Cook Islands Trust vs Nevis Trust

The Cook Islands and Nevis are the two offshore jurisdictions most frequently used by U.S. clients for asset protection trusts. Both enacted dedicated trust legislation (the Cook Islands in 1984, Nevis in 1994) and both have statutory frameworks designed to resist creditor collection efforts originating in foreign courts. The question for most clients is not whether either jurisdiction works, but which one works better for their particular circumstances.

This article compares the two jurisdictions across the dimensions that matter most in practice: statutory protections, litigation track records, trustee markets, cost, and the practical considerations that arise during trust administration and under legal pressure.

Legislative History and Jurisdiction Overview

The Cook Islands enacted the International Trusts Act (ITA) in 1984, becoming one of the first jurisdictions in the world to adopt legislation specifically designed to protect trust assets from foreign creditor claims. The Cook Islands is a self-governing territory in free association with New Zealand, located in the South Pacific. Its legal system is based on English common law, and its High Court is presided over by retired New Zealand judges. Appeals ultimately reach the Privy Council in London.

Nevis enacted the Nevis International Exempt Trust Ordinance (NIETO) in 1994, a decade after the Cook Islands. Nevis is part of the Federation of Saint Kitts and Nevis, a small Caribbean island nation in the Lesser Antilles. Its legal system is also rooted in English common law, with appeals reaching the Eastern Caribbean Supreme Court and ultimately the Privy Council. The NIETO was modeled in significant part on the Cook Islands ITA, and the two statutes share many structural features.

The ten-year head start matters. The Cook Islands has had four decades of experience administering asset protection trusts and handling the legal disputes that arise when creditors attempt to reach trust assets. Nevis has approximately three decades. That difference shows most clearly in the volume of reported case law, the depth of the trustee industry, and the level of international familiarity among U.S. courts and creditor attorneys with each jurisdiction’s framework.

Burden of Proof and Fraudulent Transfer Standards

Both jurisdictions require creditors to prove that a transfer to the trust constituted a fraudulent disposition, and both apply the beyond-reasonable-doubt standard, a criminal-law standard of proof that is significantly higher than the preponderance-of-evidence standard used in U.S. civil litigation. This is the most important shared feature of the two jurisdictions and the primary reason both are considered substantially stronger than domestic asset protection trusts.

Under Cook Islands law (ITA section 13B), a creditor must prove beyond reasonable doubt that the settlor transferred assets to the trust with the intent to defraud that specific creditor, and that the transfer rendered the settlor unable to pay that creditor’s claim from remaining assets. The burden is on the creditor to prove both elements.

NIETO imposes an equivalent standard. The creditor must establish beyond reasonable doubt that the trust was settled or the disposition was made with the principal intent to defraud that creditor. Nevis also requires that the creditor show, with clear and convincing evidence, that the settlor was rendered unable to pay the creditor’s claim from remaining assets.

The practical difference here is minimal. Both jurisdictions impose a standard of proof that makes successful fraudulent transfer challenges extremely difficult, particularly when the trust was established before any claim arose.

Statute of Limitations

Both jurisdictions impose short limitation periods for fraudulent transfer claims, but the details differ.

Under the Cook Islands ITA (section 13B(3)), a creditor may bring proceedings only if the disputed transfer occurred within two years of the creditor’s cause of action accruing, and only if the creditor commenced proceedings in relation to that cause of action in any court within one year of the disputed transfer. This second requirement, that the creditor must have already initiated litigation within one year of the transfer, is a nuance that many competitors’ articles omit. It means that a creditor who has an existing cause of action but has not yet filed suit at the time assets are transferred has a narrower window than the two-year period alone suggests.

Importantly, section 13B(3) of the ITA does not apply where the creditor has already commenced proceedings in respect of their cause of action at the date of the disputed transfer. In that situation, the transfer can be challenged regardless of the limitation period, though the creditor must still meet the beyond-reasonable-doubt standard.

Under NIETO, the limitation framework operates somewhat differently. If the trust is settled or the disposition occurs after the creditor’s cause of action has accrued, the creditor must commence proceedings within one year from the date of settlement or disposition. If the trust is settled or the disposition occurs before the creditor’s cause of action accrues, meaning the transfer predates any claim, the transfer cannot be deemed fraudulent at all.

