Appointment as Protector for US citizen/resident and his Cook Island Trust - T1135, TDF 90-22.1 3520. - Canadian-US-Global Incom


Dear Mr Ingram


RE Appointment as Protector for US citizen/resident and his Cook Island Trust


I have lived in Vancouver since 1967 and remember the times when you were so active.  Hoping you are still well and active I have a small problem and wondered if you can solve it and for how much?


My long-time friend in San Francisco is a financial planner managing over $50m for his clients.  He has a family and is establishing some sort of family trust in the Cook Islands.  As he has been advised that it is better to have a Protector who does not reside in the US, he asked if I could act as his protector.  He trusts me, I have will little if any authority, and I do not receive any income from this position.  I understand my position as protector is simply to ensure the Cook Island manager/trustee does not do anything untoward.


My concern is that if by signing on as protector, does my name appear on any customs data banks or income tax data banks which could tag me and prevent me from visiting the US, and/or have to submit a US or additional Canadian tax return.  Maybe there are other issues?  I am a Canadian citizen.


I attach a copy of the document and look forward to hearing from you. 


 Yours truly,

xxxxxxxxxx xxxxxxxxxxxx


david ingram replies:

Do not touch it unless you are prepared to be involved in a big way.  for instance, although you say you have little or not power, you have immense power as shown in items 13(d), 14(b), 14(c), 19(b), 19(c). 

I have not read the document closely but only skimmed it.

Serving as a protector without remuneration males no sense unless you are repaying an old debt. You have the right to change trustees for instance.  That is big time and is not done without hours, if not days, of thought.  You have the power to remove the trust from the Cook Islands when you change trustees.

And, no matter what the document seems to say, you have a fiduciary duty to be sure that what they are doing conforms to the terms and you clearly have a duty to make sure that it falls within US tax law.  You are, after all, the "PROTECTOR".

This 2004 dissertation will show you a bit of what i mean.  ALL TRUSTS DO NOT GO WELL.

Your friend must still answer yes to question 7 on schedule B and file a TDF-90-22.1 to report his offshore trust to the Department of Treasury.  I say this because he specifically reserves the right to substitute assets  without the consent of the Trustee, the Protector (you), the beneficiaries or any other person.  This would qualify as signing authority under question 7, Schedule B of the US 1040 return. 

He must also answer yes to Question 8 on schedule B and fill in form 3520 to report his Foreign Trust.

You also ask about going to the US, etc.  Nothing you did as a Protector should stop your entry to the USA unless it were to become defined as a tax fraud, etc.  In which case, your involvement could cause some embarrassment.

So if you are doing your unpaid job as the PROTECTOR and checking to make sure that your friend is answering yes to questions 7 and 8 on his tax return, and that he is filling in the proper forms, you should be okay.

However, (and I really hate to do this), Jerome Schneider, a Vancouver Accountant who was specializing in setting up offshore trusts for his clients, did serve 6 months in actual jail and about another 8 months in custody while negotiating, and then also paid a $100,000 fine.  His light sentence was only because he turned in 1072 clients to the IRS and Treasury.  He was arrested on a trip to San Francisco.  And, he was encouraging his clients not to fill in the TDF-90 and 3520 forms for their offshore trusts.

Offshore accounts are in the gun sights of both the CRA and IRS and one must be extremely careful about any involvement. 

Because you have no financial interest and are not the settler, you do not have to file Canadian form T1135 to report the trust. Canada is looking for ownership of offshore accounts while the US TDF for looks for signing authority and includes cub scout, girl guide, church, office Xmas party and any other account you have signing authority over.  

But,  anyone with an RBC, or TD Waterhouse or SEABANK Capital CANADIAN securities accounts with over $100,000 of US funds or securities in them, MUST file the T1135 or face up to $2,500 fines per year. this would also apply if you had a $20,000 time share in Mexico that you rented every second year, a $35,000 timeshare in Hawaii  that you rented out and $50,000 in an RBC account.  The three amounts are over $100,000 and all must be reported on T1135.

see more at

Hope this helps


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