As many families reevaluate their estate plans and fiduciary structures in the current environment, they often consider a private family trust company (“PTC”). To assist in these discussions, we have created a PTC Primer, which can be found below or downloaded here. The Primer includes:

• an overview of PTCs and how they operate
• why PTCs may be preferable to the traditional trustee model
• a diagram of a common PTC structure and Willow Street roles
• the role and responsibilities of a PTC Board
• the role and responsibilities of a PTC Secretary
• elements of Nevada or Wyoming situs

We hope this is helpful for you and your client families, and welcome the opportunity for further discussions about PTCs and other fiduciary solutions.

PTC Primer

Private family trust companies — legally referred to as family trust companies in Nevada or private trust companies in Wyoming (hereafter, “PTCs”) are business entities organized by a family to serve as the trustee of their family trusts. In this context, a “family” is broadly defined to include multiple generations and branches of an individual family. The PTC combines the structure and benefits of a corporate trustee with the flexibility of individual key advisors and family members participating in PTC operations and trust governance, as appropriate and consistent with tax objectives.

The PTC is controlled by the family and operated by the family and its trusted advisors, often in conjunction with a family office and an administrative services provider such as Willow Street. The PTC is managed by a board of managers or directors, whose role is to provide oversight to the PTC.

The PTC structure allows families to unbundle the three duties of a trustee — investing trust assets, distributing assets to beneficiaries, and administering the trust — in furtherance of family and financial goals. Unlike directed trusts, where governance occurs on a trust-by-trust basis, PTC governance typically operates at the entity level.

Investment activities are performed by an investment committee, comprised of family members and trusted advisors. Distribution activities are performed by a distribution committee, typically comprised of disinterested family members and trusted advisors. Administrative duties are performed by a family office, an administrative services provider like Willow Street, or a combination thereof, typically via a formal service level agreement (SLA).

PTCs are often preferable to the traditional trustee model because they:

• Allow the family to have more control over their fiduciary structures,
• Separate the different tasks and allocate each to a party with the requisite expertise,
• Decrease costs associated with traditional corporate trustees,
• Allow the family to hold concentrated positions or non-traditional assets,
• Limit liability for family members,
• Increase efficiencies in decision-making and implementation,
• Provide a liability shield for family members and trusted advisors serving in fiduciary roles,
• Decrease trustee costs through economies of scale and lack of profit motivation, and
• Facilitate family participation, beneficiary education, and collaboration with trusted advisors.

The following chart details the primary activities of and typical accountabilities in the PTC structure:

See PDF for chart (Fig 1, pg 2)

Key Terms

• PTC: Entity formed to serve as Trustee for family trusts; WSG may provide a Director and/or Officer to the PTC and serve on various committees
• Trust Advisor: Individual or corporate entity responsible for directing certain activities of the trust, typically investment decisions, but may also include distribution decisions
• WSG: Willow Street Group, LLC (PTC administrative services)
• WSTC: Willow Street Trust Company, LLC (Corporate Trustee)

Common PTC Structure and WSG Roles

See PDF for chart (pg 4)

*Administration may be provided in conjunction with the client family office or other service provider pursuant to a Service Agreement.

PTC Board Role and Responsibilities

The business and affairs of a PTC are governed by the board of managers, except for certain decisions delegated to committees (e.g., Investment, Discretionary Distribution, Amendment). The core administrative areas that a PTC Board manages include, but are not limited to, the following.

Committee Formation and Oversight

• Appointment and removal of persons serving on PTC committees, subject to the limitations set forth in the Operating Agreement
• Creation of new Committees, defining their powers and responsibilities
• Depending on the PTC structure, the Board might periodically take reports and ratify decisions made by Committees

Officer Oversight

• Appointment and removal of persons serving as Officers of the PTC

Financial Oversight

• Decisions relating to the PTC’s annual budget
• Determination of the amount of Trustee fees that the PTC will charge underlying trusts
• Tax reporting, in some instances; usually tax matters are handled by an accounting team, officers, and/or a family office, but sometimes the Board may wish to review and approve (or supervise) the preparation and filing of tax returns
• Arrangement for periodic financial audits

Trustee and Service Provider Oversight

• Decisions relating to acceptance of or resignation from trusteeships
• Decisions relating to hiring and firing of third-party service providers, such as administrative, legal, or accounting advisors for the PTC and each underlying trust

Strategic Fiduciary Planning

• Review of advice from legal and tax teams, and making strategic decisions as to wealth transfer structures (e.g., should trusts or other entities be modified, decanted, terminated, etc.)

Compliance Oversight

• Compliance monitoring to promulgate, review, and adopt PTC policies and procedures, and reviewing compliance on a periodic basis

PTC Secretary Role and Responsibilities

Maintain

Maintain the PTC’s policies and procedures, books, and records:

• Make recommendations on PTC policies and procedures; maintain and update PPM
• Document financial controls and risk management protocols with Board approval
• Archive financial reporting for PTC and underlying trusts
• Attend Board meetings, draft minutes and maintain minute book
• Serve as authorized signatory
• Execute legal and tax related documents

Support

Support Board of Managers on all PTC fiduciary matters:

• Oversee trust onboarding and administration
• Engage in regular administrative reviews of trust accounts
• Report to Board regarding trust business

Collaborate

Collaborate with the firm’s attorneys, accountants, and other key service providers to reasonably ensure a compliant, efficient, and well-organized complement of professional services are provided to the PTC:

• Coordinate advisor activities to ensure that legal, accountancy, and investment professionals operate with complete information
• Coordinate tax reporting and compliance
• Coordinate and participate in audits and examinations, as appropriate