Private Trust Companies
- Among high-net-worth families, private trust companies (PTCs) have grown increasingly popular in recent years as an effective tool for managing and preserving wealth through generations by tailoring fiduciary services to closely align with a family's specific values and assets – whether those assets are human, social, intellectual or financial.
- Holland & Knight's understanding of the PTC laws in different states allows for sophisticated trust planning, often resulting in a change to the state situs of trusts for the purpose of administrative flexibility, tax benefits and other factors.
- The laws and regulations governing private trust companies vary widely from state to state, and high-net-worth clients benefit from our lawyers' extensive experience when evaluating which state best meets their needs.
A private trust company (PTC) is a specialized type of trust company that is typically established by a wealthy family or a group of individuals for the purpose of managing their private wealth and assets. Unlike traditional trust companies, which offer trust services to the general public, a PTC is created solely to serve the needs of the family that establishes it.
Among high-net-worth families, PTCs have grown increasingly popular in recent years as an effective way to preserve and protect family wealth. More families are forming their own PTCs to address their sophisticated trust and financial needs and as a way to create a permanent structure to be primarily responsible for the management of trust assets; as such, a PTC may emerge as a suitable mechanism to allow family members and trusted advisors to retain involvement in the trust management process. A PTC can be structured as a stand-alone entity or incorporated into the structure of a family office.
Over a Decade of PTC Experience
Attorneys on Holland & Knight's Private Trust Companies Team have been thought leaders in the PTC area for more than a decade. Our understanding of the PTC laws in different states allows for sophisticated trust planning, often resulting in a change to the state situs of trusts for the purpose of administrative flexibility, tax benefits and other factors. The laws and regulations governing PTCs vary widely from state to state, closely intertwining with federal tax and regulatory issues, and high-net-worth clients benefit from our extensive experience when evaluating which state best meets their needs. Attorneys in our Private Wealth Services Group formed the first private trust company under Tennessee law, and we have assisted numerous high-net-worth families with the formation and administration of PTCs in states across the country.
Characteristics of PTCs
- Family Control: A PTC allows the founding family or group to retain control over the management and administration of their assets, rather than delegating these responsibilities to an external trustee or fiduciary.
- Tailored Services: A PTC can provide highly customized and personalized trust and wealth management services that are specifically designed to meet the unique needs and goals of the family.
- Confidentiality and Privacy: By using a PTC, families can maintain a greater level of confidentiality and privacy compared to using a public trust company, as the PTC's operations and affairs are not subject to public disclosure requirements.
- Governance Structure: A PTC typically has a board of directors or a similar governance structure comprised of family members, trusted advisors or representatives, including independent individuals. This allows the family to have direct input and oversight over the management of their assets.
- Continuity and Succession Planning: A PTC can be structured to provide long-term continuity and succession planning for managing family wealth across generations. The family can establish rules, policies and governance mechanisms to ensure the smooth transition of control and management of assets as per their wishes.
- Cost-Effectiveness: For families with substantial assets, establishing a PTC can be more cost-effective in the long run compared to relying on external trust companies, as the PTC's expenses can be shared among family members.
It is worth noting that the establishment and operation of a PTC involves legal and regulatory considerations that vary across jurisdictions. Families considering the formation of a PTC should consult with legal and financial advisors who are experienced and knowledgeable in trust and wealth management to ensure compliance with applicable laws and regulations.
Private Trust Company Capabilities
Holland & Knight's private wealth practice is the largest in the United States, and high-net-worth clients benefit from our lawyers' depth and experience with the income, gift, estate and generation-skipping tax issues involved with PTCs. Our capabilities include:
- trust company structure and formation, including drafting organizational documents necessary for the formation of the PTC
- advising on regulatory compliance and assisting in obtaining necessary licenses and approvals for trust companies to operate in particular jurisdictions
- transferring trusteeship of trusts to the trust company, including drafting and reviewing transfer agreements, deeds and other legal documents
- changing situs and administrative law for trusts for which the trust company is serving as trustee
- trust administration, including trust decanting and modification, drafting trust documents, seeking judicial and nonjudicial approvals, and ensuring compliance with legal requirements
- legal representation and advice on dispute resolution
- advising on tax planning strategies for the trust company, including minimizing tax liabilities and complying with tax laws
- coordinating PTCs with family offices to take advantage of favorable income tax planning for deductibility of investment expenses
- utilizing favorable trust laws to provide maximum flexibility of trust administration and protection of family wealth, including in jurisdictions that do not recognize or enforce foreign judgements, specifically concerning forced heirship laws