Private Trust Companies in Jersey

What is a PTC?

There has in recent years been a significant increase in the use of private trust companies (PTCs) in Jersey as trustees of family trusts. A PTC is a company set up by a settlor to act as trustee of a family trust (or of a series of trusts, all for the benefit of different members of the family). The board of directors of a PTC will usually include both members of the family, (possibly the settlor of the trust), other immediate family and trusted family advisers. In this way, the family can actively participate in the decisions that need to be taken by the PTC as trustee, including decisions relating to the control and management of companies owned by the trustee.

Advantages of using a PTC

The principle advantage of a PTC is that it enables the settlor and his family to become involved in the operation of a trust in a way that would not be possible if the trustee was a professional trust company.

The board of directors of the PTC would normally include family members who are sufficiently close to the settlor and to other family members, to be able to ensure that the intentions of the settlor are observed.

In choosing the board of directors of a PTC, the settlor may appoint family members who will at a future date become principal beneficiaries of the trust. In this way, the settlor is able to use the PTC as a vehicle to familiarise the family members with the wealth and business interests owned by the trusts and instruct them in the management of those assets.

Where the underlying assets are invested in private companies that are actively trading, a PTC may be able to react promptly to a request for trustee approval for a major transaction (for example, a sale of an important part of the business owned by the trustees). This does not mean that the settlor can disregard the fact that assets are held on trust as trust law will always dictate that the trust is managed in the best interests of all the beneficiaries. However, it will be easier to make decisions for instance, to invest in riskier investments where a professional trustee will always be bound to follow it own procedures.

Modus Operandi of a PTC

Whilst the settlor may be one of the directors, consideration will need to be given as to whether or not this is desirable, especially if it may adversely affect the fiscal position of the trust; likewise, whilst other beneficiaries and family members may also be appointed to the board of directors, advice should be sought as to whether or not this will affect the tax position of the PTC or cause the trust itself to suffer adverse tax consequences.

Commonly, when the settlor of a trust chooses Jersey law as the proper law of the trust, the intention is that the trustee will be a Jersey person or entity and that the trust will be administered in Jersey. Jersey trustees generally have to be licensed and regulated by the Jersey Financial Services Commission (JFSC), under the provisions of the Financial Services (Jersey) Law 1998; however, if the trustee is a Jersey PTC it may be exempt from the requirement to be licensed and regulated, so long as it falls within the scope of the exemption set out in the Financial Services (Trust Company Business (Exemptions)) (Jersey) Order 2000.

 This Order provides that the PTC must act as trustee solely of a specific trust or group of trusts; must not solicit or provide trust company business from the public; and must itself be administered within Jersey by a registered trust company services provider.

There is no requirement to submit to the JFSC or to any other statutory body in Jersey any reports or accounts of either the PTC itself or of the trusts of which it acts as trustee.

Who should own a PTC?

There are a number of ways in which a PTC may be owned: for example, the settlor may own it directly; or another member of the family may own it. However, it may be undesirable for the settlor to own the PTC directly. A common solution is to have the shares of the PTC owned by Jersey trustees of a purpose trust, the sole purpose of which is to own the shares of the PTC for the benefit of the settlor and family members. The PTC has little or no intrinsic value; its sole purpose is to act as trustee of the family trust and so its value is usually no more than the amount of its paid-up share capital; which may be minimal.

Summary

PTC's are extremely useful for individuals who hold a lot of personal assets and wish to structure them in a tax efficient manner. They are a highly attractive option because of the flexibility they offer to settlors.

IFG Trust (Jersey) Limited, as a registered trust company services provider, is able to administer Jersey PTC's and has experience of doing so.

IFG does not provide taxation or legal advice. The information and expression of opinion expressed in this briefing note are not intended to be a comprehensive study or to provide taxation or legal advice. Specific advice concerning individual situations should be taken and IFG can provide introductions to advisers who specialise in this area.