Features of the Cook Islands Legislation

Features of the Cook Islands Legislation Include:

  1. An international trust will not be void or voidable as a consequence of the settlor’s bankruptcy, notwithstanding any law to the contrary in the settlor’s domestic jurisdiction.
  2. If a creditor establishes that an international trust was settled with the principal intent of defrauding a creditor and such settlement rendered the settlor insolvent or without property by which the creditor’s claim could be satisfied, the settlement shall not be void or voidable but the trust shall be liable to satisfy that creditor’s claim from trust property which was the subject of such settlement.
  3. Generally foreign judgements cannot be entered against an international trust in the Cook Islands.
  4. An international trust shall not be fraudulent against a creditor or the settlor if:

(a) The transfer of property takes place more than two years after the date upon which the creditor’s cause of action arose; or

(b) Such a transfer takes place within two years from the date of the cause of action accruing to that creditor and the creditor fails to bring that action within one year from the date of such transfer.

  1. The settlor may retain certain powers and benefits without invalidating the trust.
  2. The interest of a “spendthrift” beneficiary in an international trust may not be alienated by a creditor.
  3. The avoidance of forced heirship rights shall not render an international trust void or voidable.
  4. A trustee may delegate its functions, discretion’s and powers (other than dispositive powers) beyond the general common law rule on delegation.
  5. Co-trustees may make valid decisions as a majority rather than unanimously. Title to trust property may be held by a single co.-trustee.
  6. The settlor, beneficiaries and the international trust are not subject to any form of taxation in the Cook Islands. It is important to note that whilst the legislation allows such flexibility, the provisions outlined in 5. – 9. above do not apply unless specifically adopted in the trust document.

It will be apparent that the Cook Islands constitutes an ideal legal environment for asset protection trusts whilst preserving commercial responsibilities to the creditors.

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