PTC Lessons Learned

Willow Street will begin sharing leading practices and case studies that leverage the expertise of our team. We are focusing first on the Private Trust Company (PTC) structure, why it may work for some families and may not for others, and leading practices for administration and governance.

As an alternative to traditional individual or corporate trustees, Wyoming law permits families and their advisors to own and operate PTCs to serve their family. A PTC is a corporation or limited liability company, usually owned directly or indirectly by the family, that serves as trustee for family trusts. For families with multiple trusts, large and complex assets, or a desire for additional input into fiduciary decision-making, a PTC may be an effective solution.

We recently worked with two families as they revisited their existing PTCs with an eye towards simplification. The PTC can be a powerful tool to advance a family’s mission and goals, but it is not the right fit for every family under every circumstance. Working closely with both families and their advisors, we analyzed whether continuing with the PTC made sense. In one instance, the family determined to keep the PTC; in the other, the family decided to transition to a directed trust model and “mothball” the PTC for potential future use.

At the outset, many families are attracted to the PTC structure due to its benefits: it offers flexible, long-term fiduciary solutions that create opportunities for family engagement, education, and collective decision-making. Some families subsequently learn, however, that the cost, complexity, and compliance associated with the PTC is greater than anticipated. In other instances, family participation is hindered by unanticipated circumstances. In our experience, the goal is to understand the challenges each family is facing and offer alternatives that could either mitigate the burden of the PTC or help the family transition to a more sustainable fiduciary solution.

In our experience, the success or failure of the PTC is informed by several factors, including:

  • the level of family engagement and buy-in;
  • the individual and collective talent and experience of family members and advisors assigned to PTC tasks;
  • the amount of work allocated to family members versus outside advisors;
  • the involvement of a family office;
  • the adoption and implementation of technology;
  • the effective use of an administrative services provider;
  • and, last but certainly not least, the cost of the PTC structure against other fiduciary solutions such as a traditional corporate trustee or a directed trustee.

As intergenerational planning and strategic thinking have become new norms, the PTC can serve as an invaluable tool in developing family stewardship and the responsible ownership of wealth by facilitating inclusion and communications, and allowing families and their members to take greater ownership of their futures. To this end, PTC leadership should plan for family succession by early involvement of younger family members and advisors in PTC roles.

Ultimately, we find that PTC families succeed when family members assigned to PTC roles truly buy in and perform at a high level. PTCs struggle when families have assigned family members to PTC roles who don’t buy in to those roles, often due to lack of skill, time, or interest. In those instances, it is paramount that the family recognize this reality and retain skilled and committed outside advisors or administrators to fill these gaps. For instance, if a driver of PTC formation was family engagement and education, then a family member needs to “own” that initiative. If the PTC was motivated by non-traditional assets, then the PTC functions well when outside advisors are heavily involved.

In the instances above, one family decided to retain the PTC structure because the control, family involvement, and collective decision-making was important to the family and justified the expense and complexity. They also decided to retain more outside advisors in order to make the PTC function. The second family determined that although the PTC held appeal in the long-term and should be maintained on a stand-by status, their present needs did not justify the added expense and complexity. For them, the additional expense of adding outside service providers was not justified compared to the benefit of the PTC, so they chose to transition to our trust company under a directed trustee structure.

In sum, PTCs are inherently collaborative, and successful collaboration requires leadership, accountability, and coordination. Bringing the PTC to life starts with the family and reflects their goals. The PTC requires fidelity to the family’s goals and PTC management must be accountable to one another as well as the family.

Please contact us to talk more about PTCs and other fiduciary solutions.