U.S. Trust Company, Northern Trust, and Bessemer Trust were originally formed as private trust companies, but today they are known and respected as public trust companies that provide a wide range of fiduciary and trust services.
U.S. Trust Company was created in 1853 by industrialist and philanthropist, Peter Cooper, founder of the Marshall Field Department Store and Marshall Field, and Erastus Corning, a railroad developer and manufacturer of iron and steel.
In 1889, Northern Trust was formed by Byron Laflin Smith, a respected banker in Chicago, and Bessemer Trust was established in 1907 by Henry Phipps, a partner in the Carnegie Steel Company.
What is a private trust company?
An Unregulated Single Family Private Trust Company is a family-owned enterprise that provides trust services similar to those provided by an individual or an institutional trustee. Generally, an Unregulated Single Family Private Trust Company is formed as a Registered Limited Liability Partnership, Corporation or Limited Liability Company; as such, it is legally qualified to act as trustee of a single trust or group of related trusts provided that the trusts are related to one single family.
Why establish a Wyoming Family Private Trust Company?
Families create Private Trust Companies for any number of reasons including to minimize estate and income taxes, to provide for future generations or incapacitated family members, to pass on a family business, or in order to more closely manage family assets. The reasons for forming a Private Trust Company are as eclectic as the families behind them.
The creation and maintenance of a Private Trust Company in Wyoming is simple and straightforward. If established correctly, a Wyoming Private Trust Company can be wholly exempt from the regulation normally required of an entity formed to offer trustee services to the public at large. Wyoming is one of only a few states where both unregulated and lightly regulated Private Trust Companies can be created, thus allowing OffshoreInWyoming.com Trust Associates LLC the widest of latitudes in helping families determine which structure better meets their needs.
OIW Trust Associates LLC assists its clients in forming their Wyoming Private Trust Companies to comply with IRS Notice 2008-63, which provides general guidance on the proper structure of such entities. OIW has pioneered the use of Wyoming Registered Limited Liability Partnerships to more precisely comply with the intent of the IRS Notice while giving family members the greatest amount of participation that can be safely undertaken.
What is the difference between regulated and unregulated trust companies?
Private trust companies may be regulated or unregulated, depending on the jurisdiction in which they are established.
An unregulated private trust company is an enterprise established under a state’s laws as an entity whose business is that of a trust company providing fiduciary services to a single family. Typically, there is no application process, no statutory prescription of what activities the enterprise must undertake in the state in order to be considered “doing business” in the state, and there is no statutory supervision process (e.g., periodic audits).
A regulated private trust company operates under rules similar to those governing financial institutions such as banks or public trust companies. States that permit regulated private trust companies have a formal chartering process, and capital and policy requirements. They also have regulatory oversight and reporting requirements.
Which states permit private trust companies, and which types do they allow?
There has been a sharp increase in the number of states permitting private trust companies over the last several years. In addition, more and more states are continuing to enact legislation to attract more trust business, for example, eliminating income taxes on certain trusts or permitting trusts that can benefit many generations.
Currently, several states allow regulated private trust companies. These include South Dakota (with a $200,000 capitalization requirement), Texas (with a one-million dollar capitalization requirement), Delaware, Nevada, New Hampshire, Alaska and Pennsylvania. In addition, three states, Colorado, New Hampshire, and Virginia recognize unregulated private trust companies by statute. Two states, Nevada and Wyoming, allow unregulated private trust companies to do business in them under administrative exemptions.
A Wyoming Unregulated Family Private Trust Company can be a Registered Limited Liability Partnership, a Limited Liability Company (“LLC”) or Corporation formed under the laws of the State of Wyoming, with the specific purpose of serving as Trustee for a family Trust or Trusts. A Wyoming Private Trust Company is prohibited from holding itself out to the public as a "Trust Company" and therefore not regulated by the Wyoming Banking Commission (other than name approval), but is limited to acting as Trustee of Trusts established for the benefit of one particular family.
(1) The Statement of Registration or Articles include a provision that the Single Family Private Trust Company cannot hold itself out to the public at large as offering Trustee services and a provision that it can only serve as Trustee for a "Single" family; and (2) The name of the Single Family Private Trust Company must follow a name form prescribed by the Division of Banking which is currently any name followed by:____ "Single Family Private Trust Company.”
Once the Articles are filed and the filling fee of $100.00 is paid, they are submitted to the Wyoming Division of Banking for review to ensure the name requirements are satisfied. The approval process is quick and usually takes no more than 7 business days and there are no additional filing or processing fees, or minimum capitalization requirements. Once the Single Family Private Trust Company is formed, it may be designated to serve as Trustee of the family’s Trust(s).
The Single Family Private Trust Company Partnership Agreement, Operating Agreement or Bylaws govern the operations. Care must be given to ensure that the governing documents are drafted so that the PTC does not run afoul of any estate tax inclusion issues.
Generally, if the individual is not able to serve as an individual trustee without estate tax inclusion problems, then involvement in the PTC may also cause inclusion problems. Although the advice of a CPA is para-mount in this process, an individual concerned about estate tax inclusion issues should avoid serving on the distribution committee or exerting too much control over the PTC.
The Single Family Private Trust Company can enter into service agreements and delegate powers for the administration of the trusts with trusted advisors, family offices or a trust company.
The owner of the Single Family Private Trust Company is typically the Trust Settlor or client, and/ or members of the client’s family. The Managers are typically non-family persons or entities. The Officers, or Directors of the Private Trust Company (“PTC”) are typically members of the client’s family or advisors of the family.
Although not required by state statutes, the Private Trust Company utilizes committees relating to its operation and the administration of the Trust(s) served. These committees may include an Investment Committee, Distribution Committee, or a Trust Administration Committee. Oftentimes, members of the client’s family and family advisors serve on the committees, subject to certain restrictions.
The requirements of forming a Wyoming Unregulated Single Family Private Trust Company are surprisingly simple. It is formed by filing the respective Statement of Registration or Articles with the Wyoming Secretary of State, in the same manner as filing the same for regular Registered Limited Liability Partnership, Corporation or LLC.
Conversely, the complexity of the Partnership Agreement, Operating Agreement or Bylaws for compliance with IRS Notice 2008-63 and State Statutes is significant and specialized, and similar at all to generic agreements on the internet or giveaways by service providers.