The Cook Islands Trust Agreement

The trust agreement, called the trust deed in Cook Islands practice, is the governing document of a Cook Islands trust. It identifies the parties, grants the trustee its powers, names the beneficiaries, and establishes the rules under which the trust operates for its entire existence. Every other document in the structure derives its authority from the trust deed, including the letter of wishes and the LLC operating agreement.

A Cook Islands trust deed is not a form document. Trustee companies maintain templates that reflect standard Cook Islands practice, but each deed is negotiated and customized for the individual settlor. The provisions it contains determine how the trust responds to litigation, how distributions are made, who controls the trust when circumstances change, and whether the structure holds together under pressure.

What Is a Cook Islands Trust Deed?

A Cook Islands trust deed is a written agreement between the settlor (the person creating the trust) and a licensed Cook Islands trust company that will hold and manage the trust assets. Both parties execute the deed, typically with signatures witnessed and notarized, and the trustee then registers the trust with the Registrar of International Trusts. The deed itself is not filed and is not a public document. Cook Islands law makes it a criminal offense to disclose trust information to unauthorized parties.

The deed creates an irrevocable trust governed by Cook Islands law. Unlike a U.S. revocable trust, a Cook Islands asset protection trust cannot be unilaterally revoked by the settlor once executed. If the settlor could revoke the trust and reclaim the assets, a U.S. court could order exactly that, and the structure would collapse.

The Privy Council took the same view of a retained revocation power in TMSF v. Merrill Lynch ([2011] UKPC 17), on appeal from the Cayman Islands. A settlor who could revoke his trusts in his own favor, owing no fiduciary duty to anyone, had rights tantamount to ownership. The court held he could be ordered to delegate that power to receivers, who would then exercise it for his judgment creditor. About $24 million in cash sat in the companies those trusts owned.

Cook Islands law permits the deed to be executed by the settlor and trustee in different locations and at different times. The deed does not need to be signed in the Cook Islands. The settlor typically signs in the United States while the trustee signs in Rarotonga, with counterparts exchanged electronically.

What a Cook Islands Trust Deed Contains

A trust deed carries the provisions below, with links to the samples published here.

• Parties and recitals. The settlor, the trustee, and the nominal initial trust property.
• Governing law and forum. Cook Islands law, and exclusive Cook Islands jurisdiction.
• Beneficiaries and excluded persons. The class, the nature of each interest, and who may never hold one.
• Protective provisions. The restraint on transfer by a beneficiary and on creditor process.
• Trustee powers. Authority to hold, invest, manage, borrow, form entities, and litigate.
• Distributive discretion. Whether, when, and to whom the trustee distributes.
• Settlor’s reserved powers. What the settlor keeps, and what happens to it under pressure.
• Protector. The office, its powers, and succession to it.
• Anti-duress provision. What the trustee does with a direction given under court pressure.
• Jones clause. Payment of one identified creditor, in post-claim deeds only.
• Change of governing law and place of administration. The flight power and its conditions.
• Trustee succession and removal. Who replaces the trustee, and on what conditions.
• Accounts, reporting, and investment direction. Records, access, and any advisory role.
• Duration and termination. Perpetual unless the deed says otherwise, with power to end it.
• Execution. Counterparts, witnessing, and registration with the Registrar of International Trusts.

Seven of these carry the asset protection: the beneficiary structure, the protective provisions, distributive discretion, the protector’s office, the anti-duress provision, the Jones clause, and the change-of-law power. The rest is the machinery any trust instrument needs.

Parties, Governing Law, and Initial Trust Property

The opening recitals of a Cook Islands trust deed identify the settlor, the trustee, and the initial trust property, typically a nominal sum of $10 or $100 that formally creates the trust before larger asset transfers occur. The deed declares that the trust is governed by Cook Islands law and that Cook Islands courts have exclusive jurisdiction.

The choice-of-law clause reinforces a statutory default. Cook Islands law governs the validity and administration of a Cook Islands trust regardless of what law a foreign court might prefer to apply. A Cook Islands court leans on that express choice when it refuses to enforce a foreign judgment.

Beneficiary Designations

Cook Islands asset protection trusts name the settlor as a beneficiary alongside family members, typically a spouse and children. The beneficiary class can be defined broadly to include future descendants or narrowly to name specific individuals.

The deed also establishes what type of interest each beneficiary holds. In virtually all asset protection trusts, these interests are discretionary. No beneficiary, including the settlor, has an automatic right to any distribution. The trustee decides when and whether to distribute, based on the deed’s terms, the letter of wishes, and the trustee’s own judgment. A creditor generally cannot seize a discretionary interest that the beneficiary does not yet have a right to receive.

