What is a Private Trust Company?
For many years, wealthy families have used trusts to protect their wealth and maintain an element of control to avoid providing large sums of money to children in one go (among many other uses).
Over recent years, some families have become more reluctant to give the full control to professional trustees, no matter how well regulated they may be.
A Private Trust Company (“PTC”) is often created to be the trustee of one or more (typically) family trusts, but is not run as a commercial trust company. PTCs are popular with ultra-high net worth families who want to retain significant control over trustee decision-making.
Ownership
As the PTC is a company limited by shares, a shareholding entity must be considered.
Occasionally, the head of the family will want to retain the shares of the PTC. From a tax perspective, it is rarely an issue as the PTC is not intended to be economically significant. The downside of the head retaining the shares is that they will, one day, die, leaving ownership down to the vagaries of the inheritance rules of their jurisdiction (and potential claims against the estate).
An alternative often used is the Purpose Trust.
Administration
A PTC must, in most jurisdictions, be administered by a licensed fiduciary in the jurisdiction. This means that the family is giving away the day to day grind of managing the trust.
The benefit of this is that it can allow the family to focus on the more important decision making aspects of being a trustee.
Purpose Trust
To avoid the issues over personal ownership, the Purpose Trust is often used to create an “orphan structure” – this means that there is no person owning the structure. Typically a non-charitable purpose trust is used, with the purpose of the trust being to hold the shares of the PTC.
The benefit of this is that the Trust can then be used to ensure the board of the PTC is properly controlled.
A Private Trust Company, coupled with our bespoke tax planning, can shelter our client’s wealth for the next generation.
Decision Making
All decision making of a PTC is carried out by the board of directors. It is at this level that a family member is usually involved.
It is important that the right directors are appointed for the PTC. Things important to consider are the residence of the directors, as well as their competence and the privacy rules of a director’s home jurisdiction. They could be resident in a jurisdiction subject to domestic legislation requiring significant disclosure of the PTC.
Control of the board of directors is crucial to the success of the PTC. It is here that the ownership of the PTC is important.
Further Information
If you think a PTC might be a good choice to help manage your family trusts, we would be happy to discuss your options. Please click below to contact Roger Holman or Jon Elphick:-