The practical effect is that both jurisdictions provide strong time-based protections, but the Cook Islands framework includes a more detailed set of rules addressing transfers made after claims have already arisen. For clients establishing trusts before any litigation exists, both jurisdictions are equally protective. For clients transferring assets after a cause of action has accrued but before litigation has been filed, the interaction between the one-year and two-year provisions under the ITA requires careful analysis.

Bond Requirement

This is the most frequently cited difference between the two jurisdictions. Nevis requires creditors to post a bond of US $100,000 (equivalent to $270,000 Eastern Caribbean Dollars under the statute) with the Ministry of Finance before commencing any action or proceeding against trust property. The bond secures payment of all costs that may become payable by the creditor if the action is unsuccessful. If the creditor loses, the bond may be forfeited.

The Cook Islands has no equivalent bond requirement. Consideration has been given to introducing one, but as of this writing it has not been implemented.

The bond is often presented by Nevis proponents as a decisive advantage. It does create a financial barrier that deters low-value or speculative claims. A creditor with a $200,000 judgment may not be willing to post $100,000 in cash just to initiate proceedings in Nevis, particularly when the beyond-reasonable-doubt standard makes success uncertain.

However, the bond’s practical significance diminishes as the claim size increases. A creditor pursuing a multimillion-dollar judgment will not be deterred by a $100,000 posting requirement. For the types of claims that most commonly prompt asset protection planning, including large malpractice judgments, business disputes, and divorce-related claims, the bond is a speed bump, not a roadblock. The statutory protections, burden of proof, and litigation track record matter more than the bond in high-value disputes.

Non-Recognition of Foreign Judgments

Both jurisdictions refuse to recognize or enforce foreign court judgments against trust assets. A creditor who obtains a judgment in a U.S. court cannot register that judgment in the Cook Islands or Nevis and execute against trust property. The creditor must instead commence new proceedings in the local court, prove the claim from scratch under local law, and meet the local burden of proof standard.

This is the core mechanism that makes offshore asset protection trusts effective. A U.S. judgment, by itself, has no legal force in either jurisdiction. The creditor must retain local counsel, navigate an unfamiliar legal system, and satisfy statutory requirements that are substantially more demanding than those the creditor faced in the U.S. proceeding.

Both jurisdictions also decline to recognize foreign judgments related to tax, revenue, or penal matters, which means that government tax claims and regulatory penalties cannot be enforced through either jurisdiction’s courts.

The practical difference between the two jurisdictions on this point is negligible. Both provide the same structural barrier.

Litigation Track Record

This is where the comparison becomes less symmetrical.

The Cook Islands has the most extensive litigation history of any offshore asset protection jurisdiction. Cook Islands trusts have been tested in numerous U.S. court proceedings over four decades. The key cases are well known among asset protection practitioners: FTC v. Affordable Media (the Anderson case), where the trustee maintained its position despite the court holding the grantors in contempt; Lawrence v. Goldberg, where a divorce creditor was unable to defeat the trust; and the Bellinger litigation, where the court found the trust was not established with fraudulent intent and the grantor continued to benefit from distributions during proceedings. These cases are discussed in detail in the Cook Islands trust case law article.

The litigation history serves two functions. First, it confirms that the statutory framework operates as intended under real adversarial pressure: that Cook Islands trustees actually refuse to comply with foreign court orders, and that Cook Islands courts actually apply the beyond-reasonable-doubt standard. Second, it creates a body of precedent that allows attorneys advising both debtors and creditors to predict with reasonable confidence how disputes will unfold. Predictability benefits the client because creditor counsel, evaluating the cost and likelihood of success, may advise against pursuing trust assets.

Nevis has a growing but substantially thinner litigation track record. Nevis trusts have been involved in U.S. proceedings with generally favorable outcomes, but the volume of reported cases is significantly lower. The shorter operational history means fewer opportunities for creditor challenges and less developed case law. Nevis proponents argue that the absence of adverse case law is itself a positive indicator, that the statutory protections are strong enough to discourage challenges before they reach the litigation stage.

That argument has some merit, but it does not eliminate the uncertainty that comes with a less-tested framework. When a creditor’s attorney evaluates whether to pursue assets in a Cook Islands trust, they can point to decades of case law that consistently shows the effort is expensive and unlikely to succeed. When the same attorney evaluates a Nevis trust, the analysis is less certain because there is less data.

