Cook Islands Trust for asset protection, Does it Work??

[run]

Is a Cook Island Foundation much diffrent in regards of asset protection than a cook island trust ?

@Sols

 

[Sols]

Yes, they are very different. At the core is the difference that foundations are legal persons (like companies), whereas trusts are not. A trust is just an agreement between two parties. It's not a thing in and of itself. This can make a big difference to the client, depending on where they live and to which country's laws they are answerable as well as the type, size/value, and scope of assets being held.

 

[EliasIT]

How exactly is an european court going to force a cook island trustee to release the assets? Moreover, how would that be posible if a spendtrift or distress clause would be inserted in the trust deed ? Can you please elaborate, maybe with some case examples ?

Very simply if you live in an EU or European country you have to comply to the tax regulations and laws there. If you try to move your assets abroad to protect them from any tax office or other law enforcement and they figure out you have a Trust there, they are able to freeze it all by court order.

 

[Frankie]

Very simply if you live in an EU or European country you have to comply to the tax regulations and laws there. If you try to move your assets abroad to protect them from any tax office or other law enforcement and they figure out you have a Trust there, they are able to freeze it all by court order.

100%. Or they put you in jail in contempt of court until you break the Trust and give your assets. All depends on the attack vectors

 

[TheGlobetrotter]

Very simply if you live in an EU or European country you have to comply to the tax regulations and laws there. If you try to move your assets abroad to protect them from any tax office or other law enforcement and they figure out you have a Trust there, they are able to freeze it all by court order.

All you are saying only applies to assets in Europe.
But if you have a Trust in Cook Island and invest in South America, what exactly is the european court going to seize ?

@ Frankie - 3 options
1) Spendtrift clause in the trust deed : you get replaced automatically as beneficiary when you are prosecuted / in trial
2) Distress clause - the trustee will ignore your orders if you are forced to give them
3) Asigning a Grantor which is out of the Jurisdiction ( optional - if you really trust him, giving him more powers that to yourself as settlor)
4) Not being the beneficiary to begin with.

It would be great we you could work with some concrete court cases , not with panic-monger material that is available everywhere.

 

[Propeller]

Yes, have worked with them many times.

That's good, I will use them when I take my new business next move forward.

 

[Frankie]

@ Frankie - 3 options
1) Spendtrift clause in the trust deed : you get replaced automatically as beneficiary when you are prosecuted / in trial
2) Distress clause - the trustee will ignore your orders if you are forced to give them
3) Asigning a Grantor which is out of the Jurisdiction ( optional - if you really trust him, giving him more powers that to yourself as settlor)
4) Not being the beneficiary to begin with.

It would be great we you could work with some concrete court cases , not with panic-monger material that is available everywhere.

1, 2, 3 - theoretically could work but it TIMING matters a lot.

Concrete court cases:
FTC v Affordable Media, LLC, 179 F.3d 1228 (9th Cir., 1999)
B.V. Brooks, 217 Bkrptcy. Rptr. 98 (Bkrptcy. DC Conn., 1998)
Larry Portnoy, 201 Bkrptcy. Rptr. 685 (Bkrptcy. DC N.Y., 1996)

Old but still very good explanation:
https://www.emalegal.com/wp-content...tection-Trusts-Impact-of-Recent-Case-Law-.pdf

Have you actually put any of these strategies to test under real legal attack?

 

[EliasIT]

Old but still very good explanation:
https://www.emalegal.com/wp-content...tection-Trusts-Impact-of-Recent-Case-Law-.pdf

pp should read this.

 

[Frankie]

pp should read this.

They should but unfortunately people believe the "marketing" hype rather than reality. And the marketing always sounds better

 

[Brutus]

No that's the main problem, a Trust can't provide any protection any longer at least not the kind of protection most seek.

Since when?

 

[Brutus]

Old but still very good explanation:
https://www.emalegal.com/wp-content...tection-Trusts-Impact-of-Recent-Case-Law-.pdf

ChatGPT summary

The article "Asset Protection Trusts: Impact of Recent Case Law" by Duncan E. Osborne and Elizabeth M. Schurig examines the implications of recent court cases on the effectiveness of asset protection trusts (APTs), particularly offshore trusts. Recent cases in bankruptcy and federal court have shown that asset protection structures can sometimes be pierced by creditors, which has raised concerns in the legal and financial communities.

Key cases discussed include:

• Anderson: In this case, the Ninth Circuit upheld a ruling that the Andersons, who had placed their assets in a Cook Islands trust, were required to repatriate their wealth after being found in contempt for failing to do so. This case emphasized the importance of settlor control over the trust and clarified that courts could imprison a settlor for civil contempt if the trust was deemed within their control.
• Brooks and Portnoy: Both bankruptcy cases dealt with self-settled spendthrift trusts, highlighting issues with applying local laws over offshore trust jurisdictions. In these cases, courts ruled that U.S. state law could override the foreign trust law, making assets available to creditors.

The article emphasizes several lessons for asset protection planners:

1. Control is critical: The more control a settlor retains over a trust, the less effective the protection. To ensure solid asset protection, settlors should avoid being trustees, protectors, or holding any power over the trust's operations.
2. Funding: Transferring all of a settlor’s wealth to an offshore trust ("in toto planning") is risky because it can invite fraudulent transfer claims. Instead, planners should consider "nest egg" planning, where only a portion of the wealth is transferred.
3. Impossibility of compliance: The defense of "impossibility" in contempt cases might not hold if the impossibility is self-imposed (e.g., by creating an offshore trust).
4. Duress clauses: Provisions that prevent trustees from distributing assets under duress may backfire and anger judges.
5. Due diligence and timing: Lawyers must conduct thorough due diligence and be cautious of clients with pending legal threats.

The article concludes that offshore asset protection trusts remain viable, but practitioners must carefully navigate the evolving legal landscape. They should structure trusts with independent, non-U.S. trustees, avoid excessive control by the settlor, and plan with multiple legitimate purposes (not just asset protection) to avoid fraudulent transfer claims.

In summary, while recent case law has raised challenges, it offers useful guidance for crafting asset protection strategies that are both effective and legally sound.

 

[mytoofood]

Pretty useless to copy / paste a chatgpt text here! You can't trust it all the way down and something is wrong beside it isn't not real knowledge!

 

[Brutus]

Pretty useless to copy / paste a chatgpt text here! You can't trust it all the way down and something is wrong beside it isn't not real knowledge!

Feel free to read through the document yourself and give us your own summary

 

[brianK]

Sorry if I missed that, but where do you live country OP ?