APT – asset protection trust

Settlor – person who transfers assets to the trust

Protector – person (or company) appointed in the trust deed with power to remove / appoint the trustee  

Trustee –  person (or company) who holds title to the trust assets and administers the trust

Beneficiary – persons who are eligible to benefit from the trust

Onshore jurisdiction – the country where the settlor lives

In 1989 the Cook Islands became the first country to enact a comprehensive set of laws protecting the assets of trusts from 3rd party creditors. Although many jurisdictions have now copied parts of our law, these are piecemeal, and incomplete, leaving transfers of assets exposed to challenge. Cook Islands law is internationally recognised as giving a Settlor the highest level of protection of any jurisdiction, with more than 30 years of Court decision defining what can and cannot be done. Unlike other offshore jurisdictions, asset protection trusts dominate all other offshore business in the Cook Islands.

Cook Islands law

  • imposes strict time limits on creditors seeking to set aside transfers to a trust.
  • requires a creditor to prove beyond reasonable doubt that the Settlor transferred the assets with an intent to defraud that creditor
  • does not recognise foreign judgments setting aside transfers of assets to a trust.
  • does not recognise the concept of bankruptcy

Experts are unanimous that domestic US APT’s offered in States like Wyoming and Delaware, might work if the trustee, the creditor and the assets claimed are all located in the relevant State. Federal law defeats all other structures.


Unlike most jurisdictions, we do not charge a fee based on total funds under management. Our standard fee for establishing an APT is US$3,520.00. Some clients will need additional consulting fees which are charged on a time cost basis at US$400 per hour. Standard annual fees in year 2 onwards are US$3,710.00.

You obviously need to satisfy yourself as to the reliability and competence of your trustee company. Trustee companies in the Cook Islands are subject to strict regulation by the Financial Services Commission (see FSC website: In addition an important requirement for a trustee of an APT, is it must not be exposed to Courts of any jurisdiction outside of the Cook Islands. If the trustee company has its administration or operations outside of the Cook Islands, the integrity of an apt is compromised. 

The ownership, management and control of T&F is specially structured to protect clients against litigation. Not only our directors, but also our shareholders in addition to our management and operations are located in the Cook Islands. Because of this T&F has reduced exposure to attempts to enforce a judgment of an onshore Court in a third jurisdiction.

There is no restriction on the type of assets able to be held by an APT, but we do distinguish how they are held. We normally categorise assets as either “hot” or “cold”. Cold assets, such as cash held in a bank account, or a share portfolio, can be held directly by the trustee.  Hot assets are those which carry the potential for liability, such as real estate, motor vehicles, unpaid shares, etc. These cannot be held directly by the trustee, and instead must be held via an intermediate limited liability entity. (see Management Structures)

An APT can hold real estate in the onshore jurisdiction, but 2 factors apply.

  • real estate is treated as a “hot” asset and therefore must be held by an intermediary entity such as a Cook Islands LLC
  • in the event of a challenge by a creditor, a Court in an onshore jurisdiction is not likely to recognise the protective provisions of Cook Islands law as applying to real estate in its own jurisdiction.

When assets of the trust are “hot”, they must be held by a limited liability intermediary. An intermediary entity is also desirable when active management of trust assets is required. T&F is not qualified to provide full service asset management.

Some clients prefer to transfer all their assets into their APT leaving nothing for a creditor to attack. Others prefer to transfer 10-20% only of their assets into their APT, (normally their more liquid assets), so they do not lose everything if financial disaster strikes. If you already face litigation, it is likely you will be able to transfer part only of your assets. (see following para)

It is advisable for you to appoint an attorney to advise you on your obligations under your domestic law, particularly if you are already facing litigation.

In brief, yes, but extra care is needed to;

  1. a) ensure clients do not contravene fraudulent transfer laws in their home jurisdiction, and
  2. b) gain the protection of Cook Islands law.

In these cases;

  1. c) it is essential for the client to have an attorney in their home jurisdiction as well as take advice from experts in the trust company.
  2. d) assets will normally be held outside of the client’s home jurisdiction directly by the trustee company as sole trustee.

 An affidavit of solvency must be sworn on formation of an APT, and it is necessary to address any potential liability at this time. It may be necessary for a client to;

  1. Retain sufficient assets onshore to meet the imminent claim, or
  2. Direct the trustee to settle the imminent claim if it eventuates


Again, care must be taken and it is advisable to appoint an attorney in the client’s home jurisdiction to make sure no fraudulent transfer laws are broken.

An affidavit of solvency must be sworn on formation of an APT, and it is advisable to address this potential liability at this time.

The power of appointment and removal of trustees in normally vested in the hands of the Protector. A Protector may also have other powers, for example a protector will often have the right to veto any proposed distributions to beneficiaries. The first Protector is appointed in the trust deed and is often the client, or a person trusteed by the client. If litigation develops at a later stage, an alternative Protector outside of the onshore jurisdiction must be found (see WHAT HAPPENS IF I AM SUED)

The client always has ultimate control over the trust. The client appoints the Protector, and the Protector has powers to remove the trustee without cause at any time. 

