Synopsis:
The Cook Islands International Trusts Act 1984 (as amended) ("the Act") creates a flexible tax effective environment in which the familiar English common law trust concept can be used for tax and estate planning and asset protection purposes.. An international trust is defined as a trust registered under the Act and in respect of which the beneficiaries are non-residents of the Cook Islands and one of the trustees is a licensed trustee company or a Cook Islands international company. All information pertaining to an international trust is confidential and subject to the secrecy provisions of the Act.
Exemption from taxation:
The trustee(s), beneficiaries, protector and settlor of a Cook Islands international trust are exempt from any form of taxation and duty in the Cook Islands.
Registration of an International Trust:
To be entitled to the benefits and protection provided by the Act an international trust must be registered in the Cook Islands. Application for registration is made by a licensed trustee company who must certify that the trust is an international trust as defined under the Act. No information need be provided other than the name of the trustee, the name of the trust and the date of the trust deed. There is no requirement to file the trust deed.
Unique features of the Act:
The legislation removes some of the difficult aspects of common law relating to trusts. The modern rule against perpetuities has been abolished although if desired the settlor may specify a perpetuity period in the trust deed. Where a perpetuity period is adopted the Act gives statutory effect to a "wait and see' period of a further 21 years. Other common law rules such as the rule against accumulations and double possibilities do not apply. The Act also allows the settlor to retain benefits and certain powers in respect of the property of an international trust without invalidating the trust.
Asset protection features:
The Act , as a consequence of amendments in 1989, 1991 and 1996, contains innovative statutory provisions for the protection of assets held under Cook Islands international trusts. The legislation overcomes specific common law problems to provide protection to settlors and beneficiaries from unwarranted claims against trust assets. Specifically the Act includes provisions that : prevent foreign judgments from being enforced against an international trust; give certainty to the definition of a fraudulent disposition (one or two year limitation); ensure that bankruptcy or fraudulent dispositions do not invalidate an international trust ; protect a trust transferred from another jurisdiction; prevent a beneficiary's interest being alienated by a creditor; and require a creditor to bring its action under Cook Islands law.
Full details are explained in our article on Asset Protection Trusts.
The content of this article is intended to provide general information on the subject matter. The reader should therefore obtain professional advice specific to their circumstances.
