For extremely wealthy families, managing and preserving great fortunes rely upon Family Trust Companies or FTCs. Nevada has grown its popularity as a base for these companies through legislation.
Nevada is more than just a state to gamble with money. It’s also one of a few states that passed legislation to allow Family Trust Companies to act as a trustee for family trusts, so long as the company is not marketing its services to the public at large.
The Wealth Advisor’s recent article, “Family Trust Companies In Nevada,” explains that although a retail trust company can provide fiduciary services to the general public, an FTC is a corporation or LLC formed to provide fiduciary services to a single family.
FTCs are particularly useful in managing the type of assets put into a trust by creators of great wealth. Trusts with controlling interests in businesses put the trustee in control of the business, and they’re potentially liable for business activity. They also manage assets like private equity interests, hedge funds and real estate. FTCs are particularly well-suited for management of interests in regulated businesses, like gaming establishments for which the trustee could itself be subject to regulatory oversight because of its degree of control of the business. Many institutional trustees may not want to be trustee of trusts holding these types of assets. Others will accept these types of assets but charge high fees.
The FTC lets the family and its employees manage the family assets. An FTC is a company that has officers and directors and can employ both family members and outside experts to manage the assets in trust. Compared to an institutional trust company with a profit motive, the FTC just serves the family and doesn’t generate fees beyond its expenses.
FTC ownership structure varies with each family. Some will have the owner of the FTC be an LLC that is itself owned either outright by a family member or by a trust specifically designed to own the FTC during the entirety of its existence.
The FTC can be involved with inter-family financial transactions. These involve a variety of financial transactions between and among the FTC, the family trusts it administers, family members and family affiliates that could be prohibited as a conflict of interest for an institutional trustee. Privacy and confidentiality are important.
An FTC can also ask the court to order that a variety of documents be sealed from the public record, including inventories, listing of accounts, fiduciary statements, and other documents related to its activities.
For some wealthy families, the FTC offers a way for generations of family members to go to work in a business that benefits the family, fostering insights into the values and history of the family that led to the creation of its fortune.
Reference: The Wealth Advisor (December 18, 2017) “Family Trust Companies In Nevada”