Tag: corporate trustee
One of the articles included in the Toronto Lawyers Association’s Newsstand this week discusses the concepts of Private Trust Companies (PTCs) and Private Trust Foundations (PTFs) in the British Crown dependency of Guernsey. While there are significant differences between these types of structures and trust companies in Canada, it is interesting to consider ways in which trustee arrangements are structured in other jurisdictions.
PTCs, similar to corporate trustees in Canada, are often used by high net worth families to consolidate various family interests into a private structure that is customized to fit their particular needs. PTCs can offer many benefits, including in-house specialized knowledge and expertise, continuity, and flexibility. In Guernsey, PTCs are structured in a two-layered manner. The PTC itself is a limited company established for the sole purpose of acting as a trustee. The shares of the PTC must then be “orphaned”, by having a non-charitable purpose trust hold the shares of the PTC.
PTFs, on the other hand, are differently structured. A foundation can be established for the sole purpose of acting as a trustee. As a legal entity the foundation can then act and exercise all the powers and obligations of a trustee in the same way as any corporate trustee, such as a PTC. However, since the foundation has no members or shareholders, it is already “orphaned” and there is no need to set up a holding vehicle, as is required for the PTC. A crucial difference between PTCs and PTFs is that, the law in Guernsey which applies to fiduciaries, does not necessarily apply to PTFs, as long as the PTF is not paid for its services. Of course, if the PTF is paid for its services, it will be deemed to be carrying on business and will fall under the Fiduciaries Law. In Guernsey, PTFs may be seen as a simpler alternative to PTCs.
In Canada, trust companies are similar in concept to PTCs, but are structured differently, as the “orphan” layer of the PTC is not necessary. Trust companies are regulated federally by the Trust and Loan Companies Act, SC 1991, c 24 and in Ontario by the Loan and Trust Corporations Act, RSO 1990, c L.25. Many of the large banks have a subsidiary trust company through which they operate in the capacity of a corporate trustee. Trust companies in Canada are fiduciaries and are paid for their services as trustees. This is an important element of trust companies, and the non-fiduciary nature of PTFs would likely be incompatible with trustee obligations in Canada.
As with PTCs and PTFs, Canadian trust companies are often used in place of an individual trustee where a trust or estate is particularly complex. For example, corporate trustees may be useful where a trust, whether inter vivos or testamentary, is intended to exist over the course of many generations. Trust companies can provide continuity of administration, and avoid issues restricted to the lifetime of an individual trustee.
Furthermore, given the increase in non-traditional family structures, such as second marriages and blended families, estates can be very complex and can involve many beneficiaries. It may be overwhelming for an individual to manage the complex structures that may be created to account for the different interests in a family. It may also be difficult for an estate trustee to remain neutral and objective if there are conflicts or issues that arise with respect to the family structure and distribution of assets.
Thanks for reading.