• Cassie Hoffman

Wyoming Private Trust Companies

A private trust company (“PTC”) is a legal entity created by a family to serve as trustee for their trusts. It operates like a corporate trustee except that family members own and manage the PTC as they would a traditional family office.


Why Establish a PTC?


PTCs are typically formed by families with significant holdings in concentrated assets where family control is preferred to a corporate trustee acting on their behalf. Examples include operating entities, such as a family-owned businesses, sports or entertainment franchises, real estate holdings, or digital assets. They are also formed by families with large and diverse pools of liquid assets that prefer to manage these assets on a combined basis, allowing the flexibility to create pooled investment vehicles and access asset classes or managers that may not otherwise be feasible.


PTCs are often chosen to promote family participation in managing generational wealth, including asset allocation, investment decisions, and philanthropic interests. PTCs can become the legal structure of a family office or incorporated into a family office, providing family members with various governance roles, and defining how family involvement is passed down to future generations. PTCs provide leadership opportunities and educate family members on their generational wealth under management. It is also common to see a foundation incorporated into a PTC structure to encourage philanthropy and reinforce family values.


Why Wyoming?


PTCs are typically established in Wyoming, South Dakota, or Nevada, with Wyoming being the most popular. Establishing a PTC in Wyoming allows the family to domicile their trusts under Wyoming’s favorable trust laws, which maximize the benefit of using trusts to manage generational wealth. Wyoming statutes allow for 1,000 year dynasty trusts as well as directed trusts. Wyoming statutes also facilitate trust migration and modifications using non-judicial settlements.


Wyoming has the lowest overall tax burden in the US, making it a top situs for generational wealth. Wyoming has no state income, capital gains, gift or estate tax, a benefit which may be extended to non-residents who place assets in a non-grantor trust.

 

In addition, Wyoming laws provide strong privacy and creditor protection. Wyoming PTC and trust details including grantors, beneficiaries and trust assets are not part of the public record.


Regulated vs. Unregulated


Wyoming is also one of the few states to allow the establishment of regulated and unregulated PTCs. There are no capital requirements to form an unregulated PTC in Wyoming, nor is the entity subject to regular examination by the Wyoming Division of Banking. A regulated PTC, on the other hand, requires a minimum capital requirement of $500,000 and is subject to regular examinations and third-party audits.


While unregulated PTCs are commonly established to serve as trustee for a single family, under Wyoming law a regulated PTC may serve as trustee for up to two unrelated families. And while most families choose to operate as an unregulated PTC, a regulated version may be preferred to provide an additional layer of protection against possible challenges to a trust's situs and to ensure adherence to best practices through ongoing reviews of policies and procedures by regulators and auditors.


Structure


PTCs can be structured either as a corporation, governed by a board of directors, or a limited liability company, managed by managers. In general, PTCs elect to be taxed as a corporation and operate with a de minimis profit, collecting trustee fees commensurate with the operating expenses of the PTC.


Directors may be family members or other trusted individuals and the same is true for committee members and officers. However, the jurisdiction in which they reside may have adverse tax consequences, so attorneys should be consulted during formation and retained on an on-going basis to limit such risks. While there are typically three committees: investment, distribution, and amendment – the structure can be tailored to each individual family to achieve its goals.


PTCs should take all steps necessary to demonstrate situs within Wyoming to benefit from the legal and tax benefits. Best practices include establishing a Wyoming bank or custody account, leasing office space, maintaining books and records in Wyoming, and administering both the PTC and its underlying trusts in Wyoming. In many instances, Wyoming-based officers, board and committee members are incorporated into these structures.


In order to succeed, families need a long-term commitment to working together, have a shared family mission, and be comfortable in addressing and handling the needs of the trusts’ beneficiaries. A PTC has fiduciary obligations to the trusts for which it serves and should perform all duties in a professional and responsible manner.


Family offices and third-party service providers are normally hired to handle the required on-going administration and compliance, as the administration that should occur at both the PTC and trust-level include thorough recordkeeping and documentation, payment of expenses, and tax reporting. The PTC should also hold regular committee and board meetings, create minutes to document such meetings and prepare and adopt a budget, amongst numerous other tasks.


Conclusion


Families with significant wealth who own assets where control is essential and who seek to encourage multigenerational participation in the management of family assets may wish to consider a PTC. Establishing a PTC in Wyoming provides access to the state's low taxes, favorable trust laws, increased creditor protection and privacy. Furthermore, Wyoming is one of the few states that authorize both regulated and unregulated private trust companies. Wyoming requires no capital for the unregulated structure, making it an attractive jurisdiction for families who wish to take advantage of the benefits of forming a PTC.


About Us


Two Ocean Trust provides a full range of trust and investment capabilities to high-net-worth families including the first wealth management platform to seamlessly bridge traditional securities, alternative investments, and digital assets.


Based in Jackson Hole and regulated by the Wyoming Division of Banking, Two Ocean Trust is uniquely positioned to provide access to Wyoming's low tax rates, favorable trust laws and unparalleled privacy and legal protections.



 

Two Ocean Trust LLC and its representatives do not provide tax or legal advice. This document was written to provide general information and for educational purposes. A qualified estate planning attorney, and possibly an accountant, should address your particular needs and specific legal and financial situations.


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