Why Establish a 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 varied and individualized as the families behind them. Frontier Administrative Services values your family’s individuality and works closely with you to establish a Private Trust Company designed to meet your needs while maximizing the benefits and protections available in Wyoming.

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. However, if a family’s needs are better met by the formation of a regulated entity, Wyoming allows for chartered, and therefore regulated, Private Trust Companies as well. Wyoming is one of only a few states where both unregulated and lightly regulated Private Trust Companies can be created, thus allowing Frontier Administrative Services the widest of latitudes in helping families determine which structure better meets their needs.

Frontier Administrative Services 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.

The many benefits to forming a Private Trust Company include:

  • Consolidation: A Private Trust Company can collect any number of family trusts under one umbrella as well as hold additional family assets, including certain illiquid assets institutional trustees are often unwilling to hold. Such consolidation results in less fragmentation and increased efficiency in terms of cost, time, and overall coordination in asset management and protection.

  • Continuity: The formation of a Private Trust Company solves the trustee successor problem that many families deal with several times over during the life of a trust. Wyoming’s near-perpetual 1,000 year extension to the Rule Against Perpetuities (RAP) resolves such successor issues. A Private Trust Company remains the trustee for the lifetime of the trust, regardless of the individuals who make up the Board and who, thereby, make distribution and investment decisions. Positions on the Board are filled or changed as needed, negating continual amendments to underlying trusts, fees associated with changing trustees, and offering added flexibility.

    • Some states, including South Dakota, Idaho, and Wisconsin advertise that because they have abolished the RAP, they are the only locations where trusts can exist “indefinitely.” Experts note, however, that there is no practical difference between the states that have abolished the RAP and “near-perpetual” states such as Wyoming whose trusts have a lifetime of 1,000 years. Daniel G. Worthington & Mark Merric, “Which Situs is Best?” 149 TRUSTS AND ESTATES 54 (January 2010).

  • Control, Convenience, and Accessibility: Control of trust assets stays in the hands of those named by the settlor and future beneficiaries. This means the management of a family’s wealth remains as much with the family itself as the settlor wishes, allowing for more personalized and better informed trust distribution and investment decisions. This structure also provides families with educational opportunities to integrate future generations into the active management of the family’s ongoing affairs.

  • Cost Savings: Over the life of a trust, the fees associated with creating and administering a Private Trust Company will generally be significantly less than if the trust is managed by an institutional trustee that charges on an ad valorem basis. Also, by consolidating family assets under the management of one company, unnecessary and duplicative cost and effort can be minimized.

    • Tax Benefits: By creating a Private Trust Company, families may be able to increase their deductible trust administration fees and expenses beyond the normal 2% Adjusted Gross Income limitation.

    • Tax Benefits Unique to Wyoming: Wyoming provides numerous tax savings opportunities. Most notably, the state assesses no state income tax on individuals, corporations, or trusts, thus minimizing the erosion of trust principal.

  • Protection: A Private Trust Company lifts liability away from individual family members named as trustees and is usually able to purchase insurance to further insulate family members and advisers acting in the capacity of owner, manager, or director.

  • Flexibility: The control a family retains in a Private Trust Company allows them long-term structural and managerial flexibility, ensuring that the Company is able to meet changing family needs and circumstances. The absence of licensing requirements allows an unregulated Private Trust Company to make changes to its Board members, officers, and some structural provisions without the hassle and expense associated with changing institutional trustees.

  • Integration: A Private Trust Company is easily assimilated with other family entities including a Family Office, an operating company, a philanthropic organization, or other outside product advisers.