have the trust declared invalid and the transfer of assets set aside on the basis that it was a “fraudulent conveyance” because it was done with the intention of avoiding creditors. The Canadian Court agrees with CRA and declares the trust invalid in Canada and orders you to take steps to dissolve the trust and bring the money back to Canada to pay your creditors.
What do you do? First of all, you should always comply with a Court Order. So you must make the request to your Trustee in the Cook Islands to comply with the Court Order. However, under Cook Islands law, before the Trustee can follow your request, he will require you to provide a sworn affidavit stating that you are not making the request under any circumstances of “duress”, such as a court order from a foreign court. Since you will not be able to provide that, the Trustee must refuse your request. The result is, you have complied with the Canadian Court’s order, but the CRA won’t be able to get your money because the Trustee is required to refuse your request.
For more information on Offshore Asset Protection Trusts click here