In general terms, a Private Trust Company (“PTC”) is a special purpose vehicle established to act as trustee of a family trust or several related trusts. The board of directors of the PTC controls it and as such can direct the fiduciary function of trustee.

The directors of the PTC will usually comprise family members, advisers to the family (e.g. lawyer, accountant, investment adviser) and several client directors from the client’s family office or corporate service provider. The exact make-up of the board would be determined according to the client’s wishes, along with legal and tax advice received.

Benefits of a PTC

Retention of control: Some individuals may be hesitant to cede complete control over their assets by settling them on a conventional trust and perhaps look to reserve certain powers within the trust deed. Whilst certain powers can be reserved to settlors, the more influence the settlor exerts the greater the risk of prejudicing the objectives of the trust. This is particularly prevalent in civil law jurisdictions where trusts are not widely recognised and the concept of relinquishing control over family assets may be alien. Nevertheless, the requirement to put effective succession planning in place is as recognised in these jurisdictions as in common law jurisdictions, especially where there are, for example, forced heirship rules or Sharia law considerations which make succession planning problematic.

Succession planning: In respect of succession planning, the board of the PTC can be constructed to provide continuity through the involvement of family members and trusted advisers. Similarly, the board is likely to have a close understanding of the family business enabling more efficient and knowledgeable management of the trust’s assets. Board members may be added or removed to keep in line with changing requirements of the family.

Protection of family wealth and flexibility for the future: The PTC enables family wealth to be safeguarded through the generations. The structure also offers a controlled yet flexible way of distributing benefit for future generations, including:

  • The Board of Trustees can make decisions instantaneously.
  • Family members and/or trusted advisers can be appointed to the Board of the Trustees.

Confidentiality and anonymity: By transferring assets to a structure, this takes away the individual’s name as the owner of the asset, of particular concern today when information is readily available by means of the internet. This is also of benefit to those individuals who reside in jurisdictions where there is concern for their personal security.

Forced heirship: The inheritance rules of some countries impose restrictions on a person’s ability to give assets to persons whom they wish to benefit whilst certain relatives are still alive. Depending on the circumstances of the particular case, use of an Isle of Man trust may enable such benefit to be validly conferred under Isle of Man law.

Centralised holding and reporting: The use of a structure enables assets to be held and maintained centrally. In addition, income generated as a result of the assets being held within the structure can be consolidated and reported back to the client in a concise and user-friendly manner.

Ability to bring in a wide variety of asset classes: A wide variety of assets can be held within both the PTC and the traditional trust structures, including, but not limited to:

  • Yachts and private jets,
  • Residential and commercial property,
  • Private and operating companies,
  • Single line stock,
  • Intellectual property,
  • Art and antiques.

Tax considerations: Tax planning is usually secondary to succession planning as a reason for establishing a PTC. That said, however, there may be some tax benefits in certain jurisdictions. In any event, tax advice will be important in each case to ensure that adverse tax consequences do not arise by virtue of the place of management and control of the PTC.

In summary a PTC is a good example of complex structural planning, in which a combination of different structures, using the excellent legislative and regulatory frameworks of respected international financial centres, provides a governance and succession planning result that is far greater than the sum of its constituent parts. This sort of complex planning is the value that an international multi-family office, such as Boston, can bring to the wealth management process for families.