Cook Islands Trusts

WHAT IS A COOK ISLANDS INTERNATIONAL TRUST?

A Cook Islands International Trust is a trust established under the laws of the Cook Islands with a Cook Islands licensed trustee company as the trustee and beneficiaries who are not residents of the Cook Islands.

Trust law is an integral part of Cook Islands law which is derived from English principles of common law and equity.

To obtain the wealth preservation benefits offered by the ITA, an International Trust must be registered with the Cook Islands Registrar of International Trusts.

WEALTH PRESERVATION ADVANTAGES OF AN INTERNATIONAL TRUST

Trusts have been commonly used in common law jurisdictions as wealth preservation vehicles to protect family wealth from litigation arising from the failure of business ventures, extravagance of family members and other misfortunes.

In 1999, the ITA was substantially amended to specifically provide certainty to settlors of trusts whose goals in establishing an international structure include a measure of wealth preservation. Since 1999, the ITA has been progressively amended to ensure that the wealth preservation features of the legislation continue to keep pace with changes in the law.

Some of the wealth preservation advantages offered by the ITA are:

• Certainty in relation to the time limitation periods in which creditors must commence actions in relation to “fraudulent transfers” by settlors of international trusts. In summary, a creditor must commence an action against a settlor within 12 months of the date of transfer of assets to the trust and against the trustee within 24 months of the date of transfer of assets to the trust, in order to have standing to argue a fraudulent transfer by the settlor.

• The creditor bears the onus of proof to show that a transfer by a settlor was done with intent to defraud creditors. The creditor must satisfy this onus of proof to a standard of “beyond reasonable doubt”.

• Judgments obtained in a court other than the Cook Islands High Court cannot be enforced against the trustee, settlor, beneficiaries or protector of an International Trust.

• An International Trust will continue to exist notwithstanding that the settlor of the trust may be declared bankrupt.

• In the event that a creditor is successful in arguing that a transfer to a trust was done with intent to defraud creditors, the only remedy available to the creditor is an award of damages from the trust fund.

• Punitive damages cannot be recovered from an International Trust.

• The avoidance of forced heirship rights in the home jurisdiction of the settlor will not render an International Trust void or voidable.
  
  
• Special purpose domestic or offshore entities can be placed underneath the International Trust and take advantage of the wealth preservation features offered by ITA.

TRANSFER OF DOMICILE

It is possible to transfer the domicile of an existing trust to the Cook Islands and, in certain circumstances, obtain retrospective protection back to the date of the original transfer of assets to the trust.

In summary, the Cook Islands International Trust is an excellent structure for a client who is seeking an international investment vehicle offering a substantial level of wealth preservation. The Cook Islands is an English common law jurisdiction which is well regulated and has an effective court system.