You would need to have been living under a rock the past ten years to have not heard of this ubiquitous asset protection vehicle. However, there is quite a lot of mystique and myth around their formation. Subsequently, this article will attempt to dispel some of the myths and detail the real cost of a Cook Islands trust for you.

probably heard of domestic trusts, but did you know that you can place assets out of reach, offshore, and under someone else’s custody? That’s right, you can legally divorce yourself from the ownership of your assets whilst also retaining some control, and the beneficial use, of them.

In contrast to domestic trusts, offshore Asset Protection Trusts (APT) have been specifically created to hold, protect, and ensure that assets settled into them endure. Specifically, a trust is a common law agreement with someone that they will hold, and manage, assets placed in trust to the benefit of the listed beneficiaries.

That’s quite a word salad of legal terms but, in reality, the modern trust is a well-established instrument that allows you to give up ownership of your assets whilst still retaining the benefits of them. The person looking after the assets, the trustee, has a fiduciary obligation to manage them only in the interests of those listed beneficiaries.

The general idea is that because you no longer “own” the assets that they are placed outside the remit of a creditor. However, domestically this can break down as there are plenty of lawyers who specialize in breaking domestic trust structures. Subsequently, this is where an offshore asset protection trust comes in.

I once had a lawyer friend brag to me that he has broken every trust he has ever come across in a lawsuit. His smugness was overwhelming, but you should have seen the look on his face when I asked him whether he had ever beaten an offshore trust.

The reality is that the offshore asset protection trust is nearly impervious to creditors. In fact, just trying to commence legal action in a far away tropical island is enough to cause some lawsuits to settle for pennies on the dollar.

Many offshore jurisdictions have provisions for APTs and countries like Nevis, Belize, and the Cook Islands are at the forefront of trust law. There are varying degrees of protection depending on your jurisdiction of choice, and your threat profile, but here at OCBF we definitely lean towards the Cook Islands.

APTs Can Be Setup Remotely Without Visiting Rarotonga.The Cook Islands Trust is the gold standard in generalized asset protection strategies. This is primarily due to their long track record of court decisions upholding their inviolability. There has only been a single case of a trust there having been pierced and that was due to the settlor, trustee, beneficiary, and protector all being the same person thereby making it a sham.

In short, these setups are basically unbreakable, and you can rest assured that any legal challenge to them will be met with stony silence in a far away jurisdiction that is hard to commence action in. Additionally, the Cook Islands does not recognize foreign judgments and every case must be commenced fresh within their courts.

If you google the formation cost of setting one of these structures up, you will find a huge range of prices. This is especially the case in the U.S. where most local attorneys will charge upwards of US$20k for the formation and management of the trust establishment process.

Sure, US$20k isn’t a huge amount of money to do everything correctly with expert advice in place. However, you needed pay extortionate fees (IMHO) to get something setup for you, but you will need an expert to deal with the local Cook Island’s trust specialists. Without someone that knows the ins/outs of these trusts you could get left with nothing but a useless trust deed.

At OCBF, we charge approximately US$10k for the formation of an Asset Protection Trust (APT) and we work with you on every step of the process because there are quite a few questions and documents that the establishment attorneys will require.

Additionally, we are there to support you as the trust moves forward, and is operated, to ensure that everything runs smoothly and in compliance with best practice.

OCBF is also happy to act in the capacity of trustee and/or the protector in cases where you might want a completely independent party to manage the trust, or oversee the trustees, for you. This is something we do quite regularly for clients who might have heightened levels of risk. Not only are we experienced, and discrete but we can also guide you on what you might need to consider for the future.

This is something that we are asked quite regularly by clients and our standard answer is that you can be BUT you need to be careful that your trust is not seen as a sham. The best structure is one where you are neither the trustee nor protector so that courts can not compel you to undertake certain activities.

Additionally, unless you are experienced at operating a trust and complying with a whole range of international laws, then you should probably leave it to the experts. It should be noted that any trustees that you appoint as the settlor have a fiduciary obligation and you should additionally draft a trustee agreement to quantify your relationship.

An asset protection trust is an incredibly powerful and worthy additional to your overall offshore structure. Given the current global uncertainty, you would be crazy to not be looking at diversifying your holdings offshore and the Cook Islands APT is the perfect vehicle for this.

However, I would caution you to find yourself an expert in the field who is familiar with establishment of these structures because, otherwise, it is very easy to end up with something that is not fit for purpose.

Feel free to reach out to us here at OCBF for a confidential consultation on your circumstances and trust needs.