Wyoming Private Trust Companies
A private trust company (“PTC”) is an entity established to serve as a corporate trustee to a trust or number of trusts for the members of a single family. Wyoming is one of the few states to permit the establishment of regulated and unregulated private family trust companies. While unregulated PTCs are commonly established to serve as corporate trustee to a single family, under Wyoming law a regulated PTC is allowed to serve as corporate trustee for up to two unrelated families.
Why Establish a PTC?
Many PTCs are formed by families with significant holdings in an asset or group of assets where family control is essential. Examples include operating entities, such as a family-owned businesses, sports or entertainment franchises, or real estate holdings. They are also formed by families with large and diverse pools of liquid assets that prefer to manage these assets on a combined basis. The PTC structure allows families the flexibility to create investment vehicles or access asset classes that may not otherwise be accessible. PTCs are most often chosen to promote family participation in guiding decision-making, asset allocation and investment management. Family involvement can provide leadership opportunities and educate members on familial assets and their management, as well as encourage multigenerational participation.
Several factors should be considered prior to forming a PTC. Family dynamics are a main consideration since generational interaction and harmony is paramount to the success of the structure. Families need to have the conviction to work together for the long term and have shared family goals and values. There also needs to be a level of comfort in addressing and handling the needs of beneficiaries.
Families should also have a strong level of commitment to the structure. A PTC has fiduciary obligations to the trusts for which it serves as trustee and should perform all duties in a professional and responsible manner. It also requires on-going administration and involvement. Typical administration that should occur at both the PTC and trust-level includes 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 file an annual report with the state in which the entity is organized.
Regulated vs Unregulated
There are no capital requirements to form an unregulated PTC, nor is the entity subject to regular examination by the Wyoming Division of Banking. In addition, while unregulated PTCs must file to establish the entity with the state, all names, values, trust agreements and other family records and relationships may be kept private. A regulated PTC, on the other hand, requires a minimum capital requirement of $500,000 and is subject to regular examinations. While most families choose to operate as an unregulated PTC, the regulated version may be preferred in order to provide an additional layer of protection against possible challenges to a trust's situs and for review of policies and procedures by regulators, which will ensure adherence to best practices.
PTCs can be structured either as a corporation, governed by a board of directors, or a limited liability company, managed by managers. Directors or managers may be family members or other trusted individuals and the same is true for the committee members. However, the jurisdiction in which they reside may have adverse tax consequences so attorneys and other qualified professionals 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 sufficient situs within the state in which they are formed to benefit from the expected legal and tax treatment. Best practices include establishing a Wyoming bank/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 board, committee members, officers and service providers are incorporated into these structures.
While a PTC may not be a viable solution in every situation, for families with significant wealth, families owning operating businesses or families seeking to encourage multigenerational participation in the management of its wealth, a PTC should be considered.
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.