More Families Choosing Private Trust Companies to Manage Assets Over the Long Term

Law Firm Newswire



Palo Alto, CA (Law Firm Newswire) January 16, 2015 – According to a recent report in the Wall Street Journal, wealthy families are increasingly setting up private trust companies to manage their assets, rather than using traditional trust companies.

“Private trust companies offer families more flexibility and more control,” said Michael Gilfix, a Palo Alto estate planning attorney with Gilfix & La Poll Associates LLP. “It is easy to see why more and more super-wealthy families are selecting this option, although there are potential downsides.”

One reason many families choose to create a private trust company, reports the Wall Street Journal, is that traditional trust companies may be bound by fiduciary duty to invest conservatively. A private trust company can take more risks when investing assets, possibly creating higher returns.

Private trust companies can also offer families the ability to keep all trust assets together. Some traditional trust companies will not manage assets that are not liquid, such as property.

An added benefit of a private trust is that the trust company remains the trustee of the assets for the lifetime of the trust, regardless of which family members or other individuals are named to the board of the trust. Families do not need to continuously amend trusts if life circumstances mean that a particular person can no longer serve as the named trustee.

Still, Gilfix points out, there can be downsides. “Private trusts can be expensive to set up,” he noted. “And although it is true that more aggressive investing strategies may mean that the trust is able to garner a higher return, success relies entirely on the skill of those appointed to make the investment decisions.”

Private trust companies are not expressly permitted by law in all states. That said, a family living in one state may set up a trust in another state where laws and tax rules offer the most benefit to the family.