In the intricate world of wealth management and asset protection, the concept of Private Trust Companies (PTC) has emerged as a strategic solution for affluent families seeking control and flexibility over their assets. A PTC is more than just a financial entity; it’s a vehicle that empowers families to manage their wealth across generations. As we delve into the realm of PTCs, this article explores the regulatory landscape, the advantages they offer, and their typical applications.
PRIVATE TRUST COMPANIES
A Private Trust Company (PTC) is a corporation established by a particular family for the
purpose of acting as trustee of one or more trusts for family members.
REGULATION
In jurisdictions where trust activity is licensed, a PTC would be prohibited from soliciting trust
business from the general public and may only create and administer trusts for a defined family
group.
PTC JURISDICTIONS
A PTC may be incorporated in many jurisdictions, but industry favorites tend to be Bahamas,
BVI, Cayman, Bermuda, New Zealand and Switzerland.
GREATER CONTROL
PTCs give a greater sense of comfort to certain families because they can exert influence over
the PTC through seats on the PTC board, or through controlling the shares of the PTC directly
or indirectly through a charitable or purpose trust.
GREATER FEXIBILITY
Trusts administered by PTCs tend to be more flexible in the permissible scope of activities as
well as the types of assets which may be held in trust. This is because the trustee risk is
largely born by the PTC itself, and to a lesser extent by the service provider administering the
structure.
On the other hand, trusts administered by financial institutions, which tend to be bureaucratic
and risk averse, are typically rather inflexible in terms of day to day administration, types of
assets that may be held in trust, etc.
DIVERSITY OF ASSETS
A PTC can create trusts which hold a wide range of assets, including financial assets, private
equity, operating companies, artworks, aircraft, yachts, etc.
TYPICAL USE
PTCs are most widely utilized by very wealthy family groups who wish to hold important
financial assets as well as operating businesses, and seek professionals to assist in the
administration of such a structure.
DISADVANTAGES
Due to the relative costs involved in creating and managing PTCs, they are suitable only for a
select group of substantial private clients.
ADMINISTRATION
Typically, PTCs are managed by a trust company under a Service Agreement, which establishes
the roles and responsibilities of the service provider, etc.
Family members may sit on the board of the PTC, but since they are typically not experienced
in trust administration, the administration is nonetheless delegated to a service provider. If the
family members do not wish to sit on the board of the PTC, the service provider normally
provides this service as well.
PURPOSE TRUST
In order to resolve succession issues in the event of the death of the shareholder of the PTC, it
is often recommended to establish a purpose trust to hold the shares of the PTC. In addition,
creating a purpose or charitable trust to hold the shares of the PTC may distance the family
from direct ownership and control over the PTC structure, and may improve the tax position
of the family in respect of income arising under the structure.
In the complex realm of wealth management, Private Trust Companies stand as a beacon of control, flexibility, and strategic asset protection for wealthy families. With the ability to influence trustee decisions, administer a diverse array of assets, and tailor trusts to individual needs, PTCs have emerged as an essential tool for those with substantial resources. While their advantages are compelling, it’s essential to acknowledge that PTCs are suitable for a select group of substantial private clients due to the associated costs. As families seek avenues to preserve and enhance their legacies, the Private Trust Company framework offers a compelling solution that bridges financial empowerment and familial continuity.
