An offshore trust is a legal tool that can be used to protect assets from creditors and lawsuits. Many legal experts consider the Cook Islands trusts to be the world’s best legal vehicle for financial privacy and asset protection. Lawsuits pose a significant threat to the assets of hard-working individuals. That’s why more and more people use offshore trusts from wealth solutions firms like Ora Partners Limited or Morgan Stanley as solid additions to their wealth management plans.
How do people use Cook Islands trusts
The primary use of a Cook Islands trust is asset protection from creditors and lawsuits. Here are some ways people use them:
- Divorce asset protection
- Protecting investments (bank account, stock market, etc.)
- Protecting assets after a lawsuit
- Protecting assets before marriage
- Protecting real estate with equity stripping arrangements
- Protecting business sales proceeds
- Estate planning & family legacy planning
How does a Cook Islands trust work?
A Cook Islands trust is not subject to taxation in its own jurisdiction. US citizens, however, must pay taxes back home, making the structure tax-neutral. Additionally, the settlor of the trust can choose who they want as the trustee.
Trust parties and their duties
Settlor – The settlor is the individual who establishes the trust.
Trustee – The trustee is the firm or person who manages the assets for the benefit of the beneficiaries.
How do you make a smooth transition when there’s a lawsuit filed against you? One safe way to do this is by creating a limited liability company (LLC), transferring your assets to the LLC, and then finally transferring the LLC to the offshore trust. This is a common strategy one could use when under legal pressure.
Custodian / Protector – Appointing a trust protector or custodian is optional. However, it adds an additional layer of protection. A trust protector may be useful when the trustee has to take over the LLC while the settlor is being sued. The custodian, who is typically a person the settlor trusts, can monitor, oversee, or control the administration of the trust. Some custodians also have the power to appoint trustees. They may veto any actions and decisions made by a trustee on behalf of the settlor. Many individuals choose not to appoint a custodian because they tend to slow down the process of withdrawing funds from the trust.
Beneficiary – The beneficiary is the individual or group of individuals for whom the trust is created. Usually, the beneficiaries of a trust are also the settlers and their family members.
According to the International Trusts Act of 1984, an international trust must meet two conditions. First, at least one trustee must either be a foreign company or a licensed trustee company in the Cook Islands. Second, the trust beneficiaries must not be residents of the Cook Islands.