Preserving generational wealth with Private Trust Companies (PTCs)

Private trust companies (PTCs) have become a favoured choice among high-net-worth individuals (HNWIs) and families, offering a unique blend of control retention and asset structuring.

Unlike the traditional approach, where setting up a trust often meant relinquishing control to a third party, HNWIs are strategically leveraging PTCs to maintain control over their assets, navigate the complexities of modern investments, and secure a lasting legacy for their families.

This evolution in structuring, resembling a corporate model, is particularly pronounced in the Channel Islands, where robust regulations facilitate their establishment. In this article, we explore how PTCs empower clients to enjoy control in managing their assets.

What is a private trust company & how does it help in wealth planning?

A private trust company (PTC) is a popular method for settlors to maintain control over their wealth planning by establishing a company to act as a trustee. This company is governed by a board of directors, including family members, advisors, and a professional trustee.

How does the composition of the board in a PTC ensure control for the settlor & their family?

One of the most popular means of settlers retaining an element of control over their wealth planning is the private trust company (PTC). This creates a company to act as a trustee of a specific trust or trusts and means that the company (and therefore the asset(s) held in trust) are controlled by a board of directors.

Typically, the board will comprise of a combination of the settlor, their family members (partner, children, grandchildren etc.), trusted family advisors, and at least one professional trustee. This balance allows the settlor and their family to retain an element of control as they will typically outnumber the other directors of the company.

What long-term benefits does a PTC offer for preserving family assets?

A Private Trust Company (PTC) offers enduring advantages for safeguarding family assets. By allowing assets to be held in trust and passed down through generations, it circumvents the constraints of traditional trusts. This unique structure ensures seamless continuity and empowers families to retain control over their businesses and assets. 

Consider a successful family business founder seeking to secure the legacy for children, grandchildren, and beyond. Traditionally, a discretionary trust would relinquish control to appointed trustees, potentially leading to diversification decisions conflicting with the founder's intent. In contrast, a PTC grants the founder unparalleled control over trust management, eliminating the constraints of typical trustee duties.

While a professional trustee remains a crucial component in a PTC, compliance with regulatory standards is maintained through a company licensed under relevant laws. This regulated trustee not only ensures legal adherence but also contributes professional governance, technical expertise, and high-quality decision-making. Their role extends beyond legality, serving as an arbiter or advisor in potential conflicts, reinforcing the strength and resilience of the family's asset preservation strategy.

How are HNWIs & families maximising control over their wealth?

Over the last decade, the surge in Private Trust Companies (PTCs) usage has been remarkable. High-net-worth individuals (HNWIs) and families are increasingly hands-on in asset management, demonstrating heightened interest in preserving, protecting, and augmenting their wealth. Cultural shifts, especially in regions like the Far East and Middle East, have fueled this growth as wealth creators seek to maintain control over their successful enterprises.

The appeal of PTCs extends to digital assets, including cryptocurrencies, offering a solution beyond traditional trustee investments. PTCs empower settlors and trustees to navigate non-traditional investment classes while maintaining control.

Despite the control PTCs provide, they function as companies requiring shareholders with voting rights. To ensure these shares are held appropriately, purpose trusts are established with enforcers, often professional trustees or trusted advisors familiar with the family. However, some HNWIs and families find PTCs fall short in granting sufficient control, leading to the emergence of Private Trust Foundations (PTFs). 

How can PTFs transform wealth management strategies for high-net-worth individuals & families? 

Private Trust Foundations (PTFs), a distinctive ownership structure, provide clients with expanded choices beyond traditional companies.

Operating without shareholders, PTFs rely on councils guided by charter rules, making them appealing to certain HNWIs and families. This structure allows for hard-coding rules, enabling founders to appoint children as councillors while maintaining control over family decisions. Sub-councils within PTFs facilitate segmented governance, letting individuals oversee specific portions while collectively deciding on overarching assets. With tools for effective wealth management and succession planning, Guernsey becomes a preferred choice for clients.

Professional trustees play a crucial role in ensuring governance and compliance, offering a blend of family expertise and fiduciary duty. The collaborative nature of PTCs and PTFs promotes information flow for harmonious structuring, emphasising the importance of professional guidance in maintaining balance.

How can Ocorian help?

Ocorian provides a wide range of trust services to help protect and manage private and family wealth.

We will work with you to establish a trust structure that meets your needs and manages your estate in the most effective and efficient way.

At Ocorian, we provide highly experienced trustees and trust administration services for all types of trust including private trust companies, managed trust companies (MTCs) and private unit trusts (PUTs).

Contact Ocorian's private client team for more information on trust services and setting up private trust companies