Types of Trust in the Cook Islands

• Domestic Trust formed under Domestic Trust Law
  • It is a common law trust based on the British common law.
  • It is not required to be registered.

• International Trust formed under The Cook Islands International Trusts Act 1984 (“The Act”)
  • The Act applies to trust for non-resident beneficiaries.
  • Cook Islands trusts formed under the Act are primarily for Asset Protection purpose by US settlors. With increasing wealth in other countries such as China, the level of regulatory oversight imposed by local government has increased, and many countries are adopting US-style legislation to regulate the newly acquired wealth of its citizens. This resulted in increasing demand for the Cook Islands International Trusts established for wealth protection and preservation.

Germaco Ltd. provides services in the formation of Cook Islands International Trusts formed under The Act.

Key provisions in The Act relating to Asset Protection in the Cook Islands International Trusts

• Two years statute of limitation in which a creditor may bring an action of fraudulent transfer or conveyance against a trust.
• Non-recognition and non-enforcement of foreign judgments.
• Settlors may retain certain controls within their trust structure.
• Higher ‘beyond a reasonable doubt’ burden of proof.
• No punitive damages.
• Foreign bankruptcy is specifically excluded.

Features of the Cook Islands International Trusts

• The Cook Islands International Trusts are commonly used in business sectors that are easily subject to litigations, such as professionals facing malpractice lawsuits, entrepreneurs dealing with creditors and some who have been sued by the US Federal Government.
• Many features of the Cook Islands International Trusts must be formally adopted in the trust agreement. This ensures the clients a trust that best suits their personal or corporate circumstances, and makes the operation of the Asset Protection Trust administratively friendly and highly protective.
• The Cook Islands International Trusts are regulated by licensed Trustee Companies, who are independent trustees and fiduciary services business groups, which have been operating trust business for more than 20 years.
• Registration requirement
  • Registration of trust information limited to name of the trust, name of the trustees, and date of the trust instrument with the Registrar is required. But there is no requirement to file the trust document / instrument
  • No disclosure of Beneficiaries, Settlors, or any parties to the Trust
  • No accounting disclosure requirements
• The Cook Islands courts will not recognize or give effect to certain judgments of foreign courts in relation to the Cook Islands International Trusts.
• International banking services are available locally in the Cook Islands, but there is no requirement to use a particular bank in connection with the Cook Islands International Trusts.

• The Cook Islands International Trusts are tax neutral for the Settlor. The trust, trustee, and all parties to the trust are not subject to any form of taxation whatsoever in the Cook Islands.
• No foreign judgment can affect the Cook Islands International Trusts. The parties to or property thereof can only be entertained in a Court in the Cook Islands.
• Perpetuity Rule under Common Law applicable to trust is abolished. A Settlor can provide in the trust instrument to continue indefinitely, terminate on a specified date or terminate on the happening of a specified event.
• The Cook Islands International Trusts are neither void nor voidable in the event of the Settlor’s bankruptcy.
• No International Trust or disposition of property to an International Trust shall be void, voidable or defective by reason that such trust may avoid an heirship right held by a person in relation to the Settlor.

Formation of the Cook Islands International Trusts

Cook Islands International Trusts are very flexible structures, which varies greatly depending on the particular circumstances of the client. Trust structures are tailor made based on the clients’ particular needs and backgrounds.

Germaco Ltd. assists clients in the trust formation, conducts detail discussions with clients to understand their concerns and background information, and refers the right trust agent to the clients for the formation of the right trusts.