What Is the Best Offshore Trust Country?

An offshore trust is an irrevocable trust formed under the laws of a foreign country to protect assets from U.S. creditors. Offshore trusts are considered the premier asset protection tool, making it very difficult for a U.S. creditor to collect.

The Cook Islands is the best offshore trust jurisdiction for most people. The Cook Islands offers a combination of statutory and common law features that provide certainty and security that other offshore trust jurisdictions may lack. Cook Islands statutes are straightforward, predictable, and effective. They allow enforceability of the trust agreement terms.

Here are the specific advantages that set the Cook Islands apart from other countries when it comes to offshore trusts:

  1. Pioneering Asset Protection: The Cook Islands was among the first jurisdictions to implement modern asset protection trust legislation with its International Trusts Act in 1984. This legislation offers strong barriers against creditors.
  2. Strong Legal Barriers for Creditors: The Cook Islands places significant obstacles in the way of foreign creditors. To challenge a Cook Islands trust, a creditor must:
    • Bring their claims to a Cook Islands court.
    • Prove “beyond a reasonable doubt” (a very high standard) that the trust was established to defraud that particular creditor.
    • Act within a limited timeframe. Once the trust is established, there’s a narrow window during which claims can be made against the trust’s assets.
  3. No Recognition of Foreign Judgments: The Cook Islands does not automatically recognize foreign judgments, meaning a creditor who obtains a judgment in another country would need to litigate their claim anew in the Cook Islands, facing the abovementioned challenges.
  4. Flexibility in Trust Structuring: Trusts in the Cook Islands can have a variety of purposes and structures, including discretionary trusts, charitable trusts, and purpose trusts.
  5. Confidentiality: The Cook Islands provides privacy for trust settlors and beneficiaries. Trust details are not part of the public record.
  6. Stable Political and Legal Environment: The Cook Islands features a stable political climate and a legal system based on English common law.
  7. Self-Settled Trusts: Unlike some jurisdictions, the Cook Islands allows for self-settled trusts, where the settlor can also be a discretionary beneficiary.
  8. Duress Protection: The Cook Islands offers provisions to protect trust assets in cases where the settlor is under duress. For example, suppose a judgment debtor is compelled by a U.S. court to instruct the Cook Islands trustee to transfer assets back to the United States. In this situation, the Cook Islands trustee would be prohibited from complying.

In some situations, other countries may be a better fit. In particular, a person with a money judgment entered against themselves will find it difficult to establish a Cook Islands trust. Forming a trust in Hungary may be a more appropriate solution in those cases.

About the Author

Gideon Alper has over a decade of experience providing asset protection planning. He has helped thousands of clients protect their assets from creditors. Read more.

Gideon Alper

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