Example: Cook Islands

For example, the Cook Islands was a quiet tourist destination in the South Pacific. In an effort to diversify the economy, the legislature enacted laws to develop a competitive tax haven- and financial services business. In 1989, Cook Islands officials recognized the explosive growth potential for asset protection services and developed the first comprehensive legislation to allow the formation of Asset Protection Trusts. The new law eliminated the ambiguities and difficulties which existed with these trusts in other parts of the world and established convenient and flexible rules allowing individuals to accomplish their privacy and asset protection objectives from a single source.

As expected, the market for the asset protection services grew rapidly, largely in response to the unchecked litigation frenzy and what many perceive as increased government and commercial encroachment on individual privacy rights. As the premier provider of these services, the Cook Islands quickly established itself as a leader in financial services and attracted much of the worldwide total business in the field.

The popularity of asset protection and the revenue and capital attracted to the Cook Islands has not gone unnoticed by the other offshore havens. Over the last few years, many of the old line financial centers have passed asset protection legislation or have focused on developing the expertise to attract asset protection business. We receive calls each month from government officials and bankers in aspiring offshore jurisdictions inquiring about the best way to develop a strong asset protection business. New entries include, for example, the nations of Nevis, Belize, Antigua, and Turks and Caicos-each of which is actively promoting its asset protection services.

The generally healthy competition between countries for this business has produced a vast array of creative financial, investment, privacy, and asset protection products. These techniques can be used in combination with a variety of legal entities to produce powerful legal protection. Wealthy American individuals, who can afford the highest priced legal talent, shield their property with elaborate strategies designed by experienced international tax attorneys. The purpose is to blend the right financial product with the proper legal structure to produce a successful result-with the highest degree of financial privacy and asset protection. We will discuss the products that are available and the structures which accommodate these products. First, let’s examine the common characteristics of the offshore havens to see why they attract so much of the money in the world.