Cook Islands: The Cook Islands - The Offshore Trust Jurisdiction

The Cook Islands was the first offshore jurisdiction to enact legislation to specifically facilitate asset protection trusts through amendments to the International Trusts Act in 1989. Further amendments were enacted in 1991, 1994 and 1996. As a result the Cook Islands currently has the most modern international international trust legislation for the protection of assets. The Cook Islands international trust law is derived from English common law and equity but the International Trusts Act 1984 (as amended) ("The Act" ) has removed some of the problem areas of common law pertaining to trusts. For example, the modern rule against perpetuities has been abolished although a specific perpetuity period can be adopted if required.

The trustee(s), beneficiaries and settlor of an international trust are exempt from any form of taxation and duty in the Cook Islands.

The Cook Islands is the pre-eminent offshore jurisdiction for asset protection trusts. The Act incorporates innovative statutory provisions for the protection of assets, the protection of beneficiaries, and protection of the interests of the settlor. Features of that legislation include:

• abolition of the statute of Elizabeth ;
• foreign judgements cannot be enforced against a Cook Islands international trust ;
• an international trust is not invalidated as a consequence of the subsequent bankruptcy of the settlor
• a clear definition of what constitutes a fraudulent disposition for the purposes of Cook Islands trust law ;
• the existence of a fraudulent disposition does not invalidate the trust (the creditors claim is to be satisfied from the property transferred under the fraudulent disposition) ;
• the statute of limitations for a fraudulent transfer is two years from the date of the originating cause of action, however a creditor of the settlor must bring his action in the Cook Islands within one year from the date of such fraudulent transfer ;
• the settlor may retain certain powers and benefits without invalidating the the trust ;
• a creditor cannot alienate the interest of a "spendthrift" beneficiary in an international trust ;
• retroactive protection may be possible for trusts that migrate from other jurisdictions ;
• the avoidance of forced heirship rights does not render an international trust invalid.

The strength of the Cook Islands asset protection legislation is highlighted in our Comparison of Offshore Trust Jurisdictions which compares the features of the major offshore trust jurisdictions offering asset protection trusts.

The Cook Islands international trust legislation also facilitates the formation and administration of charitable trusts, non-charitable purpose trusts, life assurance trusts and pre-migration tax planning trusts. Other features of the legislation include :

• a clear definition of a Protector of an international trust and specific provisions pertaining to the role of the Protector ;
• specific provisions for the appointment and role of custodian trustees ;
• clear definition of charitable objects or purposes for a charitable trust ;
• statutory recognition of trusts established for non-charitable purposes.

Overall the Cook Islands International Trusts Act 1984 (as amended) creates a flexible tax effective environment in which the familiar English trust concept can be used for both tax planning and asset protection purposes.

In the Cook Islands we operate through Asiaciti Trust Pacific Limited which was formed and licensed as a trustee company in 1986. The Asiaciti Trust group legal counsel is based in this office. The Cook Islands is our principal offshore trust centre specializing in asset protection trusts, purpose trusts, life assurance trusts, other offshore trust structures and pre-migration planning for immigrants to Canada, New Zealand and the United States. Company formation and corporate secretarial services are also provided for Cook Islands international companies.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.