Private Trust Companies
Fides Trustees can assist clients, together with their professional advisers, to choose the correct jurisdiction for their Private Trust Company (“PTC”) and for its formation, as well as act as Directors of the PTC.
What is a Private Trust Company?
A Private Trust Company is an entity whose sole purpose is to act as trustee in relation to a specific Trust or group of Trusts. They do not provide trust services generally, and they do not solicit business from the public at large.
When are they used?
PTCs are often used when a Settlor is from a jurisdiction unfamiliar with the trust concept and is unwilling to relinquish control and ownership of assets to strangers (Trustees) in another jurisdiction. Hence they can form a PTC to act as Trustee to their bespoke family Trust or Trusts. They can use professional trustees to act as Directors of the PTC, sometimes alone or with other parties close to the family (depending upon where they reside etc.), hence receiving the benefit of the experience of the professional trustee whilst not being tied to the Director’s own Trust Company.
Often PTCs are trustee of Trusts holding shares in a family company or companies, where the Settlor does not wish to give up control of these companies and simply wishes the Trustee to hold the shares of said operating company or companies. A professional trustee would be wary of taking on this type of trust as not to diversify the investments would be a breach of its fiduciary duty.
A PTC structure could help overcome both the Settlor’s concern over control and the Trustee apprehension over a potential breach of fiduciary duty.
Often the shares of a PTC are owned by a Purpose Trust, whose sole asset is the shares in the PTC. This allows the shareholder of the PTC (i.e. the Purpose Trust) to change the Directors of the PTC without having to change the trustees of the underlying Trusts.
Advantages and Disadvantages of PTCs
As stated above the PTC can provide the Settlor with an additional element of control and if established correctly will not compromise the validity of the trust structure and its residency for tax purposes. In addition, it can provide immediate and long term tax planning advantages.
The main disadvantage of the PTC is the cost of its establishment. On top of the cost of establishing the underlying trusts, the PTC itself needs to be formed as well as possibly a Purpose Trust to hold the shares of the PTC.