Trustee Requirements and Market

The Cook Islands requires every trust to have a trustee licensed by the Cook Islands Financial Supervisory Commission (FSC). Only seven companies currently hold FSC trustee licenses. These companies must satisfy capitalization requirements, maintain professional indemnity insurance, and submit to ongoing regulatory oversight. It is a criminal offense for any unlicensed entity to conduct trustee business in the Cook Islands. The trust companies overview profiles each licensed company, and the licensing requirements article explains the regulatory framework.

Nevis allows a broader range of entities to serve as trustee. Under NIETO, the trustee must be a Nevis corporation, a Nevis LLC, a licensed trust company, a licensed attorney-at-law, or a multiform foundation. This means a private trust company formed by the client’s family or advisors can serve as trustee without holding a full trust company license. The regulatory requirements for such entities are lighter than what the Cook Islands imposes on its licensed trustee companies.

The flexibility of the Nevis model appeals to clients who want more direct influence over trust administration. A client who forms a Nevis corporation to serve as trustee can select the corporation’s directors and exercise more practical control over the trust’s day-to-day operations.

The Cook Islands model sacrifices that flexibility in exchange for regulatory consistency. Every trustee in the Cook Islands operates under the same licensing regime, has passed the same fit-and-proper-person assessments, and is subject to the same ongoing FSC supervision. The regulatory comparison article discusses how this model compares to trustee oversight in other jurisdictions.

The tradeoff is real. Clients who value flexibility and lower administrative costs may prefer Nevis. Clients who value a deep regulatory infrastructure, and who want the credibility that comes with a licensed, government-supervised trustee resisting a foreign court order, may prefer the Cook Islands.

Trust Duration

NIETO originally set the maximum duration of an international trust at 100 years, though amendments have since removed this limitation. Cook Islands trusts have no statutory limitation on duration. Both jurisdictions now effectively permit perpetual trusts, though the trust deed must be drafted accordingly. For estate planning purposes, this distinction is no longer material.

Mareva Injunctions and Asset Freezing

Nevis has statutorily abolished the Mareva injunction—a court order that freezes trust assets during litigation. Under NIETO, no order may be granted that would have the effect of preventing the exercise of rights under the trust or freezing trust property during proceedings. This means a creditor cannot obtain an interim order to prevent the trustee from moving or distributing assets while the case is pending.

The Cook Islands does not have the same express statutory abolition of Mareva injunctions, though in practice Cook Islands courts have not granted such orders against international trusts in reported cases. The practical significance of the Nevis provision is that it removes any ambiguity about whether a court could freeze assets during litigation, which provides additional comfort to clients and trustees during active disputes.

This is a genuine structural advantage for Nevis. It means that even if a creditor meets the threshold requirements to commence proceedings (including posting the bond), the trustee can continue to administer, invest, and distribute trust assets during the pendency of the case. The trust does not become a frozen, unusable structure simply because someone has filed a claim.

Offshore LLC Structures

Both Cook Islands trusts and Nevis trusts commonly own a Nevis LLC as part of the overall structure. The trust holds ownership of the LLC, and the LLC holds the financial assets—bank accounts, brokerage accounts, and other investments. The settlor typically serves as LLC manager with signatory authority over the accounts until litigation arises, at which point management shifts to the foreign trustee.

The Nevis LLC adds a structural layer because it carries its own creditor protections under the Nevis Limited Liability Company Ordinance, including charging order limitations and provisions that make it difficult for creditors to reach LLC assets directly. A creditor pursuing trust assets must contend with both the trust’s statutory protections and the LLC’s separate statutory framework.

This structural feature is not a point of differentiation between the two jurisdictions. A Cook Islands trust and a Nevis trust can both own a Nevis LLC, and in practice both frequently do. The LLC serves the same administrative and protective function regardless of where the trust is sitused. The Cook Islands trust vs. Nevis LLC article compares trust-based and LLC-based approaches to offshore asset protection for clients evaluating which vehicle best fits their circumstances.

Cost

Nevis trusts are generally less expensive to establish and maintain than Cook Islands trusts. Formation costs for a Nevis trust typically range from $10,000 to $15,000 in legal fees, with annual trustee fees in the range of $2,000 to $5,000. Cook Islands trusts typically require $15,000 to $20,000 in legal fees for formation, with annual trustee fees of approximately $5,000. The specific costs for Cook Islands trusts are detailed in the costs article.

