The International Relationship Property Trust Act (2021) passed on 1 December by the Government of the Cook Islands.
The new law ensures trust assets remain intact, and not be divided and distributed to the spouses, in the event of their separation – and that the careful planning and foresight of the settlers and careful management by the trustees remains intact.
“Many jurisdictions have developed law, which allows parties to agree on how their assets are to be treated in the event of divorce.” stated Reuben Tylor Director of Trustees & Fiduciaries Cook Islands (T&F), who developed the concept of the Relationship Property Trust Act.
“None of them proceed on the basis that the assets will be retained intact, and managed intact for the benefit of the spouses and their issue”
Reuben has been involved in the offshore trust industry, both as lawyer, and shareholder of trustee companies, since the early 1980’s. Having worked with high net worth trusts for nearly four decades, he’s been involved with a number of families who have used trusts, not only to manage and accumulate wealth, but also to successfully transfer that wealth from one generation across to another.
Unfortunately, there have also been cases where spouses who settled the trust have divorced and the results of that have not been successful.
For several decades Reuben advised a very wealthy couple who set up a trust to provide for the financial needs of their issue.
In 2018 the couple separated and the very substantial assets of the trust became the subject of matrimonial property proceedings. After several years of very costly litigation the trust assets were liquidated at a considerable discount, and then distributed by the Court to the spouses.
The erosion of value was considerable and the prospective interests of the children and grandchildren of the couple ignored. After decades of successful investment and careful administration, the whole purpose of the trust was destroyed.
After carrying out extensive research, and consulting several senior international lawyers in this field, Reuben was unable to identify a clean structure in any country which ensured trust assets would remain intact, and not be divided and distributed to the spouses, in the event of their separation.
The conclusion was that new legislation was needed to achieve this.
In 2020, Reuben worked with prominent US-based foreign trust specialist, Elizabeth Morgan to develop the concept of the Relationship Property Trust and after its approval by the government of the Cook Islands, worked with New Zealand parliamentary draftsmen to produce the International Relationship Property Trust Act (2021).
“In summary, the International Relationship Property Trust Act (2021) gives Estate Planners a new tool to prevent the assets of high net worth families being broken up in the event of a divorce. Ultimately, the emphasis in the legislation is on retaining social cohesion and traditional Judeo-Christian family values.”