Trust is not something new. The concept of trust dates back to Middle Ages and has become a tool of interest for wealth management in recent years. However, trust can sound complicated at first glance, and sources for people to understand its features and advantages are lacking.
Alan Taylor, Director of Metis Global (Cook Islands) Limited and a legal veteran, published an article in the latest issue of the Asia-Pacific Journal of the Chartered Insurance Institution, explaining how a trust can help protect personal assets, and that the Cook Islands has become a top jurisdiction for trust formation by enacting comprehensive trust laws.
Matter of Trust
Alan Taylor highlights how trusts can act as insurance in wealth management
The trust is a creation of English common law and for centuries has proved to be ideal for wealth management purposes. Through legislation, the Cook Islands has enhanced the common law trust concept allowing trustees to better carry out their duty to preserve and protect trust assets. The following will highlight the uses and advantages of trusts in modern society and why Cook Islands trusts are considered to be a leader in wealth planning.
The trust is used for a variety of wealth planning purposes, most notably:
• Succession - having one’s assets and business interests pass to the next generation in accordance with specific wishes; • Wealth protection - protecting assets from those who by force, legislation or litigation may try to take them away;
• Avoidance of probate – remove the need for probate on death by removing assets from the settlor’s estate now;
• Pre-migration – to structure assets and affairs in a fiscally efficient manner before becoming resident in another country;
• Confidentiality – to allow the settlor and his/her family to benefit from their assets and conduct their business without unnecessary disclosure of personal information.
The trust can hold, directly or indirectly, all types of assets whether moveable or immovable, bankable or non-bankable. Those assets range from savings plans and investment portfolios to real estate, from shares in private holding and trading companies to luxury assets such as yachts, planes and works of art.
Trusts as Insurance
A carefully constructed trust will act as insurance, protecting its assets against various claims and economic and political uncertainties. The trust’s assets will no longer be available to the settlor’s creditors, family members, business associates or any other party unless provided for by the trust. The settlor can determine how and when a beneficiary will receive assets from the trust.
The trust can also be structured to provide the settlor with varying and appropriate degrees of control over the investment and management of trust assets without compromising the validity of the trust or the benefits it offers.
Cook Islands Trust
The Cook Islands is a sovereign jurisdiction. It has an AML regime rated highly by the FATF as well as well-regulated and licensed trustees. It has developed its trust laws to enhance the protection available to settlors and their assets. The International Trusts Act 1984 provides certainty to the rights of settlors, beneficiaries and those who might claim against trust assets by reference to specific dates and events. In addition, a Cook Islands trust strengthens the asset protection provided by a trust through:
• Forced heirship rules in foreign jurisdictions not affecting the validity of a trust or transfers on to trusts;
• Non-recognition or enforcement of foreign judgements if they are inconsistent with Cook Islands law;
• Permitting dynastic trusts with no fixed termination date.
Since enacting its trust laws, global and regional economic and political uncertainties have seen Cook Islands asset protection become accepted as the best protection available.
Notwithstanding it being a creation of the Middle Ages, the trust has developed to be a modern tool in the management and protection of wealth providing an additional layer of insurance and peace of mind.