Private Trust Companies – Part 1
Wealth Protection & Family Structures
Private Trust Companies (PTCs) are often promoted as a sophisticated tool for wealthy families who wish to retain an element of control over their trust structures. While PTCs can be an effective vehicle for wealth protection and family governance, there is frequent confusion around their purpose, operation and ownership.
In this article, we will explore what a PTC is (and is not), common misconceptions in their marketing, and key issues to consider when determining whether a PTC is right for your family’s succession and asset-protection strategy.
What is a Private Trust Company (PTC)?
A PTC is a company established with the sole purpose of acting as trustee of one or more family trusts. Unlike professional trust companies, a PTC does not provide trustee services to the public. Instead, it usually works in partnership with regulated trust and corporate service providers who deliver day-to-day administration.
The appeal of a PTC often lies in the sense of control it offers to settlors and their families, particularly in jurisdictions where the concept of a trust is unfamiliar, such as France or Egypt.
The Marketing vs. Reality
PTCs are frequently marketed with statements such as:
“A PTC allows families and their advisers to retain control in decision-making.”
“A PTC protects the family bloodline while retaining client control.”
While such statements resonate with those unfamiliar with trust law, they risk oversimplifying or misrepresenting the reality. At its core, a PTC must operate under fiduciary duties, just like any trustee. If control is too tightly retained by the settlor or family, tax authorities and courts may challenge the structure as a sham or evidence of reserved benefit.
Common Issues and Misconceptions
Key areas where PTCs can create confusion include:
Control and independence: If settlors or family members dominate the PTC board, independence may be compromised.
Management and control location: PTCs must be managed outside the settlor’s home jurisdiction to avoid adverse tax consequences.
Regulatory scrutiny: Courts and tax authorities often question whether PTC structures are genuinely independent or simply mechanisms for settlors to retain control.
This can lead to challenges around:
Breach of fiduciary duty
Trustee de son tort (where someone acts as trustee without authority)
Sham trust allegations
Who Should Own the PTC?
Ownership of a PTC is a critical structural question. Many providers recommend using a Purpose Trust. However, we have reservations about this approach—particularly where the Purpose Trust’s role is, in practice, to indirectly benefit family members through the PTC.
Instead, our preference is for a foundation to own the PTC, ideally within the same jurisdiction as the trusts it administers. This approach provides clearer governance, alignment of laws, and reduces the risk of unintended consequences.
Key Takeaway
PTCs are not “one-size-fits-all.” They can be powerful tools in the right circumstances but must be designed and administered with care to avoid undermining the very protections they are intended to provide. If you cannot fully trust the independence of the trustee, then perhaps the question is not “should I use a PTC?” but rather “should I be using a trust at all?”
For more information or tailored advice on Private Trust Companies, contact us