Asset Protection Trusts

The modern world is highly litigious, and increasingly creditors are receiving disproportionate judgments from the courts. People who have worked hard for their entire life are in danger of having their life savings wiped out by spurious litigation. Liability insurance for professionals is becoming prohibitively expensive.

An offshore asset protection trust (APT) provides the highest level of security for personal assets. Those who most benefit from an APT include persons in high-risk occupations (such as physicians and lawyers), business vendors (particularly those close to retirement), those with a high wealth profile, directors of public companies, and almost anyone who has saved a significant nest egg for their retirement.

The Cook Islands is recognised as the world leader in formation of asset protection trusts. Cook Islands law contains a number of unique features that make the operation of an asset protection trust administratively friendly and highly protective.

There are four main features of Cook Islands law that provide effective barriers to creditors attacking an International Trust:

Practical Barriers – including instructing local counsel, appearing in local Courts, absence of contingency fee lawyers.

No Enforcement of Foreign Judgments – Cook Islands courts will not recognise or give effect to certain judgments of foreign courts in relation to International Trusts.

Barriers to claims for fraudulent transfer being brought in a Cook Is court – include strict time limits, requirement of proof of fraud beyond a reasonable doubt (criminal standard), and no bankruptcy law.

Procedural law – prevents ‘fishing expeditions’ by creditors, restricting the use of interrogatories (discovery, etc).

Forming an Asset Protection Trust

If you have over $100,000 in liquid funds to protect then you may wish to immediately create a Protected Fund Investment Trust.

US clients will be interested in a summary of the typical APT structures established for US persons.

For a more in depth analysis of the technical aspects of Cook Islands law download our article on the Practical Barriers to Litigation in the Cook Islands.

For full details on the establishment of an Asset Protection Trust please contact us or download our FAQs for more information.