Some deeds define different classes of beneficiaries (primary, secondary, and default) with the trustee directed to consider each class in order. Others use a single discretionary class with guidance provided through a separate letter of wishes. The choice depends on the settlor’s family situation and goals. For married settlors, the deed may also address community property considerations so that transfers comply with both spouses’ rights.

Sample Beneficiary and Exclusion Provisions

A deed states the class, the nature of each interest, and who can never hold one.

Paragraph (b) does the protective work. A beneficiary holds a right to be considered by the trustee and nothing more, so there is no interest to value, assign, or attach. Paragraph (f) keeps the settlor out of the machinery that could undo the rest.

Paragraph (d) is written against In re Lawrence. Although Lawrence was declared an excluded person in 1995, he kept the sole power to appoint trustees. The Eleventh Circuit agreed with the district court that he retained de facto control, because he could appoint trustees who in their absolute discretion could reinstate him as a beneficiary and assign him the entire proceeds. An exclusion the settlor can reverse is not an exclusion.

The term “excluded person” does double duty in Cook Islands practice. Paragraph (c) uses it for people who may never take a benefit. Deeds also use it to bar a creditor, a judgment holder, or a creditor-controlled entity from being appointed trustee or protector, which is a governance provision rather than a beneficiary provision.

Trustee Powers

A Cook Islands trust deed grants the trustee broad authority over trust assets. The powers generally include the authority to hold, invest, manage, sell, and distribute trust property at the trustee’s discretion. The deed may also authorize the trustee to borrow against trust assets, form subsidiary entities such as a Cook Islands LLC, open and close bank and brokerage accounts, retain professional advisors, and settle or defend legal claims.

Broad trustee powers protect the trust. A trustee with narrowly defined powers may lack the authority to respond when litigation threatens. It may be unable to move assets, restructure ownership, or engage local counsel to oppose a foreign proceeding.

The trustee’s powers are fiduciary. The trustee cannot use them for personal benefit and must exercise them consistently with the deed’s terms and the beneficiaries’ interests. Cook Islands law imposes these obligations regardless of what the deed says, but a well-drafted deed reinforces them explicitly.

Sample Distributive Discretion Provision

The distribution provision decides whether any beneficiary holds something a creditor can pursue.

Paragraph (b) is the center of the clause. A standard such as health, education, maintenance, and support gives a beneficiary a claim a court can measure and enforce against the trustee. Absolute discretion leaves nothing to enforce.

Florida reaches part of the same result by statute. Under section 736.0504 a beneficiary’s creditor cannot compel a discretionary distribution or attach the interest, whether or not the discretion is expressed as a standard. Section 736.0505(1)(b) takes it back where the beneficiary is the settlor. A creditor of the settlor of an irrevocable trust can reach the most the trustee could pay the settlor or spend for the settlor’s benefit. That second rule is why a self-settled trust built for protection is not built under Florida law.

Drafting is half of it. A creditor examining the trust will look at how the trustee actually decided, and a trustee who approved every request the settlor made has not exercised the discretion the clause describes. Paragraph (g) keeps the trustee’s reasons private. The pattern of distributions stays visible.

Settlor’s Reserved Powers

A settlor of a Cook Islands trust can keep real powers without endangering the trust’s validity. The Cook Islands trust statute lets a settlor keep a power of disposition, take a benefit from the trust, appoint and remove the trustee, or hold the office of protector. None of that invalidates the trust or voids a transfer into it. Whether a creditor can reach what the settlor kept depends on the deed’s protective clause and the court hearing the claim.

The deed can reserve powers such as the ability to add or remove beneficiaries, direct or veto certain investment decisions, or appoint and remove the protector. The extent depends on how the drafting attorney assesses the balance between control and protection. Retaining too many powers can create practical problems even if Cook Islands law permits them, because U.S. courts evaluating contempt or repatriation may treat extensive reserved powers as evidence that the settlor retains effective control.

The best-drafted deeds resolve this tension by reserving powers the settlor needs for normal operation while including provisions that automatically suspend or transfer those powers when litigation begins. This is the most important drafting decision in the deed, and the one most often handled poorly. The Anderson case and the Lawrence case both turned on retained control, not on any failure of the governing trust law, and both resulted in contempt sanctions because the settlors could not demonstrate that compliance was genuinely impossible.

The Duress Clause

The duress clause instructs the trustee to disregard any direction from the settlor, protector, or any other person that is given under compulsion. The clause defines specific triggering events (a court order, a lawsuit filing, or a judgment) and directs the trustee to treat any subsequent instruction as having been made under duress.

If a U.S. court orders the settlor to direct the trustee to repatriate trust assets, the trustee is contractually and legally required to refuse. The settlor can then represent to the court that compliance is beyond the settlor’s power, because the trust deed prohibits the trustee from following compelled instructions.