There is considerable flexibility when it comes to control over management of trust assets. Some clients take an arms length position and grant control to the offshore trustee. Others like to retain control, often through an intermediary entity. There are a variety of different management structures which ensure the settlor can continue his investment and business activity without undue difficulty (see Management Structures)

There are several structures designed to allow the settlor to continue investment via the APT with confidence.  

Sole Trustee holding assets directly

T&F act as sole trustee, holding investment accounts with a bank or brokerage house outside of the onshore jurisdiction. Any “hot” assets are held by the trustee via an offshore LLC or IBC.


T&F act as a co-trustee together with an onshore person selected by the settlor. The duties of the co-trustees may be divided between them. There are 2 relationships given statutory recognition

Custodian/Managing Trustee

The custodian trustee (normally T&F) holds title to trust assts, while the managing trustee (normally the settlor or his advisor) is responsible for managing the investment activity of the trust.

Advisory Trustee

An advisory trustee (normally the settlor or his advisor) is authorised to give advice to the trustee on any matters, but does not qualify as a trustee. Meanwhile the trustee is excused from liability if it acts in accordance with the advice of the advisory trustee. 

Most clients prefer to keep their existing financial advisors and this is facilitated by having assets held either;

  • by an intermediary entity which can be managed by the client’s existing financial advisors
  • by having a foreign custodian hold the assets but managed by the clients existing financial adviser.

When litigation is commenced against a client, the trustees need to decide whether this might result in a threat against the trust assets. If so, then the trustees will consider the following steps;

  1. remove the client from any position of control over the trust
  2. remove any onshore co-trustee
  3. move all liquid assets outside the onshore jurisdiction
  4. liquidate any intermediary entities to bring their underlying assets under direct control of the onshore trustee

These steps are necessary to prevent an onshore Court ordering the client to bring the trust back onshore, or issuing a freezing order against any trust assets within the onshore jurisdiction. (for example, many clients have an onshore Protector, and an onshore court may order the Protector to remove the Cook Is trustee and appoint an onshore trustee instead)

Amongst the many thousands of APTs, there are 2 or 3 cases each year where an onshore Court has ordered this and found the client in contempt. The trustees have 2 things to consider in this situation First, the trustee must take all steps to protect the trust assets. Second, the client is usually a principal beneficiary of the trust and the trustee must act in the clients best interests. These rare situations normally lead to a settlement of any claims.

Unless there are other potential claims outstanding, then the trustee normally restores the previous management structure.

Every settlor will need to take EXPERT advice on tax reporting and filing obligations.

US resident settlors,

The APT will either qualify as a grantor or non-grantor trust.

A grantor trust is treated for both income tax and gift/estate taxes as a see through entity.   

A non-grantor trust is treated as a separate entity and it must file separate returns such as a Form 3520A.  A CPA should be engaged to assist with this process.

There may be an advantage in migrating an existing trust to the Cook Islands, instead of forming a new trust. This is because the protective time limits apply retrospectively to the date of original settlement.

You will need to assess this taking into account the cost of trustee fees and legal fees.  In some cases it may be more sensible to purchase units in T&F’s Asset Protected Unit Trust (pending)

An APT or its intermediary entity can open a foreign bank account. Signing authority is given to the trustees or person controlling the intermediary entity. Some care should be taken to choose a bank which has no presence in the onshore jurisdiction. 

An APT or its intermediary entity can open an account with Capital Security Bank. Visit for more details. 

It is advisable for you to appoint an attorney to advise you on your obligations under your domestic law, particularly if you are already facing litigation.

T&F does not offer investment advice. We encourage clients to carry out their own due diligence on investment services.

DD/KYC is required to be provided by all controlling persons and asset contributors i.e. settlors, protectors and advisors.    You will be asked to provide documents confirming your identity, proof of residential address and tax residency and status.  Details of the beneficiaries should be established but full DD/KYC is not usually required until a distribution is made to that beneficiary.

The source of funds or source of wealth used to accumulate assets being settled on the trust must be clearly identified to ensure that they are not sourced from illegal activity.

You will be asked to provide a current passport or other government issued photo ID, proof of residential address i.e. utility bill, credit card statement, tenancy agreement, Bio form and a self-certification form for tax residency purposes.

There are many types of clients who settle a APT. Prominent are;

  • persons who sell their business and give vendor warranties-more than 50% of business sales subsequently lead to litigation based on these warranties. This is particularly important where the vendor is retiring.
  • persons working in occupations which carry a high risk of liability, again particularly if the person has retired and no longer have insurance cover for past actions.
  • persons in the finance industry
  • persons wishing to protect assets from frivolous legal actions

Once T&F have completed due diligence on a client, a trust can generally settled within 2 weeks.

Should you have any other questions please do not hesitate to contact us on