How and why to set up a Private Trust Company
A private trust company (PTC) is a trust structure used by high net worth individuals wishing to establish and manage their own trust company, usually with the assistance of family members and trusted advisers.
A PTC is a privately owned company incorporated specifically to act as trustee of one or more family trusts.
Like any other company, a PTC is run by its board of directors, who in the case of a PTC make the trustee decisions. Whilst run by the board of directors, PTCs (and the underlying trust for which they act as trustee) are usually administered by a professional trustee who is experienced at carrying out trust and corporate administration.
The incorporation of an Isle of Man PTC is the same as for any other Isle of Man company with an application being made to the Isle of Man Companies Registry by an authorised corporate service provider. Incorporation can take as little as one hour.
As the PTC will be run by its board of directors, careful thought needs to be given to the choice of directors to ensure that the PTC – and ultimately the underlying trusts – are run properly whilst avoiding potential pitfalls regarding management and control.
The PTC and the trusts for which it acts as trustee will often be administered by a professional administrator (pursuant to an administration agreement) who knows how to administer trusts/companies in accordance with the local laws.
One of the major advantages of a PTC structure is the retention of a greater degree of control over the trust affairs without compromising the validity of the family trusts. Clients can compose the board of directors themselves with family members and trusted advisers who have a heightened knowledge of the family’s business and financial affairs, and who are empathetic to the needs of the beneficiaries. As well as the composition of the board, careful thought needs to be given to who will have the power to appoint and remove its directors.
Another benefit of a PTC is that ownership of the structure can remain confidential when structured with the use of, for example, a purpose trust. PTCs can also enable confidential philanthropic payments to be made whilst ensuring the person managing the structure understands the thought process in providing for such causes.
Professional trustees are always aware of their liability and the risk of being sued, not only by beneficiaries but also third parties. As a result, professional trustees are reluctant to take ownership of assets or participate in ventures where substantial risks may be present. PTCs, due to the composition of the board, can provide for riskier investments to be included in the structure if desired.
PTC structures are bespoke vehicles which can provide many benefits, and can be more flexible and speedier than other trust structures. They are not for everyone though and careful consideration should be given at the outset and professional advice sought.
If you would like more information please contact us using the details below.