A Private Trust Company is essentially a company formed for the specific purpose of acting as trustee for a single trust, or a group of related trusts. It is not uncommon for settlors to wish to retain a degree of control over the assets they place in trust and this is sometimes achieved by reserving specific powers under the terms of the trust. However, such a course has risks and, in some cases, the courts have ruled that the trusts are a sham. This can have unintended tax consequences and can expose the assets to creditor claims. Another means of retaining influence might be to supplement the settler’s family members or financial advisers as trustees. This is not always possible as the trust may therefore be treated as tax resident where these people live.
With a Private Trust Company, the settlor, their family members or their advisors may be appointed to the Board of Directors and in this capacity are in a position to influence the way the trust is managed. The composition of the Board can be changed from time to time to incorporate members of successive generations and thus involve them in the management of family affairs. The company itself will generally be managed by a trustee in the chosen offshore location and who will be represented on the Board.
A professional trust company will often not be in a position to offer the settlor the degree of flexibility and speed of response that it is looking for and its employees cannot be expected to be as familiar with the business of companies owned by the trust as members of the trust will be. of the family. Decisions may need to be referred internally and independent advice taken before they can be implemented. If a change of trustee is desired, it can be a lengthy and expensive process. However, with the Private Trust Company, problems like these can be largely avoided. Decisions are made by people familiar with the business and a change of direction for the management of the trust can be achieved by changing the Board of Directors of the Private Trust Company.
Although it all sounds simple, there are a few other considerations that need to be taken into account. All major offshore locations now have a professional trustee licensing scheme and the Private Trust Company may need to apply for a license. This means that not only will its owners and officers have to qualify, and the proposed changes will be approved in advance, but also that the ongoing compliance formalities could be onerous. The directors should also remember at all times that when they are making decisions in relation to the trust; it is the interests of the beneficiaries as a whole that must be considered. They should not be unduly influenced by their personal circumstances, which is not always easy. However, the Private Trust Company is the right solution in the right circumstances.
Ref: CO270406