As an alternative to traditional individual or corporate trustees, Wyoming law permits families and their advisors to own and operate private trust companies (“PTCs”) to serve their family. 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.
A PTC may be organized as a corporation or limited liability company. PTC activities are overseen by a Board of Directors or Managers comprised of family members and trusted advisors. Investment and distribution powers are typically held by committees populated with family members and trusted advisors. The PTC structure is flexible and the PTC Board and committees may be tailored to suit the individual needs of each family.
In Wyoming, PTCs may elect to be supervised or unsupervised. If supervised, they are regulated by the Wyoming Division of Banking (Wyoming Chartered Family Trust Company). If unsupervised or unregulated (Wyoming Private Family Trust Company), they reserve fiduciary oversight exclusively to the Board. Many families prefer the administrative simplicity of the unregulated PTC, although there are certain circumstances where a regulated PTC may be preferable.
Benefits of a Private Trust Company
- Enhanced Control and Engagement: Family members may actively participate in the PTC structure and therefore fiduciary decision-making. In addition, families may populate the Board and Committees with trusted advisors of their choosing and may be able to participate in subsequent appointments. Tax-sensitive powers are typically held by a committee of disinterested advisors.
- Limited Liability: PTCs mitigate fiduciary risk by providing a limited liability business entity to serve as trustee. In addition, trusted advisors who are otherwise prohibited from serving as trustee may be able to participate as an Officer or Board or Committee member.
- Flexibility: The PTC provides increased flexibility as to asset and investment management, distribution decisions, and efficient decision-making. For families that own complex assets in trust, such as operating businesses, real property, concentrated positions, or alternative investments, the PTC Board and Investment Committee can manage assets that traditional trustees may find impracticable.
- Beneficiary Education and Involvement: PTCs provide opportunities for additional family involvement as members of the Board, as Officers, or as members of a Committee, yielding benefits both in family involvement and control as well as family governance and beneficiary education.
- Cost Efficiency: PTCs benefit from economies of scale and may therefore be more cost effective than traditional trustees, as it lacks profit motivation and is typically operated at break-even or a de minimis profit.
How does a PTC function?
The PTC serves as trustee of individual trusts, allowing the family or its trusts to own the trust company that serves as trustee of its family trusts.
The business and affairs of a PTC are governed by the Board of Managers, except for certain decisions delegated to Committees — e.g., Investment, Distribution, Amendment. The PTC Board and Committees manage the fiduciary activities and decisions regarding investments, distributions, and administration. In return, the individual trusts pay trustee fees to the PTC, which are used to pay for the expenses of operating the PTC.
How does Willow Street work with PTCs?
Willow Street provides administrative, governance, and consulting services to both regulated and unregulated PTCs. As PTC administrator, we may provide record management and retention, cash management, bookkeeping/bill pay, compliance, tax reporting and payment coordination, minutes preparation, trust administration, and document execution and signature authority services. In addition, Willow Street may provide board members, officers, or committee members for the PTC.
Our approach begins with a discovery process and needs assessment to determine our scope, responsibilities, and the complexity of underlying assets and structures. Because we work collaboratively with a family’s team of advisors, we focus on filling existing gaps in order to appropriately operate the PTC. We work with each family, family office, and their team of advisors to analyze the needs of the PTC, and identify those areas where we will add value.
To learn more about PTCs, please visit our Dispatch here or contact us for a conversation.