Saturday, April 13

How to Properly Set Up a Cook Islands Trust

Establishing a Cook Islands trust requires several steps, generally done with the assistance of an attorney specializing in offshore trusts. You can also seek the advice of financial advisors and wealth solutions firms such as Ora Partners Limited or J.P. Morgan Chase to establish offshore trusts properly.

Here’s a step-by-step guide:

Choose a Trustee Company. Choosing a trustee company is the first step in the Cook Islands trust formation. The trustee you choose must be a licensed trust company in the Cook Islands.

Background Check. An attorney will assist an individual in completing the trust application. The trust company will need to know the source of the wealth being used to fund the trust.

Prepare Trust Agreement. An attorney will draft the trust agreement. This document outlines the terms, conditions, and provisions of the trust. It identifies the settlor (the person creating the trust), the beneficiaries (the individuals who will benefit from the trust), and the trustee.

Decide on a Protector. Appointing a trust protector is optional. A trust protector is an institution or individual given powers over the trust. A trust protector strengthens the trust’s asset protection. The trust protector must not be located in the United States.

Transfer Assets. Once the trust is registered, the trustee will help to transfer assets into the trust. These can include cash, securities, or business interests.

Here’s an example of the Cook Islands Trust Formation

Steve, a real estate developer in the US, is concerned about the potential for creditor claims arising from his line of work. After speaking with a legal advisor, Steve decides to set up a Cook Islands trust.

Steve transfers a portion of his assets into the trust, which includes various securities and cash. He names himself as a beneficiary. Upon his death, his spouse and children will become the successor beneficiaries.

A year later, John is hit with a lawsuit from several construction companies claiming breach of contract. They also demand a significant amount in damages. Even if the lawsuit succeeds, Steve’s assets in the Cook Islands trust are out of the creditor’s reach. It ensures his assets remain intact.

Who Is Involved in a Cook Islands Trust?

A Cook Islands trust typically involves third parties serving as settlors, trustees, beneficiaries, and trust protectors.

The settlor is the person who sets up the trust by transferring assets to it.

The trustee is the person or corporation in the Cook Islands that manages the trust assets according to the terms and conditions of the trust deed. Under the Cook Islands law, the trustee is bound to act in the best interests of the settlor and the beneficiaries. The trustee must have no beneficial interest in trust assets.

The beneficiaries are individuals that receive the benefit of the trust. The settlor can also be the primary or only beneficiary. If creditors sue for money, the trustee must withhold beneficiary distributions until the trustee decides that any distribution made would only benefit the beneficiary.

The settlor can choose to appoint a trust protector. The trust protector has the power to change trustees or direct the investment of trust assets.