Five key questions to consider before setting up a Private Trust Company

1. What is a Private Trust Company?

A private trust company, or PTC as it is commonly known, is a useful vehicle to consider in the planning and establishment of trust structures for high-net-worth and ultra-high-net-worth families. Rather than transferring assets to a professional service provider’s trustee company, these clients may prefer to establish their own corporate trustee to be the trustee of the trusts which they plan to create.

2. What are the key drivers for a client to set up a PTC?

Several factors might influence a client's decision to set up a PTC. These can include the desire to maintain a greater degree of control over the trust structure, the need for confidentiality, or the importance of having trustees who understand the assets within the trust (such as a family business) and can make quick decisions when necessary. A PTC also offers flexibility, making it easier to change the professional services provider at the board level without changing the trustee itself, which can be a more complicated process.

3. What is the role of the directors of a PTC?

Like any other company a PTC needs a board of directors. The board of directors will frequently be comprised of a mix of family members and professionals. Having family members on the board allows the family to be part of and retain a degree of influence over decision-making within the trust, whilst professionals will add good governance, experience and impartiality to the decision-making process.

4. What ownership structures are available for a PTC?

By its very nature of being a company, a PTC will have shares in issue and those shares need to be owned by someone. The ownership structure selected for a PTC will be influenced by the particular circumstances (including family dynamics and tax considerations) and wishes of the individual client. 

One option for consideration is for the shares of the PTC to be held directly by the client and other family members; alternatively, the PTC may be owned by a trust, purpose trust, or foundation. We discuss each of those options hereunder.

Direct ownership by the client or their family

Whilst direct ownership by the client and/or other members of the client’s family may be the simplest ownership structure to put in place, it may not necessarily be advisable or suitable. 

PTC shares owned by an individual will be assets in that person’s estate and can create difficulties in the event of death, divorce or insolvency. In the event of divorce, for example, a court might award some of the shares to the former spouse, which would allow them continued control over the trusts. 

Purpose trust 

An alternative to the above is to establish a purpose trust to hold the shares in the PTC. Purpose trusts can often be established for an unlimited period of time, which can be helpful in a dynastic trust situation. With most purpose trusts, it is advisable to have an enforcer, and thought will therefore have to be given as to who should fulfil this role. The enforcer must be a separate entity from the trustee, and it may be that an established professional family adviser or a family member is considered appropriate.

Foundation

A further possibility for consideration is the establishment of a foundation to hold the shares in the PTC. As with a trust, it is usually possible to create such a foundation for an unlimited period of existence and, unlike a company, a foundation does not have shareholders so that ownership issues as to who should own the foundation will not arise.

5. How can Ocorian help in structuring Private Trust Companies?

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.