In FTC v. Affordable Media (the “Anderson case”), the Andersons instructed their Cook Islands trustee to repatriate the trust assets, and the trustee treated the district court’s temporary restraining order as an event of duress. That stripped the Andersons of their co-trustee positions, and the trustee produced neither an accounting nor the assets. The Ninth Circuit affirmed the contempt order anyway. The Andersons were also protectors, and the deed subordinated its anti-duress provisions to the protectors’ powers, so the clause never put the assets beyond their reach.

A duress clause does no work where the settlor keeps a power the clause does not suspend. The settlor’s office as co-trustee or protector is that kind of power unless the deed limits the office to a veto and subjects it to the duress provisions.

The Flight Clause

A flight clause authorizes the trustee to move the trust’s governing law and administration to another jurisdiction if continuing in the Cook Islands becomes impractical. The clause typically permits re-domiciliation to a pre-approved list of alternative jurisdictions, such as Nevis or Belize, without requiring settlor involvement.

The flight clause covers a contingency. If the Cook Islands were to change its trust legislation in a way that weakened asset protection, or if political or economic conditions made administration impractical, the trustee could relocate the trust. Flight clauses are rarely exercised. The Cook Islands enacted its trust statute in 1984 and amended it in 1989, 1996, 1999, 2004, and 2013, without repealing the provisions a deed depends on. But the clause adds structural resilience that strengthens the trust’s long-term viability.

Sample Flight Clause

The provision names the jurisdictions the trustee may move to, states the conditions that permit a move, and keeps the settlor out of the decision.

The power sits with the trustee and is bounded on both ends. The trustee may move the trust only to a jurisdiction the deed already names. The move must also rest on one of three conditions: a change in the governing jurisdiction’s law, conditions there that make administration impractical, or a proceeding aimed at the trustee or the trust property. A move changes the designation the deed made at the outset, in its governing law clause.

The protector’s role in the clause is a veto rather than a direction. That choice tracks FTC v. Affordable Media. There the Ninth Circuit affirmed a finding that the Andersons remained in control of their Cook Islands trust. As protectors they held affirmative powers to appoint new trustees, and the deed made their written certificate conclusive on whether an event of duress had occurred. A protector who could order a change of governing law would hold a power of the same kind.

What the clause cannot do is change who the court can reach. A move changes the law that governs the trust and the company that administers it, not a U.S. court’s personal jurisdiction over the settlor. Repatriation and contempt orders run on that jurisdiction. A settlor ordered to bring assets back must show categorically and in detail why compliance is impossible, a burden the Ninth Circuit called particularly high in the offshore trust context. In In re Lawrence the Eleventh Circuit held that impossibility is no defense where the contemnor created the inability.

The Spendthrift Clause

A spendthrift clause in a Cook Islands trust deed prohibits beneficiaries from assigning, pledging, or transferring their beneficial interests, and prevents creditors from attaching or garnishing those interests. Cook Islands law makes that restraint lawful and gives it effect where a deed imposes it, so the protection stands on the deed’s own words.

The spendthrift provision works together with the discretionary distribution structure. Because the beneficiary has no fixed entitlement to distributions and cannot transfer whatever contingent interest they do hold, a creditor has no mechanism to reach trust assets through the beneficiary’s interest. This double layer, discretionary plus spendthrift, is why Cook Islands trusts are harder to attack than domestic trusts, where courts have sometimes reached self-settled spendthrift trust assets under state common law.

Sample Protective Provisions

The clause states the restraint, voids what breaches it, and tells the trustee what to do with the share.

Three things separate this from a domestic spendthrift clause. It voids a purported transfer rather than merely prohibiting it. It directs the trustee to ignore an order affecting the interest, which leaves the burden with the person holding the order. And it covers the interest of a beneficiary who is also the settlor.

That last feature is the one Florida law denies. The Eleventh Circuit held in In re Brown that a spendthrift provision in a self-settled trust is invalid against the settlor-beneficiary’s creditors. Solvency when the trust was created and the absence of fraudulent intent make no difference to that rule.

What the clause does not touch is the transfer that funded the trust. A protective provision guards an interest once it exists. Whether the settlor’s disposition into the trust can be set aside is a separate question, and in the Cook Islands the creditor bringing it must prove a fraudulent disposition beyond reasonable doubt.

Choice of Law and Forum Selection

Cook Islands trust deeds specify that Cook Islands law governs the trust and that Cook Islands courts have exclusive jurisdiction. Cook Islands law applies to questions about the trust’s validity, construction, and administration regardless of the law of any other jurisdiction. A Cook Islands court will not act on a foreign judgment against the settlor, the trustee, the protector, or a beneficiary. That bar applies where the judgment turns on a law the Cook Islands trust statute contradicts, or where it settles a matter Cook Islands law governs.

