Private Trust Companies vs. Foundations

Families who have outgrown simple wills and single trusts often bump into the same fork in the road: do we build a Private Trust Company so we can steward our own trusts, or do we organize a foundation to hold assets and set the rules from the center? Both paths can work brilliantly, and both can fail if they’re bolted on without thinking through governance, taxes, and the family’s appetite for ongoing work. I’ve helped families choose, implement, and run both structures. The best outcomes come from matching the tool to the family’s goals and operating style—not the other way around.

What a Private Trust Company Actually Is

A Private Trust Company (PTC) is a company established to act as trustee for one or more family trusts. Instead of hiring a professional institutional trustee, the family owns and controls the PTC (directly or through a purpose trust or foundation). The PTC then serves as trustee to the family’s trusts, holding shares in operating companies, portfolio investments, real estate, yachts, art—whatever the family places into trust.

Key points:

The PTC does not typically act for the public. It’s usually limited to a single family, sometimes structured to cover multiple branches.

Jurisdictions like Cayman, BVI, Jersey, Guernsey, Singapore, and certain U.S. states allow PTCs under specific licensing or exemption regimes.

Governance sits with the PTC’s board. That board can include family members, trusted advisors, and independent professionals.

Why families choose PTCs:

Control: The board can be tailored to family culture and investment orientation.

Speed and flexibility: Decisions can be made quickly and contextually, without institutional bottlenecks.

Continuity: The PTC can outlive any individual trustee, providing stability across generations.

PTCs are rarely worth the effort for smaller estates. As a rough rule of thumb, I don’t see them justified unless the family expects to hold at least $50–$100 million of assets through trusts, or there’s a compelling non-financial reason (complex operating businesses, sensitive assets, or governance needs that a corporate trustee won’t accommodate).

What a Foundation Actually Is

“Foundation” means different things depending on jurisdiction and context. There are two broad species:

Private interest foundations (PIFs): Civil-law style entities used for holding and managing private wealth, often in Liechtenstein, Panama, the Bahamas, Jersey, and Guernsey. These have legal personality (like a company) but no shareholders. They are run by a council (board) according to a charter and bylaws, for the benefit of beneficiaries or purposes.

Charitable/private foundations: In the U.S., a “private foundation” typically means a 501(c)(3) charitable vehicle subject to strict self-dealing rules and a 1.39% excise tax on net investment income. Elsewhere, “foundations” can also be explicitly charitable vehicles with their own local rules.

This article focuses primarily on private interest foundations versus PTCs because they sit in similar roles as family wealth-holding platforms. Where relevant, I’ll call out U.S. private foundations as a separate category for philanthropy.

Why families choose foundations:

Centralization: One legal person owns and controls the assets, subject to the foundation’s rules.

Civil law familiarity: For some families, a foundation feels more intuitive than a trust.

Perpetuity: Most foundation jurisdictions allow indefinite duration.

Succession clarity: The founder can define detailed succession governance without reliance on a trustee’s fiduciary discretion.

Foundations are common in civil-law countries and in common-law jurisdictions that legislated foundation regimes (Jersey and Guernsey among them). While exact counts fluctuate, there are thousands of private interest foundations globally; Jersey alone has registered several hundred since the regime launched, and Liechtenstein counts several thousand active foundations.

The Big Picture: PTC vs. Foundation

Here’s the core difference I keep coming back to:

A PTC is a bespoke chassis to run a family’s trusts. It emphasizes fiduciary governance and trustee-level decision-making across multiple trust silos.

A foundation is a standalone legal person that can own assets directly and is governed by its charter and council, not the quirks of trust law.

Both can support robust governance, asset protection, and continuity. The better fit depends on whether you want your center of gravity to be “multiple trusts with a common trustee” (PTC) or “one legal entity with a purpose and beneficiaries” (foundation).

Governance and Control

How decisions get made

PTC governance:

The board of the PTC acts as trustee for underlying trusts. Board composition is critical: typically a mix of family representatives, independent directors, and technical experts (legal, investment, risk).

