Introduction

A client wishing to create a trust has to come to terms with the requirement to transfer legal ownership of assets to the trustee. In the context of offshore wealth planning, the trustee may be a service provider's professional trust company, likely to be operating in a foreign jurisdiction. If the client is concerned about taking this step, one solution may be the use of a private trust company (PTC). This is a corporate trustee established for the purpose of acting as trustee of a specific trust or trusts. It is often used as an integral part of the private wealth structuring for those seeking to establish a dynasty of private wealth. The PTC may be incorporated in any jurisdiction and the board of directors can include family members, trusted advisors of the family and local professionals.

Private Trust Company Business Exemption

Jersey has strict regulatory requirements for the conduct of trust company business, but a PTC is able to operate in Jersey within private trust company business exemption provisions where:

  1. the purpose of the PTC is solely to provide trust company business services in respect of a specific trust or trusts
  2. the PTC does not solicit from or provide trust company business services to the public
  3. the administration of the PTC is carried out by an entity regulated to carry out trust company business (such as a Jersey corporate service provider) and
  4. the name of the PTC is notified to the Jersey Financial Services Commission (JFSC).

It follows that:

  • The exemption from regulation applies only to the provision of trust company business services in respect of trusts.
  • There is no JFSC approval required to secure the exemption and importantly there is no public record of PTCs.
  • The PTC is not required to apply its own anti-money laundering (AML) procedures, appoint a money laundering reporting officer and money laundering compliance officer, or to register with the JFSC for AML purposes. Reliance is instead placed on the regulated trust company which provides administration services to the PTC to apply its AML procedures.

Administration

As to what constitutes "administration", it is not a requirement for the Jersey service provider to supply a director to the PTC. The entire board may be constituted by family members alone. This may be attractive to clients who wish to remain closely involved in their interests, perhaps where a family business is held in the trust. However the presence of an experienced trust practitioner on the board can be an advantage complementing the knowledge of the family directors. The JFSC would in any event expect the administrator to be in a position to know about and understand the activities of the PTC even if this is achieved without it being represented on the board.

Generally the JFSC will rely upon the Jersey regulated service provider to ensure compliance with the terms of the exemption.

Ownership

The simplest structure is for the client or members of the family to own the shares  in the PTC personally. This may however be less attractive for reasons concerned with taxation, confidentiality or asset protection . It also requires thought to be given as to the devolution of the shares in the PTC on the death of the owner.

A common alternative is to arrange for the shares of the PTC to be held upon the terms of a purpose trust, the sole purpose of which is  to hold those shares and to provide a trustee to the relevant trusts. Alternatively a Jersey foundation could be used.

An advantage of using a purpose trust or foundation as shareholder is that the client has the comfort of knowing that the ownership of the PTC can be perpetual. This is particularly attractive to a client with dynastic ambitions for family wealth.

Summary

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