The ABCs of PTCs
In the US, several states allow private trust companies (PTCs). Although a family can usually choose to have an individual or commercial institution serve as trustee of its trusts, a PTC may be more appealing. Most notably, it can potentially provide bespoke trust services that the family controls.
Motivation for using a PTC
Control, investment flexibility and liability protection are common factors in a family’s decision to form a PTC. With a PTC, a family controls the services that the company offers and, sometimes as importantly, does not offer. In addition, the family generally controls the hiring and firing of the individuals who work for the family through its PTC, and the selection of third-party service providers. With a commercial institutional trustee, the family may have limited influence over changes in the trustee’s business strategy and service offerings, the assignment of individuals to handle the family’s trusts and the selection of service providers that the trustee engages.
With a PTC, a family may enjoy more flexibility in the investment and management of the assets held in the family’s trusts. Some commercial institutional trustees are hesitant to serve as trustee of a trust that (directly or indirectly) owns concentrated positions or certain types of complex assets, such as interests in privately owned operating companies, real estate and artwork. The family may be more risk-tolerant than a commercial institutional trustee would be. With a PTC, the family has a trustee whose risk tolerance reflects the family’s risk tolerance.
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