Category Asset protection

An Ideal Offshore Place to Protect Your Assets With Trusts: Cook Islands

Asset Protection – Offshore Trusts in the Cook Islands

The Cook Islands, with their main island of Rarotonga, is another offshore location that has not been so much the focus of public attention, such as the Cayman Islands or the British Virgin Islands. 
The population of the island state, which was only recognized by Germany as an independent state in 2001, is just under 20,000 inhabitants. However, the citizens of the Cook Islands do not have their own citizenship; rather, citizens are citizens of New Zealand. English is the official language next to Rarotongan.

The Cook Islands as an offshore location

Remarkably, with regard to the Cook Islands as an offshore location, it is first of all that the financial and tax legislation in the early 1980s (keyword: “International Companies Act 1981-1982”) was decisively co-developed by US business lawyers. Accordingly, the Cook Islands have become an interesting offshore financial center. 
But what exactly is the incentive for offshore activities in the Cook Islands? 
The focus of most well-known offshore locations is usually on tax optimization, tax reduction or even avoiding all taxation. The Cook Islands, however, have not focused primarily on setting such an incentive. The focus of the Cook Islands is on asset protection (keyword “asset protection”). The establishment of offshore asset protection trusts via Offshore ciitzen provides a very high level of asset protection against access by creditors, lenders or claimants.
In general, the Cook Islands do not recognize foreign judgments and titles. This means in practice that any creditors actually have to travel to the Cook Islands on-site and have their lawsuit pending and enforced there. 
Especially for wealthy Americans, who are always living in fear of sprawling lawsuits and claims for damages in their homeland, the Trust of the Cook Islands (keyword: “Wealth Preservation Trust”) as a means to escape the access of their national judiciary.

Extended privacy protection

A public register of registrations does not exist for international companies and information about them is available only with the consent of the Company itself. The register also contains only the names and addresses of the managing directors. The information regarding the shareholders is exclusively available at the registered office of the company. Penalties and sanctions for violations of these privacy rules are extremely stringent.

Our assessment

The ability to protect assets through the creation of a Trust in the Cook Islands is extremely broad, according to the intention of the Cook Islands Government. If your specific situation or planning should go in this direction, it may well be better to look into the Wealth Preservation Trust and the Cook Islands.

Asset Protection – protection of assets from access by creditors

Image result for asset protection

The risk of personal liability has increased significantly for board members and managing directors in recent years. Legislators and case law keep tightening the thumbscrews. Currently, the extension of the limitation periods is discussed.

Whether it is possible to hedge against all eventualities or to fully shift the risk by taking out a financial loss liability insurance (OO policy) -Police remains questionable. The & OO policies become more expensive, do not cover everything and the insurers become more argumentative.

This increases the desire of the management to withdraw personal assets from creditors’ access. In Anglo-Saxon law, therefore, the so-called asset protection trust has prevailed. There is nothing comparable in this country. In Germany, the transfer of property to spouses, other family members or foundations is considered in the first place. The disadvantage is obvious: in all cases, the assets are “away” from the transferor’s point of view. Also, the use is only very limited reserve, because creditors or insolvency administratorscan access it. An exception are the very personal rights of use, eg the right to live in the house transferred to the children. It is therefore important to hedge against personal risks by means of suitable recovery rights. The squaring of the circle succeeds only to a limited extent.

One can also think of the creation of seizure-free assets, which, however, has only a limited reach. Under certain conditions, the conclusion of a Liechtenstein life insurance policy can provide enforcement protection.

In all cases, long-term wealth planning is required. Asset shifts in the crisis can be punishable. In addition, liquidators and creditors may be able to challenge capital transfers. In practice, the deadline for dispensing donations is four years. Not to be forgotten are the tax effects of the capital transfer.

Conclusion: There is no such thing as miracle products, but there are design approaches that can provide a useful building block for the protection of property in individual cases.