For those establishing a trust, one of the first things to consider is who to appoint as trustee. Some might consider a trusted advisor or a professional trust and services company, others might consider establishing a private trust company. This article will discuss private trust companies.
A private trust company only acts as trustee of one or a small number of connected trusts, usually restricted to trusts connected to one family. The private trust company itself is a conventional privately owned company, with a sole and stated purpose to act as a corporate trustee. Like any other company, the private trust company is managed by its board of directors, who in the case of a private trust company, make the trust decisions. In most jurisdictions, a trust with a private trust company as trustee will have the same tax status as other trusts.
Generally, private trust companies do not take a trustee fee and are not regulated or licensed as professional trust companies. Nor do private trust companies offer their services as a trustee to the general public. However, they are often set up and administered by an existing licensed professional trust company, which then advises the board members of the private trust company in terms of corporate governance and trustee issues. In some cases, a representative of the professional services company may actually sit on the board of the private trust company. This combination of family and professional advisors allows the private trust company to react quickly to the needs of an extended family and its business interests.
In most jurisdictions, private trust companies can be established with one shareholder and one director. The ownership of the shares in the private trust company must be carefully planned. If family members own the shares, it may have tax or privacy implications in their home jurisdictions. Sometimes shares can be held by a nominee, allowing the ownership of the private trust company to remain confidential.
A private trust company as trustee could stand alone, similar to a private individual trustee. However, in most cases, a trust with a private trust company as trustee is administered by way of an administration agreement with an experienced professional trust and services company. In some jurisdictions, this is required by local regulations. This administration agreement allows for continuity in the structure, as the administrator can change by written agreement, but the private trust company and its legal title to the trust assets remains the same.
The underlying trust is then established as normal, by a settlor, with beneficiaries and a protector, if an extra level of protection is required, as in the power of a protector to appoint or remove the private trust company as trustee.
Private trust companies enjoy increasing popularity in the business of private wealth planning. A settlor should always seek professional advice when deciding what type of trustee will suit his or her needs best.