Asset Protection Trusts
The modern world is highly litigious, and increasingly creditors are receiving disproportionate judgments from the courts. People who have worked hard for their entire life are in danger of having their life savings wiped out by spurious litigation. Liability insurance for professionals is becoming prohibitively expensive.

An offshore asset protection trust (APT) provides the highest level of security for personal assets. Those who most benefit from an APT include persons in high-risk occupations (such as physicians and lawyers), business vendors (particularly those close to retirement), those with a high wealth profile, directors of public companies, and almost anyone who has saved a significant nest egg for their retirement.


The Cook Islands is recognised as the world leader in formation of asset protection trusts. Cook Islands law contains a number of unique features that make the operation of an asset protection trust administratively friendly and highly protective.

There are four main features of Cook Islands law that provide effective barriers to creditors attacking an International Trust:

  • Practical Barriers – including instructing local counsel, appearing in local Courts, absence of contingency fee lawyers.
  • Enforcement of Foreign Judgments – Cook Islands courts will not recognise or give effect to certain judgments of foreign courts in relation to International Trusts. Only Cook Islands law can apply to International Trusts
  • Barriers to claims for fraudulent transfer being brought in a Cook Is court – include strict time limits, requirement of proof of fraud beyond a reasonable doubt (criminal standard), and no bankruptcy law.
  • Procedural law – prevents ‘fishing expeditions’ by creditors, restricting the use of interrogatories (discovery, etc).


Forming an Asset Protection Trust

US clients will be interested in a summary of the typical APT structures established for US persons.

This introduction provides a summary of the steps introduce in the establishment and administration of a trust.

For a more in depth analysis of the technical aspects of Cook Islands law download our article on the Practical Barriers to Litigation in the Cook Islands.


The Cook Islands

The Cook Islands is located in the South Pacific Ocean due south of Hawaii. Named after captain James Cook, the English explorer, the country consists of 15 islands spread over 1 million square miles of ocean. The island of Rarotonga is the capital, and home to more than 60% of the population. English is the every day language.

Originally a colony of Britain, then New Zealand, the Cook Islands achieved limited self government in 1957, and became “self governing in free association with New Zealand” in 1965. It is now a fully sovereign state with its own parliament, universal suffrage, and general elections every 4 years. All Cook Islanders hold dual New Zealand and Cook Islands nationality and the country continues to enjoy a close relationship with New Zealand.

The judicial system in the Cook Islands is highly regarded. The Court system is hierarchical, beginning with the High Court, the Court of Appeal, and a further and final right of appeal to the Privy Council in England. All judges are senior judges appointed from New Zealand.

The offshore centre was established in 1981 initially targeting markets in Australasia and driven by merchant banking transactions. In 1989 the Cook Islands became the first country to introduce asset protection laws and it remains the leading jurisdiction for asset protection trusts. This industry now dominates the financial centre.

The Cook Islands is in the same time zone as Hawaii making it particularly well placed for doing business with United States based clients. While the Cook Islands is geographically isolated it maintains excellent connections with the rest of the world with modern communication systems and regular flights to Los Angeles, Tahiti, Sydney, and Auckland.

The thriving offshore industry is a major contributor to total government revenue. The other important contributors to the economy are tourism and cultured pearl farming.