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Protect your own property is now a priority for all
who possess considerable economic assets, and
international Trust is becoming of the most useful legal
instrument to obtaining this shelter. This kind of protection
turns out to be extremely important in adverse situations of
different nature such as divorce, bankruptcy or simply
considered as a future legal shield.
Offshore jurisdictions (the SO-CALLED tax havens) have
become increasingly popular and sought for the protection
and anonymity that they can offer to those who decide to use
the Trust. These jurisdictions include: Panama, the British
Virgin Islands, the Cayman Islands, Anguilla, Nevis Islands
and the Cook Islands.
Our analysis will be focus on the Trust based in
the Cook Islands, and the following reasons why this
destination has become the jurisdiction which guarantees
greater protection of the property at the global level, not only
because of the privacy it provides to its customers, but also
for the strict rule of law which protect the legal concept of
As we explained in the previous article, the Trust
is a relationship whereby one party for the benefit of another
holds property. A settlor, who transfers property to a trustee,
creates a trust. The trustee holds that property for the trust’s
There are two different types of Trust: revocable
and irrevocable. (See article no. 69 for details). The Trust
made in the Cook Islands can be considered as semirevocable.
In fact, at the request of the Settlor you can be
arranged some changes to the Trust’s operating rules that,
however, do not affect the asset protection guaranteed by
the same; therefore, you can take advantage of the benefits
of both types of Trust.
The Cook Islands have been one of the first
jurisdictions to enact a law explicitly to protect the
international Trust, which made them the number one choice
for owners of large economic capital. Now, according to data
provided by the Commission for Financial Control of the
Cook Islands, there are about 2,619 Trust present, mainly
made up of doctors, builders, accountants, architects, etc.
The current legislation of the Trust sets limits to
the possibility of filing complaints about fraudulent transfers
of funds. The provision to file a complaint is two years and,
in some cases, may even be less than one year.
Then, if the Trust is financed in a period when the
Settlor is solvent, then the transfer of funds cannot be
Furthermore, the existing legislation sets certain
conditions before a claimant can be considered creditor and
file a complain to the judicial authorities of the Cook Islands.
The rationale of this provision is to aggravate the burden of
proof, which must be asserted beyond a reasonable doubt.
This is why the laws about the protection of
personal data (privacy laws) prohibit the disclosure of
banking information, unless there would be the explicit
consent by the client. Accordingly, the Settlor is guaranteed
that no foreign government can have access to that
information. In order to ensure the honesty and integrity of
the funds, there are certain guidelines that the Government
of the Cook Islands asks for.
For example, the prevision for which the
goods/property/funds that are the subject of the Trust may
not arise from fraudulent activities, such as drug trafficking or
Some of the main elements that characterize the
Trust in the Cook Islands are as follows:
• Foreign judgments are not enforceable.
Accordingly, if you want to sue the Trust, you
should contact an attorney in the Cook Islands and
this kind of legal action is subject to rigorous
• The Settlor can retain control over the Trust and
on the same property, if so established;
• The foreign regulations on bankruptcy do not
• Creditors have a two-years period to file legal
action against the trust property;
• The law clearly sets what means by fraudulent
transfers and elements that must be present to
enable them to be relevant in the eyes of the
• Minimization of taxes;
• The Trust ensures the preservation of the property
against any temptation to waste it by the Trustee
unwary heirs or successors in title.
Additionally, another important feature is the
possibility for the Trust to include or maintain hidden
company actions, without any concern regarding possible
consequences of the opportunity to enjoy the
financial/economic benefits of maintaining such actions.
Moreover, in such cases, it is possible to limit the
Settlor ability to supervise and act in the affairs of an hidden
company, which allows the protection / conservation of
family businesses or other investment companies making
risky or speculative investments.
It is interesting note that for tax purposes in the
United States, the Internal Revenue Service (“IRS”,
corresponding to our Inland Revenue), assumes that the
Settlor who participates to the funds under the Trust cannot
be considered as a separate entity and, for this reason, it
bears on him the burden to report those funds in his own tax
return form (using Form 1040).
Also, it’s important to keep in mind that one thing
is the fiscal responsibility of the Settlor in reporting these
assets, another is the protection of assets which belong to
the Trust (and not the Settlor).
Eventually, as we have seen in our previous
articles, there are several options for company structures to
deal with. As usual, the most favorable depends on the
individual case and the specific objectives pursued; and it is
always a good idea to consult a professional to get the right
advice, fit for the single case presented.
This article contains general information and does not replace in any way the help of a lawyer. We suggest you seek professional help for further information and assistance. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you free written information about our qualifications and experience.
Founded in 1994 by Piero Salussolia, Piero
Salussolia P.A. provides specialized, dedicated service
to an international clientele on International and
Domestic Tax and Estate Planning, Real Estate and
Corporate Law, Intellectual Property, Commercial and
Born in Alice Castello, Italy, Piero Salussolia
has been practicing law in the United States and is a
member of the Florida since 1985 and California Bars
since 1984. Piero Salussolia was a member of the
Florida Tax Section (where he served as Vice Chairman
of the Foreign Tax Committee from 1989 to 1992) and
the Florida International Law Section. Piero Salussolia
was a founder of the Italy-American Chamber of
Commerce, South East Chapter, where he served as
Executive Vice President. Piero Salussolia graduated
from the Universitá Degli Studi, Turin, Italy, with a
doctorate degree in Political Science. He received his
Master’s degree in Political Science from San Francisco
State University, his Juris Doctor from the University of
San Francisco and his Master in Taxation from New
York University. He started his legal career with a
prominent Miami law firm and subsequently joined the
local office of a leading worldwide firm where he
became an international partner concentrating in
International Tax Law. For his services to the Italian
community, Piero Salussolia has been knighted by the
Italian Republic. Piero Salussolia is fluent in Italian,
English, Spanish and French.