Private Trust Company

In the conventional approach, individuals often establish a Trust through a Will, creating what is known as a Testamentary Trust. Given the intimate nature of Trusts, people typically appoint individuals they share close relationships with and trust implicitly.

However, a significant drawback emerges when considering the natural lifespan of a person – their ability to serve as Trustee may not endure the entirety of the Trust, especially when spanning multiple generations. Additionally, concerns arise about potential biases in individuals acting as Trustees, potentially jeopardising the interest of Trust beneficiaries.

In scenarios where an individual trustee is less than ideal, the logical next step is to explore the option of a Licensed Trust Company (LTC). Unlike individuals, an LTC has no inherent lifespan, promising perpetual service. Its neutrality and independence make it an ideal candidate for Trust management.

However, it is crucial to recognise the potential disadvantage – a lack of flexibility in certain administrative decisions. For example, when family members, who are also beneficiaries and actively involved in the business, need to make critical decisions, an LTC might understandably, exercise caution. This caution, often involves extensive due diligence before approving decisions like obtaining a business loan, can lead to frustration among family members over time.

A Private Trust Company (PTC) is a purpose-built solution for administering Trust(s) exclusively for connected persons, such as those related by blood or by marriage.

Under Trust Companies (Exemption) Regulations, a PTC is exempt from obtaining a licence under the Trust Companies Act 2005. It is essential to note that a PTC must engage an LTC to act as ts administrator, ensuring compliance with the Monetary Authority of Singapore’s regulations on preventing money laundering and countering the financing of terrorism.

This strategic partnership ensures the necessary checks and balances, adding a layer of security and regulatory adherence to the Trust administration process.

In a Private Trust Company (PTC), the board of directors can comprise the family members of the settlor/founder, actively engaging in decision-making processes. Consider the scenario of obtaining a business loan: with family members also serving as trustees within the PTC, decisions become streamlined. Instead of navigating external channels, the same group of individuals can swiftly reach a consensus, wielding influence at both the business and trustee levels. This synergy becomes particularly crucial for trusts overseeing family-run businesses, facilitating quicker and more aligned decision-making.

While a PTC demands active family participation, it may not be suitable for families lacking successors to manage the PTC. The appointment of successors, typically chosen from the founder’s family, plays a pivotal role in ensuring the PTC and trust administration align with the family’s unique needs and preferences.

The value and size of the trust fund emerge as critical factors when determining the suitability of a PTC for your family. Operating and maintaining the PTC structure involves inevitable costs, encompassing the engagement of professionals such as accountants, auditors, tax advisors, and lawyers for effective administration.

In essence, while a PTC structure proves invaluable, particularly for families with intricate assets and diverse needs, other factors like successor availability and maintenance costs must be carefully weighed.