Since the mid-1990s, modern trust structures, such as directed trusts, special purpose entities/trust protector companies (SPEs/TPCs) and private family trust companies (PFTCs), have allowed families to successfully integrate their key trust planning desires.
These desires, prioritized differently by each client, are: some form of governance structure for the family trusts; privacy; control and flexibility regarding trust administration and investment management; family promotion of social and fiscal responsibility inter-generationally; and tax and asset protection benefits.
Despite this trend, it’s important to note that 70 percent of families typically name family members, business colleagues and friends as trustees of their trusts3 without the advantages of these modern trust structures, which limits their ability to integrate these key desires into their trust planning. As more families and their advisors familiarize themselves with the advantages and operation of these modern trust structures, their use and popularity will only continue to grow, as has been the case since the mid-90s.
One of the more popular modern trust structures is the modern PFTC, used by the ultra-wealthy (that is, families generally with net worths well in excess of $100 million or more). Wealthy families, both above and below the $100 million net worth threshold, also use directed trusts and SPEs/TPCs as trust structures that provide trust planning solutions to answer their key desires. There are many similarities among these three structures, allowing families at all net worth levels to accomplish their desired goals.