Nevis Trust vs Cook Islands Trust: Which Offers Better Protection for North Americans?

Introduction to Offshore Trusts

Trusts have become an intergenerational tool to preserve wealth. They are quite powerful because they're based on the English principle of relinquishing ownership, especially when they are established in the right jurisdictions. 

The level of protection of any given country lies in its legislation, with certain factors being key. No enforcement of foreign judgments, high demands for starting legal action, and a short statute of limitations are some of these factors. 

Today, we compare two of the strongest of the so-called offshore trusts: Nevis trust vs Cook Islands. The former is an island, part of the jurisdiction of Saint Kitts and Nevis, and the latter, a nation composed of several islands in the South Pacific.

Quick Summary of Trust Options

In our days, there are only a handful of jurisdictions that offer the level of protection that makes a trust worthy of your time. To the above-mentioned, we can add Belize, the BVI, Jersey, and the Cayman Islands. Furthermore, some US states, like Nevada, South Dakota, and Delaware, can be added to this list.

As you see, the list is not that long. It's not that trusts don't exist in other places; it's that these legal frameworks are specially geared for maximum protection. Moreover, they are aimed at families with international assets or global investments. 

Why Choose an Offshore Trust?

Firstly, we need to establish what an offshore trust is. Due to the bad press this word has had, the concept of offshore trust can lead to misunderstandings and misconceptions.

There's no need to clarify that the term offshore means away from the shore. In general, it refers to an island that is a few miles away from the mainland. Although in the financial world it has had different meanings, today, it simply refers to a jurisdiction that somehow benefits the global investor. In Nevis, for example, there is no tax on foreign assets. What does it mean in practical terms?

If your assets inside the trust are located outside of Nevis, they won't be taxable in the jurisdiction of Nevis. Nevertheless, this doesn’t make you tax exempt in your country of residency or tax residency, and you'll have to declare them before the IRS or the corresponding authority.

Overview of Trust Types

Revocable trust 

As its name indicates, this is a structure that you can change or cancel at any time. This makes it uniquely flexible, as you can expect to gain some of the control back. For the same reason, it is more vulnerable than traditional trusts.

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Irrevocable trust

Once the trust has been established and the assets have been transferred, the trust cannot be changed or revoked. This means a total relinquish of control on the side of the settlor, but the ultimate protection for the assets.

Discretionary trust

It grants the trustee the faculty to make decisions about the assets. The fact that they can change how to distribute the income adds a layer of flexibility to the strategy.

What Is a Cook Islands Trust?

Key Features

This structure is regulated by the International Trust Act of 1984, which establishes a set of convenient rules for those who want to protect their assets in this South Pacific region. 

Its main strength is the non-recognition of foreign judgments, which makes it much harder for potential claimants to start legal action even if they were successful in foreign courts. Furthermore, a tight statute of limitations leaves a short window for claimants. 

All these characteristics make it ideal for families or individuals who have a large amount of assets and complex structures.

Pros and Cons

Having a trust in the Cook Islands creates a firewall keeping all potential threats away from the family's estate. In matters of protection, there is hardly a better option than the Cook Islands. Only a few jurisdictions can withstand a comparison against it. 

There's inevitably a con to all this, that is, high protection comes with full relinquishment of control. Anyway, this is part of the deal if you truly want an unbreakable structure.

What Is a Nevis Trust?

Key Features

On the other side of the world and rocked by waters of a totally different sea, lies the island of Nevis. The jurisdiction is part of a country called the Federation of Saint Kitts and Nevis.

It has the same level of protection as its South Pacific cousin, since it doesn't recognize rulings from foreign courts either. Nevis adds yet another layer by stipulating a bond of $100,000 for anyone starting a lawsuit against a local trust. As for the statute of limitations, the time frame is 2 years after the settlement. 

Mundo expert's opinion by Karina Dinsberg: “When the editorial team approached me to request my opinion about where I stand between Nevis and Saint Kitts, my answer was straight: it entirely depends on the case. When providing financial services, it’s very hard to establish a one-size-fits-all solution. This is why my recommendation to Mundo readers is that they discuss their strategy in detail with their experts, and that they reach the best solution for that particular strategy. The decision on whether Nevis or the Cook Islands should be strictly based on the extent of the assets, the location, and the trust purpose, whether it is for asset protection, estate planning, or charity”. 

