Ohio Is One of a Select Number of States with Private Family Trust Company Statutes

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 were pioneers in offering families this statutory option, while Missouri, like Ohio, added statutes which became effective in 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: 

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 Clearstead on how an Ohio Family Trust Company can provide a succession solution for your family!

^{Disclosures: The information provided is general in nature, is provided for informational purposes only, and should not be construed as financial or legal advice. The views expressed by the author are based upon the data available at the time the article was written. Any such views are subject to change at any time. Clearstead disclaims any liability for any direct or incidental loss incurred by applying any of the information in this article. All financial decisions must be evaluated as to whether it is consistent with your objectives and financial situation. You should consult with a financial, tax or legal professional before making any decisions.}