Asset protection trusts are becoming increasingly important in 2022 as lawsuits, forced heirship, anti-capitalist governments, and increased tax obligations reach a fever pitch. Subsequently, the Cook Island’s Asset Protection Trust (APT) is again, rightly, at the forefront of many people’s minds given its position as the gold standard. Therefore, in this guide, I will try and answer the question as to How Much Does a Cook Islands Trust Cost to Setup.
The Short Answer on How Much Does a Cook Islands Trust Cost to Setup
Obviously, it depends on your required trust agreement terms, and whether you require trustee and protector services, but plan to budget around US$10,000 for the cost. This would typically include all legal, professional, and trustee and protector fees.
- The Short Answer on How Much Does a Cook Islands Trust Cost to Setup
- Understanding What a Cook Islands Trust Actually Is
- How Is a Cook Islands Trust Structured?
- Who Can I Appoint As a Trustee
- What is a Trust Protector
- How Much Does a Cook Islands Trust Cost to Setup
- Next Steps
Understanding What a Cook Islands Trust Actually Is
If you have been around the offshore world for a while, it is highly likely you are familiar with the legal concept of a trust. However, for those that are not…a trust is a legal agreement between an individual, known as the “settlor”, and a “Trustee”, to look after assets on behalf of “beneficiaries” which are listed in a trust agreement.
Now, that’s a hell of a mouthful but what it means in practice is that you can take assets and vest them with a trustee to manage on behalf of beneficiaries which might also include yourself. At this point, you no longer “own” these assets as they are now owned by the trust.
In short, it’s a legal way of distancing yourself from ownership and control of your assets whilst, in some cases, still retaining their benefits. A good example is moving a home into ownership of the trust whilst, as a beneficiary, being allowed to still live in it and derive that benefit without actually owning it.
This puts you in a position of not having any assets that can be attached to a lawsuit during any sort of litigation. It is the first step in making yourself judgment proof to vexatious legal action. However, not all trust jurisdictions are created equally and different countries, and states, all have vastly different rules on how trust assets are treated when considering divorce and legal action.
In contrast, the Cook Islands Asset Protection Trust legislation is very upfront on who can/cannot act against it. This is the reason why the structures have become incredibly sought after over the past few years. The Cook Islands effectively allows almost zero legal action to be taken against a settled trust.
Additionally, the nation recognizes no foreign judgments, and any court action must be processed and taken within the Cook Islands. You can imagine that this is incredibly difficult for most individuals to achieve and there are almost no cases where the validity of the trust has been successfully challenged. Subsequently, many U.S.-based self-employed professionals and entrepreneurs look to these asset protection trusts to provide them with total protection against the sort of lawsuits that the nation is well known for.
How Is a Cook Islands Trust Structured?
Firstly, you will need a settlor who establishes the trust and places the assets into it. The Settlor, along with the proposed trustees, signs the trust agreement and the trust is then legally valid.
You will also require one or more trustees who will overseas the trust assets to the benefit of the listed beneficiaries. These individuals have a fiduciary responsibility and legal obligations, and the normal practice is to appoint a professional trustee (normally the lawyer who formed the trust) and one other trustee to manage the assets and affairs.
You will also need to work out who you want as a beneficiary of the discretionary trust and whether to have any provision for their heirs upon their death. It should be noted that the settlor may also be a beneficiary of the trust and that there is no restriction on this type of structure. Extra beneficiaries may also be added to the trust if, and when, required.
Finally, you may decide to appoint a role known as the Protector of the trust. This is a key position that I will go into in the following section so all I will say is that they add another layer of oversight to the trust and have special powers.
Who Can I Appoint As a Trustee
You can effectively appoint anyone you like as a trustee of the trust. However, the normal practice is to appoint a professional trustee in the Cook Islands for the purpose of acting as the primary point of contact.
The above point is important given that they are then, legally, separate from your location of residence. Separating out the trustees is good practice so that, in the event of domestic legal action, the courts do not attempt to order your local “trustee” to undertake certain tasks.
I would normally also advise you to appoint a trusted individual to work alongside the professional trustee. It’s an added level of oversight and, as mentioned, separating out the various jurisdictions is smart.
In short, you can appoint anyone over the age of 18 years old as a trustee and you can even appoint a trust company that you create to also manage the trust if you wish.
What is a Trust Protector
This is a very special role and is, somewhat, unique to the Cook Islands trust regime. The protector effectively sits above the trustees in the hierarchy and has the obligation to ensure that the trustees are following the trust deed to the letter.
Effectively, the Protector is charged with ensuring that the Trustees are following their fiduciary obligations and acting in the best interests of the settlor. They typically have the ability to remove a trustee and make other key changes to the trust, if required.
It’s important that you pick a trusted individual to undertake this role as it gives you excellent protection against a rogue trustee. In fact, protectors may be able to veto trustee decisions and actions, or at least forestall them, in the case of bad behavior.
Subsequently, you should always have a protector as it really provides oversight, and ultimately, confidence that the trustees are doing what they were engaged to do.
How Much Does a Cook Islands Trust Cost to Setup
The costs of establishing these sorts of trusts vary from provider to provider and also as to what roles you wish to have appointed and the general complexity of the setup. You will see many online providers quoting prices of US$20k -$30k which I find incredibly ridiculously over-priced.
I will give you the real breakdown of costs here that you probably won’t get from anyone else online.
How Much Does a Cook Islands Trust Cost
|Cook Islands Trust||Estimated Costs US$|
|Drafting of Trust Agreement & Execution including Professional Trustee Services||$5,600.00|
|Professional Protector Services (if required)||$1,000.00|
|Bank Account Opening (If Required and with CSB)||$ 800.00|
|Total Estimated Costs||$10,400.00|
The above is a reasonable breakdown of what you can expect to pay to have a fully formed offshore Cook Islands Asset Protection Trust. There may be some ancillary fees around the FATCA and compliance checks or if you require some additional service add-ons.
You can expect annual fees to run around US$6,000 per year and this will keep your trust completely compliant and fully operational.
Ultimately, the cost of the trust structure is very reasonable given the absolute level of protection that you are receiving. Through the use of an asset protection trust, you are placing yourself in the position of being almost judgment-proof.
The value of this should not be underestimated, especially for self-employed specialists, or even entrepreneurs. Lawsuits are a very real risk, just ask any doctor or specialist why they utilize offshore trusts to protect their wealth. Subsequently, the benefits far outweigh the actual costs of setting up and maintaining this trust.
If you are serious about protecting your wealth, and privacy, then feel free to contact our consulting arm to discuss your specific circumstances. We have significant experience in forming Cook Island Trusts and know exactly what to do, and what not to do, to ensure that you have the best level of protection possible.
Take Care Fellow Entrepreneurs!