March 15, 2013
By: Kelly Diamond, Editor
The Cook Islands go out of their way to protect your assets and otherwise leave them alone. The US seems to go out of its way to get those assets.
Cook Islands — and other off-shore locations — prove time and again their loyalty to their trust clients, while the US can’t even pay lip service to it without bringing down the house in fits of laughter!
Recently, I posted a blog about the Cook Islands, and how they fit the bill of BEST FRIEND when it comes to your assets. In that article, I listed some cases where the unwavering judiciary along with the unbreakable trustees defended private assets under some intense political pressure. However, while it feels good to see trustees do their jobs, and judges enforce laws consistently, and even legislators make laws that actually defend individual property rights, let’s take a look at the other side of that coin: that is, what we contrasted the Cook Islands to. Perhaps it was backwards of us to present a solution when the problem was not starkly defined first.
As the Cook Islands judges tend to remain un-phased by the word-play or attempts at lexical manipulations with regard to how they should interpret and subsequently enforce the laws, this speaks to the integrity of their courts, their judiciary and the relevance of their laws. That little latitude is extended shows how serious the Cook Islands is when it comes to the business of offering a premium off-shore asset protection product to those who demand it. However, a trust is NOT a trust is NOT a trust.
Imagine if the US government or creditor came after your assets, and at the first sign of tumult, the trustees buckled. What good was the trust? A straw house in a windstorm about sums up that bit.
Kilker v. Stillman, 2012 WL 5902348 (California Appellate Court District 4, Unpublished, Nov. 26, 2012)
Stillman appraised some soil for the Kilkers who wanted to build a pool on that land. Four years AFTER rendering those services, Stillman settles a trust in Nevada. Four years AFTER settling that trust, the Kilkers brought suit upon Stillman. The defendant openly admits creating the trust for “asset protection” so that “creditors could not go after any equity”. Evidently, this passed for fraudulent intent!
The US courts found that a potential future creditor or claimant can still be a victim of fraud in a general sense. So, while there is no proof Stillman specifically intended to defraud the Kilkers, his intent to protect his assets, in itself, is an act of fraudulent transfer. While provisional legislation exists concerning future creditors, such creditors are expected to be reasonably foreseeable: that an evidentiary and causal link can be made between services rendered and a settlement of a trust (or related action toward asset protection).
There are instances where the writing was on the proverbial wall, and in response individuals establish a trust. In the case of Severance v. Knight-Counihan Co. (1947) 29 Cal.2d 561, 567-568 their sales were falling, their debts were rising, all prior to the settlement of their trust. Given the trend, it was foreseeable, creditors would expect to collect on that debt. In this case, Stillman went four years without a claim from the Kilkers before establishing an asset protection remedy. He then went another four years before finally receiving a claim from them. There was a two-year statute of limitations on the trust for any fraudulent claims in the state of Nevada. While the defendant and plaintiffs all reside in California, the trust was established under Nevada law. California enacted the Uniform Fraudulent Transfer Act (UFTA). The CA courts made their determinations based on this… and their very loose interpretation of it. So, the fact that Nevada also subscribes to this legislation in their state, justifies their ruling and allows the ruling to stand, per the judges.
We can gnash our teeth over the pathetic foundations of the California courts’ rulings, but to what end? The realities remain the same: the courts will trample your contracts and seize your wealth, and no state or trust company in the US will do a thing about it.
The fact that judges would equate the intent to protect assets to the intent to fraudulently transfer funds is cause for concern. Those judges exist, and they set some very REAL precedent with regard to such financial remedies. That jurisdictions cross state lines, and citizens enjoy no safeguards from the seizures by other states, demonstrates the feeble protections (if you can even call them that with a straight face) offered by American courts and laws.
In marketing, we call this “failure to deliver on the brand promise”. A trust is virtually meaningless in the United States because there is no means by which a trustee can follow through with their promise to protect their clients’ assets from government action. Sadly, it is the US government that seems to be in the business of going after individual wealth the most. The tragedy lies in the shift from “protecting your property (i.e. wealth and assets) is a virtue and a right” to “protecting your property is criminal and fraudulent”!
The sole purpose of services and products like trusts and LLCs is to protect assets. That said, imagine the implications surrounding a court ruling finding “intent to protect assets from future (unknown and unpredictable) creditors” as tantamount to fraudulent transfer of funds. So ANYONE establishing an LLC or trust is engaging in a fraudulent act? But said fraud cannot be detected when the trusts or LLCs are set up… it is adjudicated years after the fact by a court because someone somewhere at some time can file suit? Wow.
The Cook Islands maintain their title as Assets’ Best Friend: ONE year statute of limitations on claims of fraudulent transfer… not two. That year is enforced by the courts and trust companies. Intent of fraudulent transfer MUST be proven beyond a reasonable doubt before the trustees loosen their grip on the assets. “I want to protect my assets” does not constitute such intentions in the Cook Islands. The statutes of the International Trust Amendment Act (ITAA) are clear. Section 13B is the global standard bearer for offshore asset protection… not only for how it is written, but how it is enforced and protected by the Cook Island judges. The dichotomy is obvious: Loyalty (offshore) vs Deception (domestic).
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