As reported by the WSJ in an article entitled Matters of Trust: Super-Rich Set Up Companies, the über wealthy are increasingly setting up their own privately-held family trust companies or “FTCs” to administer their trusts. Here’s an excerpt:
It isn’t enough to have a trust fund any more. The next step is to have your own trust company.
A small but increasing number of the super rich are setting up their own trust companies — boutique trust firms owned or controlled by wealthy families themselves. Some want more say over how their trust assets are handled; others want to consolidate a bunch of family trusts under one umbrella.
This isn’t a game for the average trust-fund baby. Families typically should have at least $100 million to set one up, and most that do have at least $250 million. Experts estimate there are only a couple hundred private trust companies in the U.S.
Still, their numbers have increased in the past decade as trust lawyers begin to tout their benefits. John P.C. Duncan, a Chicago lawyer who specializes in private trust companies, is setting up 16 this year, compared with only five four years ago. The South Dakota Trust Co., Sioux Falls, which provides back-office and other services for private trust companies, is helping to administer 12 private trust companies this year, up from five last year.
Florida Family Trust Company Act
The WSJ piece was published in 2007. To maintain its edge in the hyper competitive trust-fund business, Florida needed to react to this new trend, and it finally has. With the passage of CS/SB 1238, effective October 1, 2015, we now have the “Florida Family Trust Company Act,” found in F.S. Chapter 662.
The dollars at stake in this kind of planning are going to be significant, so if you’re thinking about setting one of these up you’ll want to get the lay of the land. First, read the legislative Staff Analysis summarizing the new act. Second, read Florida Family Trust Companies: Tax and Nontax Considerations, an excellent article in this month’s Florida Bar Journal explaining the nuts and bolts of the new act. Here’s an excerpt:
On June 13, 2014, Governor Scott signed the Florida Family Trust Company Act, creating F.S. Ch. 662. The act, which becomes effective October 1, 2015, governs the formation and operation of family trust companies (FTC) in Florida. At least 14 other states currently have legislation authorizing FTCs (private trust companies). The act, together with favorable trust law and the absence of a state income tax, should allow Florida financial, banking, accounting, and legal service providers to gain a share of the growing FTC business. However, unresolved federal income and transfer tax issues continue to loom over the use of FTCs, whether in Florida or elsewhere. This article provides an overview of the act and discusses key tax and nontax considerations related to FTCs.