The PTC will adopt policies—investment policy, distribution policy, conflicts policy, related-party transactions policy—and apply them across trusts.

A protector or enforcer can oversee each trust, adding checks and balances without undermining the PTC.

Foundation governance:

The foundation council (board) runs the foundation under its charter and bylaws. A protector or supervisory board can be added, and some jurisdictions require it for certain powers.

The founder can reserve specific powers (change beneficiaries, amend bylaws, approve major sales), but over-reservation can create tax or asset-protection risks.

Beneficiary rights vary by jurisdiction and the charter: some allow robust information rights; others limit access to maintain confidentiality and flexibility.

Personal insight: For families with strong entrepreneurial leadership, PTC boards tend to feel natural, especially when they mirror a company board with committees and MIS reporting. Foundations work best when the family buys into a constitution-like charter and wants fewer moving parts.

Control vs. independence

A perennial tension: families want influence without undermining the legal integrity of the structure.

In PTCs, you can put family directors on the board, but blend them with independent fiduciaries. Keep records of deliberations. Avoid having the founder as the sole decision-maker; it risks a “sham trust” argument or tax recharacterization.

In foundations, founders often reserve powers, but too many reserved powers—especially unilateral rights to withdraw assets—can make revenue authorities treat the foundation as transparent or as still controlled by the founder. Moderation and documentation matter.

Common mistake: Allowing an investment committee of family members to effectively control all decisions without independent oversight. It defeats the purpose of creating a buffer and invites future legal challenges.

Asset Protection and Succession

How robust is the ring fence?

Trusts (via a PTC) rely on the trustee’s fiduciary separation of legal and beneficial ownership. Many jurisdictions have “firewall” statutes that defend trusts from foreign forced heirship claims and certain creditor actions if properly settled and not tainted by fraud.

Foundations offer separation via distinct legal personality. They can be equally robust if established before a problem arises and operated as a genuine independent entity. Many foundation laws also include strong firewall provisions.

Timing and clean structure are everything. If you set up a PTC or foundation after liabilities have crystallized, you’re unlikely to get protection. Substance and independence in decision-making will be examined if challenged.

Succession simplicity

PTCs give continuity of trusteeship. Directors can rotate without changing trustees. Each trust carries its own distribution and succession rules, avoiding “one-size-fits-all” rigidity.

Foundations centralize succession inside the charter. One charter governs governance and benefits, which can simplify inter-branch fairness. If different branches need radically different outcomes, a foundation holding company over multiple substructures can still work.

For families with contentious dynamics, I lean toward the PTC with multiple trusts—one for each branch—because it isolates risk and calms the “we’re all tied together forever” concern.

Tax and Reporting

I won’t sugarcoat this part: the tax analysis makes or breaks the choice. There is no generic winner; outcomes depend on the founder’s tax residence, beneficiaries’ locations, asset types, and the jurisdictions chosen.

High-level principles

Trusts are not legal persons in most jurisdictions. Tax treatment depends on whether the trust is considered resident, grantor vs. non-grantor, and where underlying assets sit.

Foundations are legal persons. Tax authorities may treat a private interest foundation as a corporation, as a trust, or as sui generis. The classification drives whether distributions are dividends, gifts, or trust distributions.

Cross-border reporting:

FATCA (U.S.) and CRS (OECD) impose reporting on financial institutions and often on investment entities. Over 110 jurisdictions participate in CRS exchanges.

Many trusts (including those with PTCs) are considered Financial Institutions if they are “managed by” a financial institution or meet the investment entity test, triggering account reporting on controlling persons.

Foundations can be FIs or NFEs depending on their activities and whether they are professionally managed.

Practical tip: Run a classification memo early. I’ve seen structures redesigned late in the process because the CRS/FATCA status would have triggered broad reporting that the family didn’t anticipate.

U.S. connected families

PTC/trust route:

U.S. grantor trust rules are unforgiving. If the settlor retains certain powers or U.S. persons are beneficiaries, a foreign trust can become a grantor trust, pulling income into the U.S. tax net.

