The Cook Islands

Why the Cook Islands. The Cook Islands was the first jurisdiction to enact a statute designed to protect a settlor's trust assets against foreign creditors. It remains the reference point against which other offshore trust jurisdictions are measured. Its International Trusts Act 1984, substantially amended from 1989 onward, combines a narrow fraudulent-disposition claim that must be proved beyond reasonable doubt, short limitation periods, a refusal to recognize foreign judgments and explicit validation of trusts in which the settlor retains powers and benefits. The statute has been tested by American creditors, by the United States government and by a settlor's contempt in an American court. Its courts have applied it, and its legislature has amended it when a decision went against the trusts. For these reasons the Cook Islands trust is the benchmark structure for American clients seeking an offshore self-settled trust (see supra ch. 21).

The jurisdiction. The Cook Islands is a group of fifteen islands in the South Pacific with a population of about fifteen thousand. It has been self-governing in free association with New Zealand since August 4, 1965, under the Cook Islands Constitution Act 1964 (N.Z.). Cook Islanders are New Zealand citizens. New Zealand retains responsibility for defense and foreign affairs in consultation with the Cook Islands government, but the Cook Islands legislates for itself, including in financial services. Cook Islands Constitution Act 1964, ss. 3, 5 (N.Z.). The legal system is based on English common law and New Zealand statute, modified by local legislation. The financial services sector, including trust companies, is supervised by the Financial Supervisory Commission under the Financial Supervisory Commission Act 2003.

Scope of the chapter. This chapter applies the framework of chapter 21 to the Cook Islands. It examines the International Trusts Act framework (see infra ¶ 2210), the fraudulent-disposition rule (see infra ¶ 2220), the provisions on foreign judgments, bankruptcy and family claims (see infra ¶ 2230), trustees, protectors and duress (see infra ¶ 2240), the cases (see infra ¶ 2250), companies, LLCs and foundations (see infra ¶ 2260), banking and practice (see infra ¶ 2270), and regulation, transparency and U.S. reporting (see infra ¶ 2280). It closes with the Cook Islands in the Threat Matrix (see infra ¶ 2290).

A note on sources. The International Trusts Act has been amended at least eight times, and no official consolidation was located online. The provisions described in this chapter are drawn from the Act as enacted and each amending Act, as published on PacLII (paclii.org). Several Cook Islands decisions are reported only in summary form. The planner should obtain a current consolidation and an opinion from Cook Islands counsel before relying on any provision described here.