Cook Islands Trust for Brazilians: Law, Limits and Tax

The Cook Islands trust follows the International Trusts Act 1984 and limits claims by the settlor's creditors, but it does not change taxation or the duty to report in Brazil. Under Law No. 14,754/2023 (Lei 14.754/2023), art. 10, the assets remain the settlor's until distribution or death. The trust organizes assets and neither hides nor shields anything.

This guide sticks to what the official text of the two laws says. For an overview of trusts, see offshore trust for Brazilians. For the legal landscape on creditors, see protecting assets from creditors.

What does Cook Islands law say about the international trust?

The law is the International Trusts Act 1984 (No. 14), in force since December 27, 1984 and amended several times, including in 1989, 1991, 1995-96 and 1999. The consolidated text is on the Cook Islands' official legislation portal (cookislandslaws.gov.ck). A common mistake: citing the law as "from 1989." That is the year of an important amendment, not of the law.

The most-cited points in Part 2 of the law:

Read section 13B in full before any decision: the exceptions and definitions change the outcome.

Does Cook Islands law stop a creditor from reaching the assets?

It does not stop it. Section 13B allows the creditor to reach the transferred assets if the creditor proves, beyond reasonable doubt, that the settlor acted with the principal intent of defrauding the creditor and was left without assets to pay. The burden of proof is on the creditor. The trust's liability is limited to the transferred assets and what they earned.

There is also a deadline. Under 13B(3), the transfer is deemed not fraudulent if it occurs more than 2 years after the creditor's right arose. If it occurs earlier, the creditor must file the action in the Cook Islands within 1 year of the transfer. Section 13K defines where and how the action is brought. The law does not accept the idea of "total shielding": anyone who transfers assets while already in debt, or close to being sued, faces exactly this section.

How does Law 14,754/2023 treat the trust in Brazil?

Art. 10 of Law 14,754/2023 says that the assets and rights of the foreign trust remain under the settlor's ownership after the trust is created. They pass to the beneficiary only on distribution or on the settlor's death, whichever comes first. The transfer may be considered earlier if the settlor irrevocably gives up the right over part of the assets (§ 1º).

Practical consequences, all from the legal text itself:

• •Income tax: income and capital gains are considered the owner's on the date they occur and enter individual income tax (IRPF) under the owner's rules (art. 10, § 3º).
• •Controlled entities: if the trust holds a controlled entity abroad, it is treated as held directly by the owner, and the law's rules on controlled entities apply (art. 10, § 4º).
• •Information: the settlor or the beneficiary must ask the trustee for the resources and data needed to pay the tax and comply with obligations in Brazil. If the trustee does not comply, the obligation remains (art. 10, §§ 5º and 8º).
• •Reporting: the trust's assets and rights are reported directly by the owner on the DAA (annual income tax return), at acquisition cost, as of the base date of December 31, 2023 (art. 11).
• •Similar contracts: the rules apply to contracts under foreign law with characteristics similar to those of a trust (art. 13).

Text: Law 14,754/2023. For the full tax picture, see how to reduce taxes with offshore within the law.

Can a Brazilian judge annul the Cook Islands trust?

It may be challenged. Cook Islands law governs the trust, but the debtor and the assets located in Brazil remain subject to Brazilian law. Two concepts matter.

Fraud against creditors (Civil Code, arts. 158 to 165). A debtor who is already insolvent, or who is reduced to insolvency by the act, and makes a gratuitous transfer of assets can have the transaction annulled by unsecured creditors (art. 158). Onerous contracts can also be annulled when the insolvency is notorious or known to the other side (art. 159). The action may be brought against the debtor, whoever contracted with the debtor or third parties in bad faith (art. 161). If annulled, the benefit returns to the pool of assets for the creditors' concurso (art. 165). The deadline to request annulment is four years, counted from the date of the transaction (art. 178, II).

Fraud against enforcement (CPC, art. 792). A disposal or encumbrance is fraud against enforcement, among other cases, when a lawsuit capable of reducing the debtor to insolvency was pending against the debtor (item IV). In that case the act is ineffective with respect to the enforcing creditor (§ 1º).

Note the difference between the deadlines: Cook Islands law uses 2 years and 1 year, and the Civil Code uses four years. Ask a Brazilian lawyer to assess which deadline applies to each asset and each person. Texts: Civil Code and CPC.

How does ITCMD reach the trust?

Law 14,754/2023 treats the change of ownership of the trust's assets as a gratuitous transfer from the settlor to the beneficiary. If it occurs during life, it is a gift. If it results from the settlor's death, it is a transfer causa mortis (art. 10, § 2º).

Complementary Law 227/2026 (Lei Complementar 227/2026) says that ITCMD, the state inheritance and gift tax, applies to transfers causa mortis and gifts arising from contracts abroad with characteristics similar to those of a trust, unless the acquirer's domicile is abroad (art. 148, § 1º). The taxpayer is the successor or the donee (art. 157). The law also defines which State collects, according to the type of asset (arts. 158 and 159). Rates and local rules vary by State: confirm in the legislation of the taxpayer's State. For inheritance planning, see succession planning.

What does the Brazilian settlor need to report?

On the DAA, the trust's assets and rights go on the Assets and Rights form, at acquisition cost and in the owner's name, as provided in art. 11 of Law 14,754/2023. Anyone who had already reported the trust as an asset must replace it with the underlying assets and rights (art. 11, § 1º).

In addition to income tax, the Central Bank requires the declaration of Brazilian capital abroad. Under BCB Resolution 279, the annual declaration is mandatory when the total on the base date of December 31 is equal to or greater than US$ 1,000,000.00 (arts. 9 and 10). Whether the trust counts toward this total depends on the assets and the structure: confirm on the official CBE page.

How much does a Cook Islands trust cost and how is it set up?

There is no official cost table. Fees for the trustee, lawyer and maintenance vary and depend on the assets and the complexity, so ask for a written proposal from more than one provider and compare. The law provides for registration of the trust (Part 3), and the regulations include forms, among them the trustee company certificate. The standing of a licensed trustee in the Cook Islands should be checked with the competent body, and the registration rule and fees in the text of the law itself.

Before signing, define with a Brazilian lawyer: who the settlor is, which powers the settlor keeps (section 13C allows several, but Law 14,754 will treat the settlor as the owner), who the trustee is and how the trustee will deliver information for the DAA. To structure the corporate side, see corporate structures and international tax planning. For an overview, see the offshore asset protection guide.