Non-grantor foreign trusts trigger complex distribution rules (throwback taxation and interest charges) on accumulated income distributed to U.S. beneficiaries. If that’s a possibility, plan for DNI/UNI tracking, or consider a domestic trust (e.g., South Dakota/Nevada) combined with a U.S. PTC.

Foundation route:

A foreign private interest foundation may be treated by the IRS as a foreign corporation or trust depending on facts. Corporate treatment can trigger Subpart F/GILTI concerns; trust treatment brings you back to grantor vs. non-grantor issues.

For philanthropy, U.S. private foundations are highly regulated: strict self-dealing prohibitions, minimum distribution requirements (~5% of assets annually), and a 1.39% excise tax on net investment income. On the plus side, contributions can be income-tax deductible, and the regime is familiar to U.S. donors.

Bottom line for U.S. nexus: Many families prefer a domestic trust/PTC combo for core wealth and use a U.S. private foundation or donor-advised fund for charitable aims. If a foreign structure is desired, get specialist advice early to avoid nightmare reporting and adverse tax.

Non-U.S. families

PTC/trust route:

Non-resident trusts in well-chosen jurisdictions can be tax efficient if beneficiaries are also non-resident and distributions are carefully timed. Local anti-avoidance rules (CFC-style attribution, transfer of assets abroad rules, “settlor interested” tests) vary widely.

Foundation route:

In some civil-law countries, foundations receive more predictable treatment than trusts, reducing the risk of recharacterization. Others may treat them like companies, taxing income at the beneficiary level when distributed.

Both routes:

Watch for controlled foreign entity rules, exit taxes, and “significant influence” tests that can pull entity income onto personal tax returns if control is too concentrated.

Relocation plans matter. If family members may move to the U.K., Spain, or Australia, design with those tax regimes in mind or build flexibility to pivot.

Cost and Complexity

Generalized ranges vary by jurisdiction and provider, but for planning:

PTC:

Setup: $75,000–$250,000+ including legal, formation, AML/KYC onboarding, policies, and initial board assembly. If you need a regulated license (less common for family-limited PTCs), costs go up.

Annual: $50,000–$200,000+ for directors’ fees, corporate administration, registered office, compliance, accounting, audit (if required), economic substance, and board meetings. Add more if the PTC runs multiple trusts with complex assets.

Foundation (private interest):

Setup: $15,000–$100,000 depending on jurisdiction, drafting complexity, and whether a protector/supervisor is added.

Annual: $10,000–$75,000 for council fees, administration, registered office, accounting, and compliance. The variance reflects asset complexity and substance expectations.

Charitable U.S. private foundation:

Setup: $10,000–$50,000 for legal work, IRS exemption filing, policies.

Annual: $15,000–$100,000 for administration, tax filings, grant management, and governance, plus the 1.39% excise tax on net investment income.

If the structure oversees operating businesses, art collections, or cross-border real estate, budget more for specialist governance and insurance.

Choosing a Jurisdiction

Key factors that actually move the needle:

Legal framework: Modern trust law or robust foundation statute, firewall protections, reserved powers regimes.

Regulatory clarity: Clear PTC exemptions or licensing pathways; efficient registry; stable case law.

Tax environment: Neutrality for non-resident structures; no surprise withholding taxes; double tax treaty access if needed.

Substance: Ability to meet economic substance rules (local directors, premises, C-suite services if required).

Professional ecosystem: Depth of experienced administrators, lawyers, auditors, and banks comfortable with the structure.

Confidentiality and transparency: Beneficial ownership registers (many exist but are not public); competent authority access under AML/CTF and tax information exchange.

Common choices:

PTCs: Cayman, BVI, Jersey, Guernsey, Bermuda, Singapore, selected U.S. states (South Dakota, Wyoming, Nevada).

Foundations: Liechtenstein, Panama, Bahamas, Jersey, Guernsey, Malta. Some families also use Austrian or Dutch foundations for specific purposes.

Personal note: I prioritize a mature ecosystem and predictable regulators over shaving a few basis points off administration fees. Saving $20,000 annually is irrelevant compared to the cost of a governance failure.

