Why the Cook Islands
The Cook Islands is a self-governing island nation in the South Pacific, in free association with New Zealand. In 1984 it enacted the International Trusts Act, one of the first statutes written specifically to protect trust assets from foreign creditors. Repeated amendments since then have made it one of the most creditor-resistant trust laws in the world.
Key protections
- U.S. judgments are not recognized. A creditor must bring a new case in the Cook Islands High Court, with local counsel, under Cook Islands law.
- Short limitation periods. A transfer generally cannot be challenged if the creditor's cause of action arose after the transfer, or more than two years before it. When the claim arose within the two years before the transfer, the creditor must sue in the Cook Islands within one year of the transfer.
- Beyond reasonable doubt. The creditor must prove, to the criminal standard, that the transfer was made with the principal intent to defraud that specific creditor and left the settlor insolvent.
- Practical barriers. Contingency-fee litigation is not available, and courts may require security for costs. Few plaintiffs' firms are willing to finance that fight.
A track record in U.S. courts
Because it has been used for so long, the Cook Islands trust has been tested in U.S. litigation more than any other. In the well-known contempt cases, the trust assets were not handed over. But settlors who funded their trusts after claims arose, or who kept control, faced personal sanctions. The takeaway is consistent: a Cook Islands trust is powerful when it is funded early, with an independent trustee and protector, by a solvent settlor.
Pairing the trust with an LLC
Most Cook Islands trusts we design own an LLC, either a domestic LLC or an offshore LLC (such as a Nevis or Cook Islands LLC). The licensed Cook Islands trustee manages the LLC and its accounts, and can work with an investment advisor you name. The right LLC depends on what you own, where you live, and how much reporting you're comfortable with. We walk through the options and their tax filings with you.
Is the Cook Islands always the answer?
Not always. Some clients prefer Nevis for its creditor bond requirement, or a combination of jurisdictions. We evaluate the trustee options, cost, and your specific risks before recommending a jurisdiction. Compare Nevis →