The real cost of a Cook Islands trust

Full transcript

0:10 Hi, I’m Max Dilendorf. I’m a New York-based attorney, and I help clients build smart onshore and offshore structures to protect and grow their wealth.

0:21 Today, I want to talk about something that comes up often—but isn’t always fully understood—when it comes to offshore planning: Cook Islands Trusts.

0:32 Now, these trusts are known for their asset protection features.

0:35 And for the right client, they can be effective. But here’s the reality—they’re complex, expensive, and they come with trade-offs. They also have certain weak points that U.S. creditors may try to exploit—and we’ll get into those in future episodes.

0:54 Let’s take a common setup as an example: a U.S. resident sets up a Cook Islands Trust.

1:01 That trust owns a Nevis LLC. The LLC opens a bank account in Switzerland.

1:10 From the outside, it looks straightforward. But from a U.S. tax perspective, it comes with multiple layers of compliance and reporting: Here’s what you’re potentially filing just to stay compliant: • Form 3520 – when you transfer assets into the trust • Form 3520-A – every year, filed by the trustee • Form 8938 – if your foreign financial assets exceed FATCA thresholds • FBAR (FinCEN Form 114) – if your foreign accounts total over $10,000 • Form 5471 – if the Nevis LLC is classified as a controlled foreign corporation • Form 8858 – if the LLC is a disregarded entity And don’t forget Form 709 – the Gift Tax Return, which may be required when transferring assets into an irrevocable trust, even if no gift tax is due. These aren’t forms you want to file on TurboTax.

2:06 You’ll need a CPA who’s well experienced in international structures. And they don’t come cheap. You’re looking at $10,000 and $15,000 per year just on tax preparation and compliance.

2:21 Then there’s the maintenance cost. A Cook Islands trustee typically charges around $4,000 annually. A trust protector might add another $1,000. Then there are fees for the Nevis LLC, the Swiss bank account, legal updates, and more.

2:39 Altogether, you’re looking at $15,000 to $20,000 per year just to keep the structure running. Is It Worth It? When a Cook Islands Trust Makes Sense So, is it worth it? For the right client—yes.

2:52 For example, if you’re safeguarding a large crypto portfolio, international real estate, or building a legacy plan for future generations, it can be a wonderful tool.

3:04 But here’s the key thing to understand: establishing a Cook Islands Trust means giving up legal ownership of the assets. It’s irrevocable. You’re transferring control to a third-party trustee. That’s what gives the structure its strength—but it’s also a serious planning step. And that’s why strategic planning matters: in some cases, you can achieve many of the same goals—with a U.S. domestic trust and estate planning tools, without the offshore complexity and cost. Every situation needs to be carefully reviewed—goals, risk profile, family structure, and asset mix.

3:49 If you’re considering offshore planning—or just trying to figure out if it’s the right move—this channel is here to walk you through it, step by step.

3:59 Thanks for watching. I’m Max Dilendorf—subscribe for more, and I’ll see you in the next episode.

A transcript of the recording, so it reads as speech rather than as prose. It explains the law in general terms and is not advice on your own situation, which turns on facts this video cannot know.