Insight
Managing wealth with a Private Trust Company
February 2022
The wealth management landscape has evolved in recent years, with international developments such as Brexit, political and environmental challenges, regulatory change, and digital advancements all playing their part. Then in March 2020, the coronavirus pandemic added more uncertainty.
Investors have become anxious during these volatile times and are keen to protect their wealth. They need trusted advisers handling their wealth, while retaining some control and flexibility.
One way to achieve this has been to establish a trust, using a professional trust company, placing their wealth in the hands of experienced professional trustees. However, given the current climate, they may be reticent to hand over full control when circumstances can change suddenly forcing them to adapt their requirements quickly. A more appropriate solution may be a private trust company Private Trust Company (PTC).
What is a PTC?
A PTC is an entity whose sole purpose is to act as a trustee in relation to a specific trust or trusts. They do not provide trust services generally and they cannot solicit business from the wider public.
Using a PTC
The most common use of a PTC is to act as trustee for a trust holding a variety of assets. This can include shares in a family company. Settlors of such trusts often wish to maintain some control of the assets; this can conflict with a professional trustee, who may wish to keep full control over the assets to avoid any risk of breaching their duties as a trustee.
In the past, express provisions in the trust deed allowing the trustees to hold the assets and removing all discretion on their part to manage the investment may have resolved any issue. Alternatively, the trust could give the settlor powers over specific assets and investments, but this can cause tax issues and may not be ideal for the settlor.
By using a PTC, the settlor can keep control while still benefitting from the help and advice of experienced trustees. The PTC also allows other family members or advisers to be appointed to its board.
Advantages and disadvantages
The key advantage of establishing a PTC is the control it provides – control over both the assets and who sits on the board of directors. Control can be especially important where the settlor lives overseas or is from a jurisdiction that is unfamiliar with the concept of trusts and is, therefore, reluctant to relinquish control to someone in another jurisdiction.
A PTC also has the added advantage of allowing for more privacy and rapid decision making, while also offering some potential tax advantages.
The settlor and family members can be shareholders in a PTC, which gives them the power to appoint and dismiss the board of directors. This can be a particularly welcome advantage, but it can bring tax consequences. Often, as an alternative, the settlor will establish a purpose trust with the sole purpose of holding the shares of the PTC. This gives the settlor the advantage of being the enforcer of the trust, allowing removal of directors and the professional trustee.
The main disadvantage of a PTC is the establishment costs: setting up the trust also means creating a company. Creating a purpose trust adds more cost. This means PTCs are only likely to be attractive in a commercial context, or for very large family structures where the control advantages may outweigh the cost.
Jersey as a provider of PTCs
Jersey is a jurisdiction that offers PTCs. The PTC doesn’t need to be licensed and regulated by the Jersey Financial Services Commission (JFSC), although the JFSC continues to exercise a supervisory role. It is a requirement that the PTC must be administered by a Jersey licensed trust company; one or two directors of the trust company will sit on the board of directors in a corporate governance capacity.
With worldwide uncertainty set to continue, Jersey’s PTC solutions demonstrate their commitment to protecting clients’ wealth and offer a level of reassurance, certainty and forward-thinking to prepare for whatever the future brings.
About the author
Claire Machin
Jersey, British Isles
Claire is Group Director, Head of Trusts and Private Wealth for the Jersey office of Russell Bedford’s Isle of Man member firm, Suntera Global.
Managing multi-jurisdictional trust and corporate structuring for the business, Claire has been involved in business development for the last six years, with a key focus in Africa, in particular Kenya. Claire manages a team that supports the establishment and ongoing management of structures for private, corporate, and institutional clients worldwide.
C.Machin@suntera.je