Why a PFTC?
Family Offices are a common operational element for wealthy families. In some instances, those family offices have held trust powers, thereby creating an in-house “Private Family Trust Company”. In recent years, due to changes in state laws, new technologies allowing for lower costs of operations, and an increase in the outsourcing of certain functions, a separate Private Family Trust Company has become more attractive to families seeking control over their fiduciary activities.
Establishing a Private Family Trust Company (PFTC) through Lenox separate from the Family Office (FO) offers the best flexibility in terms of estate planning and family governance. Often the choice is to engage an institutional fiduciary, in the form of a retail trust company for example. Public or “retail” trust companies can have their limits, however. They are often not experienced in handling complex and nuanced matters, such as family business operations or private equity investments, for example. They can also impose limitations with regard to personalized service or tailored needs. Lenox as your partner eliminates these problems.
PFTC Benefits
A PFTC managed by Lenox offers benefits that overcome the limitations of retail trust companies:
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With years of experience working with families, Lenox knows that organizational, operational and leadership abilities vary or may be lacking across family units. Family governance issues can present significant challenges, and a well-managed PFTC provides structure and stability, while allowing family members and younger generations to learn, develop, and participate in trust operations. With Lenox as the PFTC manager, family members can engage by sitting on the Board of Directors, or on investment or distribution committees for example. This partnership is a unique characteristic that allows for personalized and tailored services, while ensuring a clear separation of duties. Family members are not solely involved in discretionary distributions or amendments, but individuals can still have a voice that would not be preserved, with a public or retail trust institution. Together, Lenox and the PFTC act as good stewards of the intentions and spirit of the trust company.
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When trusts or estates hold non-traditional assets (hedge funds, private equity, international investments closely-held businesses, mineral properties, natural resources, art and real estate for example), a public or retail trust institution may not the best fiduciary. Retail trust companies profit off estate investments, and agency issues and misaligned motives may lead to conflicts with the estate when decisions are based on investment profit motives or the requirement to diversify risk. Additionally, pooled assets for an entire family, rather than many individual trust assets, may offer better investment access or opportunities.
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It is not uncommon that individuals are placed in trustee roles. These persons often lack the knowledge, skills or experience needed to properly serve in this role, and their actions may not always be aligned with the desires of the estate. Furthermore, individual trustees create an added risk. Individuals may pass away, become ill or otherwise incapacitated, or for many reasons fail to adequately perform their fiduciary duties. Individuals are also held legally liable for their decisions regarding the trusts and estate, and this alone may impact their willingness to serve, or have responsibility for decision making. External corporate trustees can experience staff turnover, become acquired or merge with an unknown company, or simply cede doing business. A PFTC managed by Lenox eliminates such problems, and can afford uninterrupted oversight and management of trusts, developing family leadership over generations.
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A PFTC can eliminate the need for a family office to be registered with the SEC or State as an RIA. In fact, Lenox can organize the PFTC in such a manner that disclosure to regulatory agencies is kept at a minimum, protecting the privacy of individual family members, reducing complexity, and minimizing reporting and compliance requirements. Alternatively, management by Lenox guarantees institutional quality oversight while minimizing legal and professional exposure to family members.
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An PFTC serves only “its family.” It maintains exclusive authority to hire investment and other professionals and advisors as needed. The PFTC may also act as Trust Protector with the ability to add and remove advisors and outsourced professionals accordingly.
