Uses and advantages of private trust companies (PTCs)

Most people are aware of the advantages of establishing a trust, which include asset protection, asset preservation, estate planning and the professional administration of family assets, to name just a few.

However, there can sometimes be disadvantages to using a third-party trustee company – if, for example, the trustees do not discharge their fiduciary duties. Furthermore, there might be several changes of trustees during the lifetime of the trust, which may lead to lost and missing documents, with trustees continuing to increase their fees.

One of the solutions to this problem could be to hire a professional protector for the trust. Unfortunately, protectors may also create difficulties for all parties and generate additional fees.

Private trust companies may offer a simpler – and in many cases more economical – solution.

Private trust companies (PTCs) are companies created with the sole purpose of acting as a trustee of a trust, or group of related trusts, for the same family. These entities can be established in several jurisdictions with the assistance of professional advisors.

There are several situations in which a family might benefit from the use of a PTC, for example:

• if the principal wants to retain a high degree of control over the investment activity and decisions
• if the principal is actively involved in trading stocks and bonds in international markets requiring real-time responses
• if the principal wishes to appoint one or more members of his/her family as directors of the PTC board in order to oversee the actions of the trustee
• if the principal wants to have a proper succession plan in place to ensure minimal disruption in case the trustee needs to be replaced
• if the principal wants to have a more complete overview of the trustee’s costs and expenses

The advantages of a PTC over a third-party trustee company include the following:

• The principal can retain a higher level of control and supervision without running the risk of the trust being considered a sham due to undue influence
• The principal can decide who the directors of the PTC should be and include different parties such as, for example, his/her lawyer, asset manager or private wealth advisor as board members of the PTC
• The principal can prevent a trustee from committing a breach of trust as a dual signature mechanism can easily be implemented
• Changes can be made to the composition of the PTC’s board without having to amend trust documents, bank accounts, etc.

Although PTCs may entail many advantages for a principal, the nature of the principal’s control over the PTC requires detailed and tailor-made advice to ensure that the structure is set up properly.

PTCs have been set up in several traditional jurisdictions such as the British Virgin Islands, Cayman Islands, Cook Islands and Jersey. However, onshore jurisdictions such as Singapore, Cyprus and Switzerland are now often used as well.

Use of PTCs in Singapore:

• A Singapore PTC must have at least one Singapore-resident director and can also have non-resident directors. However, for management and control purposes it is recommended that the majority of directors are based in Singapore. In this way, the board of directors can include family members together with Singapore-based professional advisors.
• Singapore is a very popular onshore jurisdiction of choice for wealthy Asian families, who may be more reluctant to deal with trustees in traditional offshore trust jurisdictions.
• The city state’s political stability and strong rule of law as well as favourable exemptions for certain activities makes Singapore a favoured jurisdiction for wealthy families to set up a family office.

Use of PTCs in Cyprus:

• A PTC is effectively a special purpose company registered in Cyprus. As there is no specific PTC regulation, the PTC can be used to act as a trustee of more than one trust for the same family.
• Compared to other jurisdictions, the set-up and running costs in Cyprus can be very competitive. In addition, Cyprus-based providers are primarily UK-educated and demonstrate extensive knowledge and experience.
• In order to enjoy favourable tax treatment in Cyprus and for the Cyprus PTC to be used in a Cyprus international trust structure, the majority of the directors need to be based in Cyprus and control must be exercised in the jurisdiction by regulated trustees. However, additional directors may be added to the board in order to oversee the directors’ activities.
• As Cyprus is part of the European Union, using a Cyprus PTC can, if structured correctly, have many advantages when dealing with businesses and investments within the region, utilising Cyprus’s extensive double taxation agreements.

 Use of PTCs in Switzerland:

• Swiss PTC companies are deployed in cases in which clients prefer to be associated with onshore centres.
• As many clients often have assets in Switzerland, dealing with a Swiss-based trustee can simplify administration and reduce time-related costs.
• Switzerland is also a centre for financial and investment opportunities. Dealing with a Swiss company can therefore simplify due diligence processes.
• Switzerland has a strong tradition of excelling in providing a wide range of services to wealthy families from around the world.

swisspartners Marcuard Heritage AG has the knowledge and expertise to help set up a family PTC. Irrespective of whether your preferred jurisdiction is Singapore, Cyprus or Switzerland, we have experienced professionals who can support the whole process, explain the characteristics of each jurisdiction and subsequently provide ongoing assistance with the day-to-day business.

For more information on Singapore, please contact:

Lucia Luchetti
swisspartners Marcuard Trust (Singapore) Pte. Ltd
lucia.luchetti@swisspartners.com.sg

Evelyn Tay
swisspartners Marcuard Trust
(Singapore) Pte. Ltd
evelyn.tay@swisspartners.com.sg

For more information on Cyprus, please contact:

Andreas Hadjimichael
SPMH (Cyprus) Limited
andreas.hadjimichael@swisspartners.com.cy

Anastis Nikolau
SPMH (Cyprus) Limited
anastis.nikolau@swisspartners.com.cy

For more information on Switzerland, please contact

David Sykes
Head Trust & Corporate Services,
swisspartners Marcuard
Heritage AG Switzerland
david.sykes@swisspartners.com

Cintia Amoros
swisspartners Marcuard
Heritage AG Switzerland
cintia.amoros@swisspartners.com