Cook Islands Trust for asset protection, Does it Work??
- Thread starter blancmon229
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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.
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 able︀ 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 you︀ are prosecuted / in trial
2) Distress clause - the trustee will ignore your orders︁ if you are forced to give them
3) Asigning a Grantor which is out of︂ the Jurisdiction ( optional - if you really trust him, giving him more powers that︃ to yourself as settlor)
4) Not being the beneficiary to begin with.
It would be︄ great we you could work with some concrete court cases , not with panic-monger material︅ that is available everywhere.
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 you︀ are prosecuted / in trial
2) Distress clause - the trustee will ignore your orders︁ if you are forced to give them
3) Asigning a Grantor which is out of︂ the Jurisdiction ( optional - if you really trust him, giving him more powers that︃ to yourself as settlor)
4) Not being the beneficiary to begin with.
It would be︄ great we you could work with some concrete court cases , not with panic-monger material︅ that is available everywhere.
1, 2, 3 - theoretically could work but it TIMING matters a lot.
Concrete court︁ cases:
FTC v Affordable Media, LLC, 179 F.3d 1228 (9th Cir., 1999)
B.V. Brooks, 217︂ Bkrptcy. Rptr. 98 (Bkrptcy. DC Conn., 1998)
Larry Portnoy, 201 Bkrptcy. Rptr. 685 (Bkrptcy. DC︃ 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 of︄ these strategies to test under real legal attack?
Concrete court︁ cases:
FTC v Affordable Media, LLC, 179 F.3d 1228 (9th Cir., 1999)
B.V. Brooks, 217︂ Bkrptcy. Rptr. 98 (Bkrptcy. DC Conn., 1998)
Larry Portnoy, 201 Bkrptcy. Rptr. 685 (Bkrptcy. DC︃ 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 of︄ these strategies to test under real legal attack?
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:
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.
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 failing︀ to do so. This case emphasized the importance of settlor control over the trust and︁ clarified that courts could imprison a settlor for civil contempt if the trust was deemed︂ 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 ruled︄ that U.S. state law could override the foreign trust law, making assets available to creditors.︅
- Control is critical: The more︆ control a settlor retains over a trust, the less effective the protection. To ensure solid︇ asset protection, settlors should avoid being trustees, protectors, or holding any power over the trust's︈ operations.
- Funding: Transferring all of a settlor’s wealth to an offshore trust ("in toto︉ planning") is risky because it can invite fraudulent transfer claims. Instead, planners should consider "nest︊ egg" planning, where only a portion of the wealth is transferred.
- Impossibility of compliance: The defense of "impossibility" in contempt cases might not hold if the impossibility is self-imposed︋ (e.g., by creating an offshore trust).
- Duress clauses: Provisions that prevent trustees from distributing︌ assets under duress may backfire and anger judges.
- Due diligence and timing: Lawyers must︍ conduct thorough due diligence and be cautious of clients with pending legal threats.
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.
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