Use Cases: What Works Where

Multi-branch families with divergent needs:

PTC with separate trusts per branch. Shared PTC board sets high-level policies; each trust can fine-tune distributions. Reduces inter-branch friction.

Entrepreneur with a large operating company:

PTC route often works better. Trusteeship over a trading business requires nimble, informed decision-making and careful conflicts management. The PTC board can include operating experience.

Civil-law family prioritizing a simple central entity:

Foundation as a holding platform, with a clear charter and reserved powers (within reason). Beneficiary rights and succession rules are easier to convey culturally.

Philanthropy-centric families:

U.S. taxpayers: a U.S. private foundation or donor-advised fund, sometimes paired with a PTC/foundation for private wealth.

Non-U.S. families: a charitable foundation under local law, coordinated with private holding structures. Mind the charity regulator’s expectations and reporting.

Privacy-sensitive families:

Either can be structured with privacy, but assume regulators will know who you are. Avoid jurisdictions with unstable transparency policies.

Decision Framework: Questions to Answer

Control: How much hands-on involvement does the family want in fiduciary decisions?

Diversity of needs: Do different branches require customized trusts, or will one charter suffice?

Tax footprint: Where are the founder and beneficiaries tax-resident today and in five years?

Assets: Are you holding a portfolio of liquid investments, or complex operating businesses and real assets?

Substance: Are you prepared to staff a PTC board meaningfully and meet substance expectations?

Budget: Are you willing to spend six figures annually on governance done right?

Culture: Does a trust-based fiduciary model or a constitution-like foundation charter fit the family’s DNA?

How to Set Up a Private Trust Company: A Practical Sequence

Goals and scoping workshop

Map assets, family tree, succession objectives, time horizon, and risk tolerance.

Identify sensitive assets and special purpose vehicles that may need reconfiguration.

Tax and regulatory mapping

Commission a cross-border tax memo. Determine trust classification (grantor/non-grantor), residency, and CRS/FATCA status.

Decide jurisdictions for the PTC and trusts based on legal and tax mapping.

Governance design

Draft board composition: number of directors, mix of family members and independents, term limits.

Define reserved powers (if any), protector roles, committees (investment, distributions, audit/risk).

Write core policies: investment, distribution, conflicts, valuation, digital assets, ESG if relevant.

Formation and licensing

Incorporate the PTC. If licensing is needed or an exemption applies, prepare filings and undertakings.

Create a purpose trust or foundation to hold the PTC shares for stability.

Draft trust instruments

Tailor trust deeds to each branch/purpose. Include powers around operating businesses, distributions, and trustee indemnities.

Add protectors where appropriate, with carefully limited powers.

Substance and resourcing

Appoint directors, company secretary, and administrators. Consider local resident directors if needed.

Arrange office support, meeting cadence, and board portal. Put D&O insurance in place.

Asset onboarding

Transfer shares, settle portfolios, and novate contracts as needed. Update banking mandates.

Document valuation and related-party protocol for intra-group transactions.

Compliance setup

Accounting policies, audit scope, MIS reporting templates.

First-year operating rhythm

Quarterly board meetings with clear packs and minutes. Annual strategy day with family council.

Review distribution and investment outcomes and adjust as needed.

How to Set Up a Foundation: A Practical Sequence

Purpose and charter workshop

Define whether the foundation is private interest or charitable. Clarify primary objectives, beneficiaries, and purpose clauses.

Decide on founder rights and oversight mechanisms.

Tax classification memo

Determine how key tax jurisdictions will treat the foundation (corporate vs trust vs sui generis).

Assess CRS/FATCA status and reporting obligations.

Jurisdiction selection

Compare foundation laws, confidentiality, council requirements, and regulator culture.

Choose a place where your charter will be enforceable and respected.

Charter and bylaws drafting

Draft precise beneficiary definitions, distribution criteria, amendment powers, and dissolution rules.

Establish a protector or supervisory board if needed. Set conflict-of-interest standards.

Council appointment and administration

Appoint council members with relevant expertise. Blend family advisors with independent professionals.

Put indemnities, D&O insurance, and clear remuneration in place.

