Cook Islands Trust Case Law: Litigation History

In the world of asset protection, marketing brochures often promise “bulletproof” protection. However, as a former attorney for the IRS Office of Chief Counsel, I prefer to look at how litigation plays out in the real world.

The true test of a Cook Islands trust is not what the statute says, but what happens when a Federal judge is screaming at a debtor, threatening jail time, and demanding the repatriation of assets.

By analyzing the main three cases—Anderson, Lawrence, and Rensin—we can see a clear pattern: the Cook Islands Trust structure has never been broken by a U.S. judge. However, the settlors (the people who created the trusts) have faced significant pressure. Understanding this history is the key to designing a structure that keeps your assets safe and keeps you out of jail.

Why 99% of Cases Never Reach Trial

Before examining the famous court battles about Cook Islands trusts, it is critical to understand the cases you don’t see.

For every Anderson case that makes headlines, there are thousands of cases where the plaintiff simply walks away. When a creditor realizes that your assets are in a Cook Islands trust, they face significant financial and legal barriers. To get your money, they must:

1. Hire a legal team in New Zealand or the Cook Islands.
2. Post a cash bond with the Cook Islands High Court.
3. Prove “Fraudulent Transfer” beyond a reasonable doubt (the criminal standard).
4. Do it all within the strict 1-to-2-year statute of limitations.

Faced with this economic reality, 99% of creditors settle for pennies on the dollar or abandon the claim entirely. The cases below represent the extreme minority. They are the rare scenarios where a creditor (usually the U.S. Government) refused to give up.

The “Anderson” Case (FTC v. Affordable Media)

The Case: Federal Trade Commission v. Affordable Media, LLC, 179 F.3d 1228 (9th Cir. 1999).

This is the most famous case in offshore asset protection history. It is often cited by critics as a “failure” because the Andersons went to jail. In reality, it is the ultimate proof of the trust’s power.

Michael and Denyse Anderson ran a telemarketing scheme that the FTC accused of being a Ponzi scheme. The Andersons had placed millions of dollars into a Cook Islands Trust. When the FTC sued, the U.S. District Court judge ordered the Andersons to bring the money back.

The Andersons faxed their Cook Islands Trustee, requesting the funds. The trustee, spotting the U.S. court order, invoked the duress clause in the trust deed. This clause stated that if the Settlor makes a request while under court compulsion, the trustee must ignore it and remove the Settlor as a co-trustee.

The Result:

The U.S. Judge did not believe the Andersons. He ruled that they created this “impossibility” and held them in civil contempt, jailing them for six months to force compliance.

Despite the Andersons sitting in a jail cell, the Cook Islands Trustee refused to release the funds. The Trustee argued that its duty was to the beneficiaries, not the U.S. court.

Eventually, the Andersons were released. The Trust remained intact. While the Andersons later settled with the FTC to stay out of prison for criminal charges, the civil asset protection structure successfully withstood the full power of the U.S. Federal Government.

Key Lesson: The “Anderson Risk” is real—you can be jailed for civil contempt if the judge believes you control the trust. However, the case proves that even under maximum pressure, the Cook Islands Trust cannot be pierced by a U.S. judge.

In re Lawrence: Reality of Civil Contempt

The Case: In re Lawrence, 279 F.3d 1294 (11th Cir. 2002).

If Anderson is the success story, Lawrence is the cautionary tale. It answers the question: “What is the worst-case scenario?”

Stephan Lawrence, a Bear Stearns derivatives trader, lost a massive arbitration judgment. He placed $7 million into a Mauritius Trust (structurally similar to a Cook Islands Trust). When the bankruptcy court ordered him to repatriate the money, he refused, claiming “Impossibility.”

The judge did not believe him. The court found that Lawrence had retained the power to appoint a new trustee and, therefore, had created his own “impossibility.” The judge held him in civil contempt.

Stephan Lawrence spent six years in federal prison for civil contempt.

Hidden Victory

Most articles stop there to scare you. But I want to direct you to what happened next.

Despite six years of imprisonment, the offshore trustee never turned over the money. The duress clause held firm.

Eventually, the court had to release Lawrence because the incarceration had lost its “coercive effect” (i.e., it was clear he could not or would not pay).

The creditors ultimately had to settle for a fraction of the original judgment.

Takeaway: Lawrence proves that a properly drafted offshore trust is structurally unbreakable. However, it also proves that if you retain “sloppy” powers (like the ability to fire trustees at will), a US judge may punish you personally. The goal of my firm is to structure your trust so you avoid the Lawrence prison cell, not just the asset seizure.

In re Rensin: Why Domestic Trusts Fail

The Case: In re Rensin, 600 B.R. 711 (Bankr. S.D. Fla. 2019).

This case is the holy grail for understanding why Domestic Asset Protection Trusts (DAPTs) are inferior to Cook Islands Trusts. It perfectly illustrates the conflict of laws issue I warned about earlier.

Joseph Rensin, a resident of Florida, had an offshore trust in Belize. He filed for bankruptcy in Florida. The bankruptcy trustee argued that because Rensin lived in Florida, Florida law should apply. Not Belize law.

The US Bankruptcy Court agreed with the creditor. It ruled that because Rensin was a Florida resident, Florida’s “public policy” against self-settled trusts overrode the trust’s choice of law.

If this had been a Nevada or Delaware DAPT, the game would have been over immediately. The US judge would have ordered the Nevada trustee to hand over the assets, and under the “Full Faith and Credit” clause of the U.S. Constitution, the Nevada trustee would have obeyed.

However. in the Resin case, becuase the Trustee was in Belize (outside US jurisdiction), the outcome was different.

The US judge ruled that the trust assets were part of the bankruptcy estate. But the judge admitted he had no power to force the Belize trustee to turn over the $13 million principal.

Rensin proves that “conflict of laws” will destroy a domestic trust. A US judge will simply apply your home state’s law and strip your protection. But with a Cook Islands trust, the US judge cannot enforce orders against a foreign trustee.

Impossibility Defense: How to Stay Out of Jail

The defining lesson from In re Lawrence is simple: you cannot fake impossibility.

If a U.S. judge believes you have the power to get the money back—even if you have to fire the trustee, appoint a new one, or amend the trust deed—they will hold you in contempt until you exercise that power. The “keys to your jail cell” must be genuinely out of your reach.

Proper Structuring

To ensure the “Impossibility Defense” stands up in court, we draft your trust with three specific “Fail-Safe” provisions that were absent or poorly executed in the Lawrence case:

1. The “Anti-Duress” Removal Clause: In Lawrence, the debtor went to jail because he retained the power to fire his trustee. We draft your trust so that your power to hire/fire trustees is automatically suspended the moment a duress event (like a lawsuit) occurs. You legally cannot fire the trustee to install a compliant one, even if the judge orders you to.
2. The Independent Protector: You can appoint a third-party “Trust Protector” (usually a Swiss or Nevis professional) who holds the veto power during litigation. When the judge asks, “Who can move these assets?” you can truthfully answer: “Not me. Only the Protector can, and they are outside your jurisdiction.”
3. Substance Over Form: In United States v. Grant, a trust was pierced because the settlor used the trust bank account like a personal ATM to pay for groceries and dry cleaning. We ensure your structure respects corporate formalities. You never touch the trust principal directly. You live off distributions paid to your domestic bank account. By treating the Trust as a distinct legal entity, we prevent the alter-ego attacks that destroyed the Grant trust.