Blog

Understanding Trust Companies

Trustee Liability

Jul 11, 2023

3 minutes

Trust companies can be private or public depending on how they are structured and the number of people or families they serve. Outlined below is the difference between private and public trusts, and additional resources.

What Is a Private Trust Company?

A private trust company (PTC) is a limited liability company or corporation with the specific purpose of providing trust services for a trust or a select number of trusts for only one family. It can be formed either as a regulated or unregulated entity. While an unregulated trust company has fewer requirements to become active, over the long term, it’s important that it implements governance standards similar to those of a regulated PTC.

PTCs create a permanent trustee that can adapt to changing family structures. In other words, this is a way to institutionalize the role of trustee and provide a fluid successor trustee, allowing new members to be appointed and others to resign without needing to change the trust documents.

PTCs are organized under a separate corporate structure, with the individuals serving on the board, as managers of an LLC, and/or serving on various committees. The most common committees are established to provide recommendations regarding investments, distributions, audits, and philanthropy. PTCs will often use an administrative trust company to establish situs and provide additional administrative functions. Additionally, they may hire professionals, such as investment advisors, lawyers, and certified public accountants, to perform specific services, or have a family office execute on these decisions.

The Individual Trustee Liability coverage Woodruff Sawyer offers provides a broad policy to cover members of the LLC, committee members, and directors and officers of the private trust company for their service as trustees of the private trust company. Learn more about individual trustee liability and apply for coverage.

Learn more about private trust companies and risk management techniques by reading our blog post: Why Are Private Trust Companies Becoming More Popular?

What Is a Public Trust Company?

A public trust company resembles a traditional bank trust department or bank trust company; the defining factor is that they serve multiple or unrelated families as well as individuals with much less wealth.

A public trust company can have either a state charter or a national charter.

A trust company is a legal entity that acts as a fiduciary, agent, or trustee on behalf of a person or business for a trust. A trust company is typically tasked with the administration, management, and eventual transfer of assets to beneficiaries. It may also act as a custodian and manage investments.

It’s important for your insurance professional to understand the structure of the trust company and services provided in order to customize the appropriate insurance solutions.