On June 14, 2016, Governor Kasich signed House Bill 229 allowing families to establish a family trust company to serve as trustee of family trusts.  The Ohio Family Trust Company Act (O.R.C. Chapter 1112) makes Ohio part of a select group of approximately 16 states with these forward-thinking statutes.  Most notably, South Dakota, Nevada and Wyoming have been offering families this statutory option for years while Missouri most recently added statutes which were effective on August 28, 2016.

The Ohio Family Trust Company Act became effective on September 15, 2016.  The Act authorizes both licensed (regulated by the Ohio Division of Commerce’s Department of Financial Institutions) and unlicensed Family (Private) Trust Companies.  A key requirement of an Ohio Family Trust Company is that the clients served are limited to “family members.”  Family members include spouses, spousal equivalents, adopted children, stepchildren and foster children.  It also includes family charities, family estates, trusts set up for family members, key employees and entities owned and operated by family members. 

What is a Private Family Trust Company (“PFTC”)?

A PFTC is:

  • A family owned and controlled entity with fiduciary powers which limits its activities to the management of assets for the benefit of a single family lineage
  • Is authorized under state statutes:
    • To operate as a corporate trust company (may be a corporation or limited liability company)
    • To serve as trustee for family trusts
    • To provide investment management or advisory services to family entities such as trusts, private foundations or limited liability companies
    • May be licensed (regulated) or unlicensed (unregulated)

When considering trustee options, typically, naming a traditional (bank) corporate trustee or individual(s) are considered.  Below is an outline of some of the characteristics of each of these options as well as for a PFTC:

Traditional Corporate Trustee

Individual Trustee

Private Family Trust Company

Regulated

Professional

Rigid Policies

Conservative

Turnover of Personnel

Expensive

Accountable

Impersonal

Sensitive & knowledgeable about the family

Flexible/Subjective – saying “no” can be difficult

Private

Not Expensive

Not Permanent

Individual Fiduciary Liability

Impact of Family Dynamics

Governed by Family Members

Permanent Trustee Solution

Confidential

Institutionalize the personal, business, & investment matters for a family

Personalized Service

Liability Protection

Flexibility in Managing Concentrated Positions

Consistent Trust Administration/Compliance

Family Engagement Opportunity

  

Who Should Consider a PFTC – Common Traits

  • Families doing multi-generational estate planning
  • Families concerned about trustee succession & trustee liability
  • Families with a family-owned business, real estate holdings, or partnership interests held in trust
  • Families that want to select own personnel, officers, investment managers, and to develop a family succession plan
  • Families interested in educational opportunities

Benefits of a Private Family Trust Company

  • Professionalizes & standardizes the families’ current & future trustee roles
  • Permits a flexible & adaptable structure allowing family participation & governance
  • Provides continuity & privacy
  • Protects family assets including a family business enterprise held in trust
  • Supports the complexities of wealth
  • Educates the rising generation & offers additional engagement opportunities
  • Sustains family legacy
  • Respects the qualities that make each family unique

Start the conversation with CLS Consulting, LLC on how an Ohio Family Trust Company can provide a succession solution for your family!