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Private Trust Companies

For very large families—those with liquid assets at least over $100 million—the private trust company (PTC) can make a great deal of sense. Such families are already likely to have significant infrastructure in terms of a family office, hence the incremental cost of setting up a PTC can be minimal. And because a PTC vastly simplifies many of the jobs the family needs to do—including complex accounting and reporting and providing ongoing trusteeship and administration of family trusts—the true net cost can easily be negative.

Until the late 1980s, when the Rockefeller family established a PTC, virtually all substantial families used the services of a commercial trust company or the trust department of a commercial bank. That option was never particularly desirable (aside from the poor quality of the investment performance, leaving sensitive family decisions to the trust committee of a corporate entity unrelated to the family was especially problematic), but with the massive consolidation of banks, leaving most American communities with no true local trust company, it has become unacceptable for any family that can afford another option.

The main advantage of the PTC is that it can provide fiduciary services directly to a family. Other forms of family office organization can support individual trustees or work with commercial trust companies, but they lack trust powers. A family that forms a PTC can thus avoid having to deal with an unaffiliated fiduciary ...