A creditor cannot present a U.S. judgment to a Cook Islands court and expect enforcement. The creditor must commence a new proceeding under Cook Islands law, meeting the two-year limitation period and the beyond-reasonable-doubt burden of proof, and proving that the specific transfer was fraudulent as to that particular creditor.

Trustee Succession and Removal

A Cook Islands trust deed establishes how the trustee can be replaced. The protector typically holds the power to remove the trustee and appoint a successor. The successor must keep the trust qualified under Cook Islands law, which requires at least one trustee to be a licensed Cook Islands trustee company, a registered foreign company, or an international company. The deed also addresses situations where the trustee becomes incapacitated, loses its license, or is placed into receivership. A well-drafted succession provision keeps the trust functioning even if the original trustee ceases to operate.

Trust Duration

Cook Islands law permits perpetual trusts. The trust statute allows an international trust to continue indefinitely unless the deed specifies a shorter term. Most asset protection trusts are drafted as perpetual trusts so they can serve later generations as well. The deed may also include provisions allowing the trustee or protector to terminate the trust and distribute its assets when succession or other circumstances make continuation unnecessary.

Accounting, Reporting, and Investment Direction

A Cook Islands trust deed requires the trustee to maintain accurate records of all trust assets, transactions, and distributions. Most deeds let the protector and the beneficiaries ask to see them. These provisions support U.S. tax compliance by giving the settlor access to the information needed to file required IRS reports. The deed’s accounting provisions need to create an enforceable obligation, not merely a general statement that records will be kept.

The deed may leave investment to the trustee, or it may name an investment advisor. Under the Cook Islands trust statute an advisor only advises. Every power and discretion stays with the trustee, which may follow the advice or decline it, and is not liable for a loss from advice it followed. A settlor who wants a voice in investment strategy has that formal channel instead of informal calls to the trustee, which a court can read as retained control.

What the Trust Deed Does Not Contain

The letter of wishes, the affidavit of solvency, and the deed of indemnity are all separate documents, not provisions of the trust deed itself.

The letter of wishes is a private communication from the settlor expressing preferences about distributions, investment philosophy, and treatment of specific beneficiaries. It is not legally binding. Because the letter is guidance rather than a mandate, it preserves the trustee’s discretion while giving the trustee context for the settlor’s intentions. Including these preferences in the trust deed itself would convert them into binding obligations and could limit the trustee’s discretion in ways that weaken asset protection.

The affidavit of solvency is a sworn statement by the settlor confirming that the asset transfer will not render the settlor insolvent. Trustee companies require this affidavit as part of their due diligence process. It is evidence that the trust was not funded to defraud specific known creditors.

The deed of indemnity is an agreement between the trustee company and its directors addressing how the company will indemnify its directors for costs and liabilities arising from trust administration. This document protects the trustee’s officers and is standard in Cook Islands trust practice.

Banking resolutions, account opening documents, and LLC formation documents are also separate. They derive their authority from the trust deed, which authorizes the trustee to open accounts and form entities; the individual documents implement those authorizations.

The Jones Clause in Post-Claim Trusts

Cook Islands trusts can be established after a lawsuit has been filed. The trust deed in a post-claim trust includes a Jones clause, a provision that authorizes the trustee to pay the specific existing creditor under defined conditions. The Jones clause reduces fraudulent transfer exposure and strengthens the contempt defense by showing that the trust was not designed to permanently evade the obligation but rather to control the terms of resolution.

Post-claim planning carries higher risk than pre-claim planning. The settlor’s negotiating position is weaker, and the contempt risk is greater. But the practical protection still holds. The creditor must pursue enforcement in the Cook Islands under Cook Islands law, which remains impractical in most cases.

How Drafting Quality Determines Protection

The trust deed is the document that a Cook Islands court will interpret if the trust is ever challenged. Every provision either strengthens or weakens the trust’s position under litigation. Ambiguous language about the trustee’s powers can create uncertainty about whether the trustee has authority to resist a repatriation demand. A poorly drafted duress clause with undefined triggering events may not operate when needed. Reserved powers that are too broad may give a U.S. court grounds to conclude the settlor retains effective control, undermining the impossibility defense.

Drafting a Cook Islands trust deed requires familiarity with both Cook Islands statutory law and the practical realities of how U.S. courts have treated offshore trusts in contempt and fraudulent transfer proceedings. The Anderson case, the Lawrence case, and later proceedings show how a trust deed’s provisions need to be drafted.

The trust deed is also the document that the trustee company reviews most carefully during the onboarding and acceptance process. Trustee companies routinely request revisions to draft deeds that contain provisions inconsistent with their operational practices or that create compliance concerns under Cook Islands regulatory requirements. This back-and-forth between U.S. counsel, the settlor, and the trustee is a normal part of forming a trust.