Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Tuesday, November 19, 2019

Article on Tiered Structures for Family Office Operations: Integrating a Private Trust Company with a Family Office

Office1William J. Kambas, Amy M. Staehr, and Constance Shields published an Article entitled, Tiered Structures for Family Office Operations: Integrating a Private Trust Company with a Family Office, Probate & Property Magazine, Vol. 33, No. 5 (Sept/Oct 2019). Provided below is the introduction of the Article:

Both private trust companies (PTCs) and family offices (FOs) are often integral parts of the family-owned and family-controlled enterprises. As services organizations that are used to manage and control assets, orchestrate transition, and represent family interests within a multi-generational structure, the overall goal of both types of entity is to guide the use and enjoyment of family assets across generations. The reasons for establishing an FO or a PTC - or both - are numerous and varied. For some families, the most streamlines and efficient approach involves intergrating the two.

As a family enterprise grows, the integration of a PTC and an FO can be particularly attractive; if done properly, it can create economies of scale and result in efficiences like those found in multi-national corporation structured as a parent-subsidiary or branch operations. For example, one model moves the FO into a headquarter-type position as it takes on the supervision and control of the component parts of the operations of a family enterprise, resulting in consolidation, consistency, and substantial overal supervision of the group. The FO may supervise several subsidiary operations including fidicary services, insurance companies, and philanthropy management - much like a corporate holding company popular with many parent-subsidiary companies of the world. From an ownership standpoint, the FO would hold the equity interests in the subsidiary operations. This model is efficient, offers creditor protection, and promotes consistency among operations, much like a logitics center. An alternative model results in the PTC as the headquarters or parent component.

Such integration, however, is not without risk and can have unintended consequences. In this article, we focus on some of the leading issues faced with integrating a family's PTC with its FO. In certain cases, the combination of responsibilities into a unified structure will result in exponential benefits.


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