Jurisdiction of Preference
Cook Islands – A stable democracy with modern infrastructure
- Constitutional Legal system: incorporating English common law, certain British and New Zealand statutes and customary laws
- Formally part of New Zealand Gained independence in 1964
- Highly respected New Zealand judges
- Competent professionals to provide backup services to offshore financial services industry
- Highly educated English speaking labor force
- No FX controls
- Boast the highest GDP per capita amongst the South Pacific small island nations
So why the Cook Islands?
Pioneering Trust laws:
- In the 1980s, the Cook Islands codified the concept of Asset Protection Trusts through the enactment of the International Trusts Act
- modifies certain common law trust principles, which were contrary to asset protection
Result:
- Considered the leading asset protection jurisdiction in the world
- Legislation has been copied by other jurisdictions
- Long track record and case-law that has provided certainty
Cook Islands International Trusts Act
- Foreign judgments NOT enforceable
- Self settled Trusts permitted
- Settlor permitted to retain powers and benefits in a trust
- Spendthrift provisions – an interest in trust property cannot be alienated or pass from the trust by bankruptcy of, or process of law relating to beneficiaries
- Bankruptcy – an International Trust is not void or voidable in the event of the Settlor’s bankruptcy
Cook Islands International Trust
- Trust can only be challenged on the grounds of a fraudulent transfer
- Comprehensive fraudulent transfer rules
- Limited time to commence action against trust
2 step test:
a) Did the transfer occur within two years of a cause of action arising, and if so;
b) were proceedings commenced in the Cook Islands within 1 year of the settlement or transfer to the Trust?
Test to establish Fraudulent Transfer:
- Must prove beyond reasonable doubt that the transfer was with the principal intent to defraud a specific creditor AND it rendered the Settlor unable to pay that creditor
- Fraudulent intent negated under circumstances in which such intent would almost certainly be found under USA fraudulent transfer/conveyance laws.
- Privacy is guaranteed
- Foreign process – a strong deterrent to creditors
- Security for costs
- Contingency fees not permitted
- Finding a lawyer that hasn’t already been conflicted by the trustee….
- Highly regulated jurisdiction; Trustee Companies subject to strict monitoring and supervision
- Professional Indemnity insurance is a pre-requisite for licensing
- No Cook Island tax on assets and income of offshore vehicles
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