On October 1, 2015, the Florida legislature passed the Family Trust Company Act. This act allows families to form private family trust companies in Florida, similar to those available in states like Wyoming, South Dakota and a number of other states.
So what does this legislation mean to you?
It means that affluent families (or affluent clients) with significant assets in trust could realize the following benefits in formation of a private family trust company (PFTC) to manage their family trust assets:
• More control over how those assets are managed; • Possible trustee fee cost savings; • More flexibility in how to structure the entity to suit your family needs; • More personalized service; • The ability to choose board members; • Faster decision making; • Fewer restrictions on family owned or closely held assets; • Greater privacy in the community; • Possible estate planning benefits; • And more….
What is the minimum size and capital requirement for establishing a PFTC?
The minimum size is generally driven by the cost of formation and operation. InTrust already has established professional relationships in place and in general the ideal size in trust assets is $3.5 million or more in such assets among all family trusts.
The family should also be prepared to fund the PFTC with $250,000 in required capital and another $20,000 to $30,000 to fund the entity formation, legal and registration costs.
What is the regulatory cost of a PFTC?
The cost of registration depends on the type of PFTC formed, licensed or unlicensed.
We believe the majority of families will benefit most from the unlicensed structure as there are fewer regulatory oversight risks. The unlicensed PFTC registration is just $5,000 and $750 annually thereafter.
How can we help?
As a boutique wealth management firm and family office, we have already put together the professional relationships to make this a smooth transition for you.
We will also help as follows:
Help oversee the PFTC structure development including bylaws or operating agreements and processes & procedures;
Work with outside counsel to change trustees or deem trusts to change the current trustees to your PFTC;
Assist you in setting up and operating your PFTC including accounting, bank accounts, bill payment and reporting;
Assist in the monthly asset and performance reporting, as well as, trust accounting and reports to the PFTC Board;
Help you in planning and running your PFTC board and committee meetings;
Help evaluate your current investment holdings and your investment options with your new PFTC as trustee over these assets;
Assist in setting investment policy, asset allocations and with investment management.
Assist you in manager selection, if applicable;
Handle distribution requests, tax estimates and facilitating end of year tax preparation;
Are there downside risks?
Yes, as in everything in life the PFTC may initially make your life or lives a bit more complex, but we will be there to assist you.
Additionally, some guidance relating to the tax consequences of using a PFTC to serve as the trustee of a trust for a family member have yet to be finalized by the IRS after it stopped issuing affirmative private letter rulings on the subject. Such guidance should be forthcoming.
What is the next step?
Why not give contact us to discuss how a PFTC may benefit you and get a quote on what it might cost to implement and run your own PFTC?