The Cook Islands are a group of Islands in the Pacific. They are independent but under the protection of New Zealand. The British Queen is their nominal head of state.
The super-rich have long been aware of the advantages of forming Cook Islands Trusts and Cook Islands Companies.
The main advantage of the Cook Islands is that they do not recognise foreign judgements.
If a creditor gets a judgement against you in Europe or the USA that means nothing in The Cook Islands.
Your pursuer would have to make a trip to the other side of the world and start the whole process over again.
That will make most creditors think twice about starting proceedings against a Cook Islands Trust.
If assets that have been gifted to the trust are disputed, perhaps because of a bankruptcy or divorce, the claimant has only 12 months to make a claim against the settlor of the trust and 2 years to make a claim against the trust.
After 2 years it’s impossible for any creditor to make a claim.
There are also provisions in The Cook Islands trust law to prevent distributions being made from the trust under duress.
If a court orders you to transfer money from the trust to satisfy a claim, that would be considered ‘under duress’ and the trustees would refuse to make the payment.
Even the US government, normally considered to have a wide reach has failed to grab money from Cook Islands trusts.
In legal filings, Fannie Mae, the US government backed lender admitted that it was only able to collect a paltry $12,000 on a $10 million judgement against an Oklahoma property developer.
Fannie Mae complained that the clear purpose of the trust was to frustrate legal efforts to collect on the judgement.
Trust clients have used Cook Islands trusts to protect yachts, classic cars and valuable art, as well as owning operating companies on behalf of high net worth families.
Another useful advantage of Cook Island trusts is the standard of proof required for creditors to seize assets.
In normal commercial litigation the standard of proof is on the balance of probabilities.
For Cook Islands trusts the standard is beyond reasonable doubt.
This is an almost impossible standard of proof in a commercial case and will stop most litigation before it gets started.
Punitive damages cannot be awarded against a Cook Islands Trust.
Cook Islands Trust law is quite possibly the most robust in the world.
I know of creditors who have settled lawsuits for paltry amounts rather than risk starting litigation in a far off jurisdiction when the odds are stacked heavily against them.
If you’d like to set up a Cook Islands Trust get in touch here: