The Private Trust Company – or PTC - explained
The PTC is a powerful tool to optimize a family’s wealth, streamline governance and optimise succession planning strategies. But what exactly is a PTC, how can it benefit a family, and why is it attractive to establish a PTC in Switzerland?
What is a Private Trust Company (PTC)?
A Private Trust Company is a company that acts as trustee of one or more trusts established for a person or a connected group of persons, usually a family. As the name suggests, a PTC is a private company and does not offer trustee services to the general public.
Using a PTC as private trustee allows family members to be included in decision-making processes. Family members can either sit in the board of the PTC, or they can be part of advisory committees. A PTC is therefore not only a means for a family to ensure bespoke trustee services, it can also serve as a family governance tool.
In practice, PTC's are often administered by professional trustees to ensure compliance with legal and regulatory requirements applicable in the respective jurisdiction in which the PTC is incorporated.
In the case of Switzerland, a Swiss professional trustee will for example ensure that the PTC is compliant with Swiss Anti-Money Laundering laws, international automatic exchange of information requirements, international mandatory disclosure rules/DAC 6, Swiss and international economic substance requirements, the recent Financial Institutions Act (under which PTCs are exemptfrom licensing requirements, but such exemption requires a proper setup), and so on. A professional trustee will also make sure that the administration of the trust is carried out with the required duties of skill and care, and that the fiduciary powers are exercised in accordance with the trust instrument and the governing law of the trust.
Last but not least, a professional trustee will ensure that the PTCs corporate and tax matters are professionally taken care of.
Example of a typical Private Trust Company structure
Like any other company, the PTC is run by its board of directors. Typically, professional trust company officers are among the members of the board of directors. Family members and trusted family advisors can also be on the board of a PTC. The shares of a PTC are usually owned by a dedicated Purpose Trust managed by a professional trustee. Direct ownership by family members is possible, but in practice rarely the optimal solution as the goals are, more often than not, the continuity of ownership of the trustee and some degree of confidentiality.
A typical PTC / Trust setup often looks like this:
As mentioned before, the PTC can then act for an unlimited number of trusts, as long as all trusts are established for a closed group of connected persons, usually a family spanning various branches and generations.
Why establish a Private Trust Company in Switzerland?
A PTC should be established and administered in a jurisdiction with high-quality professional trustee services. Switzerland is a world leading trust administration jurisdiction. Paired with a high degree of competence linked to the international environment, Swiss professional trustees adhere to the highest standards of care and professionalism required to support clients and their families in the administration of a PTC and the family trusts.
What are the benefits of a Private Trust Company structure?
A PTC provides a means by which a client, family members and trusted advisors can participate in the decision-making and management of the PTC without compromising the legal validity of the family trusts. This is especially valuable in complex family situations where heightened knowledge of the family’s business, financial affairs and the family members’ individual needs is required for the trustee to take appropriate decisions. A PTC can also provide the legal infrastructure for a family office.
A PTC allows clients and their family members to retain more control over their trust or several trusts, rather than relying on a corporate trustee to act on their behalf. Clients can select individuals to occupy the various roles in the PTC setup, for example in the board of directors of the PTC, the PTC trustee advisory committee or the investment and distribution committees of the family trusts.
Continuity of trustee
Changing a trustee can be a long and arduous process, and changing the ownership of the trust property, especially if registered in public registers, can be cumbersome. A PTC offers the advantage that only the board of directors of the PTC needs to be replaced in the event of a change of trustee. A PTC provides continuity in the trusteeship of the family trusts, and therefore in the ownership of family trust assets.
Increased regulatory pressure has led to strict policies and procedures for professional trustees. Implementing trustee decisions is therefore often a lengthy process that involves legal and compliance departments. Within a PTC, the trustee can focus on the connected trusts. Decisions are processed faster, with less overhead and less people involved in their execution.
How to incorporate a Private Trust Company in Switzerland
PTCs should be established and managed by professional services providerswho can assist with:
- the establishment of the complete PTC structure
- the domiciliation and corporate administration of the PTC, including tax filings and accounting
- support with AML duties of the PTC, including acting as AML officer if required
and provide management and administration capabilities such as:
- act as trustees, directors, protectors or enforcers within the PTC structure
- support with regulatory reporting duties (CRS/FATCA/DAC 6) and compliance with economic substance requirements in various jurisdictions
- statutory accounting for all or selected structure entities, including the PTC
- consolidated financial reporting for the structure
- consolidated performance monitoring and reporting
In case you would like to know more about the Swiss Private Trust Company possibilities, to elaborate on this solution and further alternatives depending on your situation, please do not hesitate to contact us.