¶ 1101
Overview
Scope of the chapter. A Cook Islands international trust is usually settled to last for generations, and few deeds survive that long without change. The family's circumstances change, the beneficiaries move, the tax law of their home countries changes, the trustee company is sold or loses its licence, and the original drafting turns out to be defective. This chapter examines the four ways in which an international trust changes or comes to an end: variation of its terms, a change of its governing law, migration of its administration into or out of the Cook Islands, and termination. It examines the powers on which each depends, the provisions of the International Trusts Act 1984 that govern them, the limits imposed by the general law and by the Trustee Act 1956 (N.Z.) as it continues to apply to international trusts, and the consequences of deregistration. It closes with the law on mistaken exercises of powers, model provisions and a planning checklist.
Relation to other chapters. The International Trusts Act, its amendments and its registration provisions are examined in chapter 5 (see supra ch. 5). The validity of the trust on its creation, including the governing-law provisions of section 13G as they apply at settlement, is examined in chapter 6 (see supra ch. 6). The trustee's powers and duties, and the removal and replacement of trustees, are examined in chapter 7 (see supra ch. 7). The beneficiaries' interests, the rule in Saunders v. Vautier and section 10 of the Act are examined in chapter 8 (see supra ch. 8). Protectors, reserved powers and the duress provisions that may require the trust to move in a crisis are examined in chapter 9 (see supra ch. 9). Purpose and charitable trusts are examined in chapter 10 (see supra ch. 10). This chapter is concerned with the trust after it has been validly constituted: the means by which its terms, its law and its place of administration may be changed, and the ways in which it ends.
The statutory text. The International Trusts Act 1984 has been amended by eight Acts between 1985 and 2013, and no official consolidation has been published (see supra ¶ 530). The provisions examined in this chapter are stated as they stand after those amendments, reconstructed from the Act as passed and each amending Act. The governing-law provisions of section 13G were inserted by the International Trusts Amendment Act 1989, section 6, and rewritten in part by the International Trusts Amendment Act 1995–96, section 14. The registration and deregistration provisions of sections 14 to 16 were substituted by the 1995–96 Act, sections 18 to 20, and amended by the International Trusts Amendment Act 1999, section 7, and the International Trusts Amendment Act 2004, section 3. The migration provision in section 13K(5) was substituted by the 1999 Act, section 6.
Why the subject matters. Variation and migration are the means by which a long-term trust keeps its protection. A Cook Islands trust whose deed cannot be varied cannot be adapted to a change in the settlor's home tax law, and a trust that cannot move cannot leave a trustee that has become unsuitable. The same powers create risk. A power of variation or a power to change the governing law held by the settlor personally may be treated as property of the settlor in proceedings brought by a spouse or a creditor (see infra ¶ 1120.06). A power exercised by mistake may produce a tax charge that cannot be undone (see infra ¶ 1180). And a trust that is allowed to lapse from the register loses the protection of the Act without any decision having been made (see infra ¶ 1160.05). The drafting of these powers is therefore among the most important tasks in settling a Cook Islands trust.