The cost difference reflects several factors: the Cook Islands’ licensed trustee companies carry higher overhead due to regulatory compliance, insurance mandates, and capitalization requirements. Nevis’s more permissive trustee market allows lower-cost structures, particularly when the trustee is a private company rather than a full-service trust firm.

Cost alone should not determine the jurisdictional choice. The cost difference between the two jurisdictions is typically $5,000 to $10,000 over the first year and $2,000 to $3,000 annually thereafter. These amounts are small relative to the value of the assets being protected and the litigation exposure the trust is designed to address.

U.S. Compliance Obligations

Both jurisdictions trigger the same U.S. tax and information reporting obligations. A U.S. person who establishes a Cook Islands trust or a Nevis trust must file the same federal forms: Form 3520, Form 3520-A, FBAR (FinCEN Form 114), and Form 8938. Both structures are typically treated as foreign grantor trusts for U.S. tax purposes, with all income and gains flowing through to the grantor’s individual return.

There is no compliance advantage or disadvantage to choosing one jurisdiction over the other. The reporting burden is identical. The penalties for noncompliance are the same regardless of where the trust is located. A detailed overview of these requirements appears in the compliance hub.

Privacy and Confidentiality

Both jurisdictions provide strong confidentiality protections. Neither requires public filing of trust deeds or disclosure of beneficiary information. Trustees in both jurisdictions are prohibited from disclosing trust information without proper authorization.

Nevis has a slight edge in statutory privacy provisions. The Confidential Relationships Act makes unauthorized disclosure of trust information a criminal offense, and non-criminal proceedings involving trusts are held in camera (privately) by default. The Cook Islands also maintains strong confidentiality standards, but the statutory framework is somewhat less explicit on the point.

In practice, the privacy difference is unlikely to be decisive. Both jurisdictions provide substantially greater confidentiality than domestic trusts, and neither jurisdiction’s privacy protections will prevent disclosure to the IRS under U.S. reporting requirements.

Self-Settled Trust Provisions

Both jurisdictions permit self-settled trusts—trusts where the settlor is also a beneficiary. This is a critical feature for asset protection planning because it allows the client to establish the trust, fund it with assets, and remain entitled to distributions during their lifetime.

NIETO expressly provides that the settlor or trustee of a trust may also be a beneficiary (Section 32(4)). The Cook Islands ITA similarly permits the settlor to be a beneficiary and includes provisions ensuring that this arrangement does not, by itself, render the trust vulnerable to creditor claims.

Both jurisdictions also provide that a discretionary interest, where distributions are at the trustee’s discretion, cannot be directly reached by a beneficiary’s creditors. A creditor cannot compel distributions that the trustee has discretion to withhold.

When Each Jurisdiction Is Typically Selected

The choice between Cook Islands and Nevis depends on which factors the client prioritizes.

Clients who prioritize the deepest available litigation track record, the most tightly regulated trustee market, and the jurisdiction with the longest history of successfully defended challenges tend to select the Cook Islands. This is particularly true for clients with high-value exposure—litigation involving millions of dollars, complex business disputes, or contentious divorce proceedings where the opposing party is well-funded and represented by experienced counsel. In those situations, the certainty that comes from four decades of case law and a well-known statutory framework provides meaningful value.

Clients who prioritize lower cost, greater structural flexibility, the availability of the Nevis LLC as a complementary vehicle, and the additional barrier of the bond requirement may prefer Nevis. Nevis is often selected when the client’s asset level or risk profile does not justify the higher cost of a Cook Islands structure, or when the client prefers the additional control that comes with Nevis’s more permissive trustee arrangements.

Neither jurisdiction is objectively superior for every client. Both provide protections that are dramatically stronger than any domestic asset protection trust. The difference between a Cook Islands trust and a Nevis trust is substantially smaller than the difference between either offshore trust and a domestic trust in Nevada, Delaware, or any other U.S. state. The comparison of Cook Islands trusts to domestic asset protection trusts explains that distinction in detail.

The jurisdictional choice should be made in consultation with experienced offshore planning counsel who can evaluate specific circumstances, asset types, risk profiles, and timing considerations. For comprehensive information about Cook Islands trust structure, formation, and administration, return to the Cook Islands trust overview.