Asset Protection Trust is a trust established in an offshore jurisdiction, a country which is outside the principal residence of the asset owner, with laws enacted to protect the underlying assets of the trust transferred from the asset owner (also referred to as depositor, settlor or grantor) from any potential claim. It is a type of irrevocable trust to which the titles of the assets are transferred, and a trustee will manage the assets on behalf of named beneficiary(s).
Many countries offer the convenience of forming offshore trusts. However, only a few provide sound asset protection statute. The Cook Islands is the first to incorporate the features of asset protection in its trust legislation, and is recognized as the world leader in formation of Asset Protection Trust.
| COOK ISLANDS vs BRITISH VIRGIN ISLANDS | ||
| Trust Jurisdiction | Cook Islands (“CI”) | British Virgin Islands (“BVI”) |
| Perpetuity | Perpetual | 360 years |
| Residency Requirement of Beneficiary | Beneficiary must be non-resident | No specific requirement |
| Application of Saunders v Vautier Rule (i.e. Beneficiary’s Right to Request to Terminate the Trust and to Distribute the Assets (*Note 2) | Not applicable | Not applicable for a 20-year period |
| Protection of Settlor | Settlor can be Beneficiary of the trust | Settlor cannot be Beneficiary of the trust. Settlor can only be the director of underlying BVI holding |
| Protection from Creditors | a) Trust will not be invalid for fraudulent transfer b) Creditor must prove on fraudulent transfer c) Strict statutory time limit on fraudulent transfer action brought by creditor |
a) Trust will not be invalid for fraudulent transfer b) Creditor must prove on fraudulent transfer |
| Stamp Duty for Trust Agreements | Not applicable | US$200 |
*Notes
1) For comparison purpose
- Trust in CI refers to the Cook Islands International Trusts formed under The Cook Islands International Trusts Act.
- Trust in BVI refers to VISTA Trust in BVI.
2) Beneficiary refers to all beneficiaries who are adult and of sound mind.