As a unique type of trustee, a private trust company (PTC) typically serves as a trustee for families with irrevocable asset protection trusts. The legal entity serves just one family, and each family member can be active in managing the company.
A private trust company is not for every family that possesses an incredible amount of wealth. However, your family might discover that the control, privacy, and flexibility offered by setting up a PTC is well worth the high costs and substantial responsibilities. Ultimately, a PTC is a sound financial strategy for wealthy families that want to protect assets for multi-generational transfers.
What Are the Benefits of a Private Trust Company?
A PTC that administers a trust typically enjoys a considerable amount of privacy. You face less strict reporting standards and do not have to deal with the burdensome regulations placed on public trust companies. Families that establish a PTC enjoy considerable control over their financial futures. Nonetheless, just a few states allow the formation of a PTC.
You can expect to cover a few one-time-only set-up costs, but the long-term costs of administering a PTC are substantially lower than the cost of administering other types of trusts. In Wyoming, capital requirements are the lowest of any state in the nation. You are not required by law to run a staffed office or have full-time employees on your payroll. All you have to do in Wyoming is to hire a service firm to handle all administrative functions.
A PTC is a great way to pass on assets to future generations. Unlike a person, the company does not die, move away, or lose interest in managing the trust. It is a legal maneuver that ensures continuity.
Continuity requires a plan for succession that addresses both the management and the ownership of the PTC. Some families might find succession planning a daunting challenge, but creating a succession plan protects the assets in a PTC for generations to come.
Because of low legal fees and no capital requirements, family law attorneys typically establish PTCs in one of four states.
- South Dakota
Why should you establish a PTC instead of a trust in your home state?
You and your family gain more control over a PTC than you would with other types of trusts. The lack of a corporate trustee means only your family decides how to allocate assets through generational transfers of wealth. You choose the individuals who serve in different governance roles, such as appointers, board of managers, and trust company officers.
Although every governance provision influences the operation of a PTC, you can still create different requirements for individual trusts. You can name each of your children to be the head of the investment committee that manages money for his or her trust. As your family’s financial needs change, you can modify the structure of your PTC to accommodate the change.
The four states listed above offer much more trust-friendly laws for families looking to start a PTC. If you live in an unfriendly trust state such as California, establishing a PTC in Wyoming means your trust follows Wyoming’s much friendlier trust statutes. This means you enjoy an almost perpetual trust duration, as well as no state income tax and strong protection against lawsuits and creditors.
Get Help Setting Up a PTC
Before you decide to form a Private Trust Company, discuss your plans with one of our family law attorneys. We can help you set up your PTC in a friendly state like Wyoming and guide you through creating this type of trust. Cloud Peak Law Group helps families with considerable financial assets protect those assets from creditors and lawsuit settlements.
Contact us today to schedule a free case evaluation. We will analyze your financial position to determine how to set up a Private Trust Company for yourself and your family.
Like private wealth management advisory companies, family offices provide financial services for ultra-wealthy clients. Family offices differ from traditional wealth management advisory firms because they offer a complete outsourced solution for affluent families who need financial and investment support. Some of the services delivered by family offices include budgeting, insurance, tax services, and family wealth transfer. A family office also can provide lifestyle management services.
How Are Family Offices Structured?
A family office provides a wide variety of financial services that meet the needs of ultra-wealthy clients. Family offices can be single-family offices (SFOs) or multi-family offices (MFOs). A single-family office provides financial services for one client, while a multi-family office operates the same way as more traditional wealth management firms that serve several clients. The types of services offered by both SFOs and MFOs differ significantly. For example, a client might need advice from a wide range of financial planning experts, while another client requires one financial planner to organize personal finance documents.
What Are the Types of Financial Services Provided by Family Offices?
Giving financial advice and providing a wide variety of services for super-rich families requires more than one certified financial advisor. A family office operates as a coordinated team of personal finance specialists who provide legal, insurance, investment, and estate planning services. Personal financial experts provide the highest quality of financial planning services such as legacy and lifestyle management.
After accumulating assets over a lifetime, a wealthy client faces numerous obstacles while trying to preserve assets. You face high estate taxes that are governed by strict estate laws. Another issue some clients of family offices have to deal with involves protecting business assets. The primary responsibility of a family office that handles legacy management is to ensure a client’s assets remained protected by transferring the assets into a family trust.
Family offices also educate their clients on financial issues and strategies to help them make the best-informed decision about their financial resources.
A family office focused on lifestyle management handles the personal affairs of one or more clients. This can involve providing personal security for home and travel and handling personal matters such as streamlining daily to-do lists. Family offices that provide lifestyle management services do less planning and more active participation in the lives of their clients.
What Are the Classifications for Family Offices?
Family offices fall under four classifications, with each classification designed to address specific financial issues. For example, a Class 1 Family Office offers comprehensive oversight of all the liquid financial assets held by a client. The first classification of a family office provides the same estate planning services that traditional financial planning firms offer.
A Class 2 Family Office offers advice without having any conflict of interest. Firms in this class do not sell financial products and services. On the other hand, a family office designed to be Class 3 offers financial products and services, some of which are outside the scope of what the family office sells. Finally, a Class 4 Family Office monitors an estate to report any issues to the trustee.
Learn More About Family Offices
If you have accumulated considerable wealth, you might benefit from hiring a family office to manage your assets or handle some of your daily lifestyle activities. Before you decide on which family office to hire, schedule a free consultation with one of the estate planning attorneys at Cloud Peak Law Group. We will review your financial portfolio and your lifestyle activities to determine how we can help you better manage your life and your financial resources.
What Are the Cons of Setting Up a PTC?
Establishing a PTC can bring two negative points into the debate.
Establishing a PTC requires hands-on management by most, if not all, family members. But some members of your family might not be interested in getting involved with the management of a PTC. In addition, if your family is considering setting up a PTC, you have to weigh the benefits of succession planning against the significant time commitment to administer the trust.
Here are just a few of the responsibilities your family must handle when managing a PTC:
- Administration of trust assets
- Distribution of trust assets
- Making investment decisions for each asset
- Maintaining the records required by state law
- Creation of a succession plan
- Frequently updating the succession plan
For families unwilling to fill these roles professional advisors can be utilized instead.
Consideration of Costs
The initial contributions of capital to a PTC can be more than $500,000 in some jurisdictions, or $0 in Wyoming, with maintenance fees beginning at $2,500 per year to maintain. You also have to consider operating expenses since you are creating a company to manage your trust.
- Filing fees
- Regulation requirements
- Business insurance
- Office space and equipment
- Travel expenses
Do You Need a Lawyer to Help You Set Up a PTC?
Your family’s financial goals and willingness to become active financial managers determine whether you should form a PTC. Because the laws vary among the states that permit the creation of PTCs, working with a family law attorney can help you make the right decision.
As a state-chartered legal entity, a private trust company (PTC) provides fiduciary services for family members. Establishing a PTC represents an effective strategy for families of high net worth to deal with the challenges presented by the generational transferring of wealth. However, creating a PTC comes with unique considerations that include analyzing its effectiveness as a family’s life moves forward.