Pricing

Mundo presents a convenient package system in which the cost can be adapted to the needs of the settlor. Starting with a bronze package, which includes the basics, you can escalate and obtain higher benefits. While the bronze level is mainly designed for the most experienced ones, the gold option is more comprehensive. The latter is ideal for beginners or for experts who want to delegate.

How much does it cost to set up a trust? Mundo’s packages

Bronze 

• Trust registered agent
• Trust registered address
• Preparation of all constitutional drafts
• Registered agent for the private trust company
• Registered address for the private trust company
• Preparation of all constitutional drafts 
• Courier services of the originals from Nevis

Silver

• All benefits from the bronze package plus
• Drafting the deed of trust
• Consultation with an expert lawyer specializing in local trusts
• LLC in Nevis to hold assets on behalf of the trust
• Registered agent for the LLC
• Registered address for the LLC
• Preparation of constitutional drafts for the LLC

Gold

• All benefits from the silver package plus
• Legal opinion of an independent trust lawyer specialized in Nevis, stating that the structure is in accordance with the local legislation

Optional services and maintenance (can apply to any package)

• Accounting services for the first year
• Corporate bank account for either the trust or the LLC, plus notarized copies for opening the said account
• Subsequently yearly costs
• Annual renewal of the trust
• Annual renewal of the PTC
• Annual renewal of the LLC

Pros and Cons

One of the vital pros that families find in Nevis is its territorial taxation. This means that all the assets in a local trust, provided they are located abroad, are exempt from taxation on the island. High levels of confidentiality are much appreciated in such situations, as some families don't want the public to know about their wealth for obvious safety reasons. Add a green check mark to this one because there are no public records of trusts in Nevis. The settlor’s information will appear in the registered agent’s records.

Comparative Analysis of Trusts

When looking at both island nations, they may seem identical, like two drops of water. But like two drops of water, they present some minor differences. It might be useful for the reader to see all the key features in a table to quickly grasp the contrast.

Cook Islands vs Nevis trust

Disclaimer: all the information provided in this article may be inaccurate or outdated at the time of reading. This article doesn't constitute legal or tax advice. Updated information, relevant to the specific case, will be provided only through formal consultations with the Mundo team.

Conclusion 

The conclusion is evident: both structures are highly similar. A factor that stands out in favor of Nevis is that it stipulates a $100,000 bond for anyone who wants to start a claim. Another difference between the Cook Islands vs Nevis is the uses. Since the former is backed by years of history and reputation, it's usually recommended for complex structures and highly risky cases. It is therefore more costly than its counterpart. On the other hand, the Nevis trust constitutes the most cost-effective option for middle-income families, and simple approaches to estate planning or providing for the loved ones. It’s also the best alternative for those trying to protect a single asset, like a house or a bank account. 

Accounting 

Being tax-free on the island of Nevis doesn't mean entirely free of responsibilities. Nevis trusts are subject to accounting requirements and reporting. Please download our FAQ guide below for details on accounting, maintenance, and reporting. 

Download our FAQ guide on Nevis trusts

Note: the above guide only introduces requirements on the island of Nevis, but it doesn’t contemplate any other requirements you may be subject to in other jurisdictions. 

Final thoughts on Cook Islands vs Nevis: which one to choose?

At the end of the day, choosing a trust is about choosing the right jurisdiction. For them to be effective, there must be key pillars holding them together, and in this article, we’ve gone through the most important ones. When we make a comparison of Nevis vs Cook Islands, it's clear that neither of them lacks the strength to protect your assets: the difference lies mainly in price and complexity. 

Given that Nevis has been proven to be highly successful as an asset protection jurisdiction, and since it’s more cost-effective, it’s among our favorite alternatives. 

Who is Mundo

We are a journal and a team focused on services for international investors. Besides trusts, we can help you open foundations, companies, bank accounts, and acquire real estate. Mundo has a long history of helping clients achieve their goals, and the skills and knowledge of all our experts combined might be just what you need for the next step in your financial plan. Contact us today and tell us about your inquiry.

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