The Cook Islands, a Pacific island nation 2000 miles Northeast of New Zealand, passed the International Trusts Act in 1984. This law created the first true Asset Protection Trust: A Self-Settled Spendthrift Trust which is statutorily prohibited from recognizing any foreign judgements or jurisdiction. Many countries followed suit, including Belize, Bahamas, Nevis, and Cayman Islands creating several Foreign Asset Protection Trust options.
For a creditor to extract assets from a Cook Islands trust, they must re-try the case from scratch in the island nation, an unfriendly jurisdiction for creditors.
Plaintiffs must hurdle the highest burden of proof of “beyond a reasonable doubt”, not the much weaker “by a preponderance of the evidence” prevalent in the U.S. There are no contingency fee attorneys allowed, requiring plaintiffs to pay legal fees and court costs up front, which include flying a judge in from New Zealand. Strict two-year statutes of limitations eliminate old claims. The loser of a case will likely pay their own legal expenses AND those of the winner.
The drawbacks, however, of an offshore trust include higher setup and maintenance costs and a heavier paperwork burden of IRS filings and federal disclosures. A Settlor must also be willing to relinquish control to a foreign trustee. There are also negative perceptions of impropriety that accompany offshore accounts, companies and trusts (although they are entirely legal and ethical).
For legally protecting assets offshore, a Cook Islands Asset Protection Trust stands at the top of the list.
Learn about the concepts of a Trust, Irrevocability, Spendthrift Provisions and much more.
5 Reasons Why the Bridge Trust® is Better than a Foreign Asset Protection Trust