Incorporation and registrations

File charter with the registry. Complete any regulator approvals.

For charitable foundations, complete charity regulator onboarding and public reporting setup.

Asset transfer and banking

Transfer assets with documented valuations and tax clearances.

Establish banking and investment mandates. Implement an investment policy and liquidity plan.

Ongoing governance

Annual general meeting equivalents, council meetings, and reporting cadence.

Review charter relevance every 3–5 years; maintain a change log for amendments.

Common Mistakes and How to Dodge Them

Over-reserving control

Mistake: Founder retains sweeping unilateral powers (replace everyone, extract assets at will).

Fix: Use balanced reserved powers, require multiple signatures, and appoint a protector to oversee critical changes.

Ignoring tax characterizations

Mistake: Treating a foreign foundation as “tax invisible” or assuming a trust will be non-grantor without testing.

Fix: Obtain written tax advice for the founder’s and beneficiaries’ countries. Recheck if anyone’s residence changes.

Treating governance as a box-tick

Mistake: Skeleton boards that rubber-stamp family dictates; no conflicts policy; no minutes.

Fix: Recruit credible directors, train them on fiduciary duties, and run real meetings with real debate.

Mixing personal and entity assets

Mistake: Using foundation or trust accounts to pay personal expenses without proper authorization or records.

Fix: Adopt clear expense policies. If personal benefits are intended, document them as distributions per the governing documents.

Underestimating economic substance

Mistake: PTC formed in a jurisdiction with substance rules but no local decision-making.

Fix: Place genuinely active directors locally, keep records and meetings there, and engage local administrators.

Poor asset onboarding

Mistake: Missing assignments, unfunded trusts, or lingering personal guarantees.

Fix: Use a closing checklist. Confirm title transfers, update registries, and reconcile bank mandates.

Forgetting beneficiaries’ information rights

Mistake: Assuming beneficiaries have no rights to information and stonewalling reasonable requests.

Fix: Set a policy on beneficiary communications aligned with local law. Provide tailored reporting to build trust.

No plan for illiquid assets

Mistake: Holding concentrated stakes without a liquidity plan for distributions or taxes.

Fix: Build a liquidity ladder and valuation policy. Consider preferred shares or tracking interests to align benefit expectations.

Practical Tips From the Field

Design for the second generation, not the first. The founder’s clarity won’t last forever. Bake flexibility into documents so future stewards can adapt without dismantling the structure.

Write the distribution policy in plain language. Boards change; a clear policy reduces discretionary whiplash.

Build a data room. Store charters, trust deeds, minutes, policies, tax memos, valuations, and bank docs centrally with access controls.

Think in committees. Investment, distributions, audit/risk, and nominations committees bring order and accountability.

Insure the people. Fiduciary liability, D&O insurance, and sometimes E&O are not optional when stakes run high.

Stress test with a crisis drill. Simulate a rapid liquidity need or key-person loss. See where decision-making stalls, then shore up the weak points.

Plan for digital assets. If you hold crypto or tokenized interests, write down key custody and access procedures. Board members should understand private key risks and wallets.

Regulatory and Market Trends to Watch

Transparency creep: Beneficial ownership registers are standard; while not always public, competent authorities have access. Expect more cross-border cooperation and data sharing.

Economic substance: Jurisdictions increasingly expect real decision-making and a traceable “mind and management” in the place of incorporation.

CRS 2.0 and DAC8: The reporting net is widening, including crypto-asset reporting. Assume digital assets will be as transparent as securities over time.

Philanthropy scrutiny: Regulators are sharpening focus on charitable funds flow, sanctions screening, and cross-border grants. Expect heavier AML/CTF demands.

ESG pressures: Family structures that cannot demonstrate responsible governance may face reputational drag when co-investing or fundraising.

FAQs: Quick Answers

Can a foundation own a PTC?

Yes. A foundation or a purpose trust often holds the PTC shares to avoid concentrating ownership in one branch.

Is one structure more private than the other?

Not meaningfully, given AML and tax exchange regimes. Privacy now comes from good governance and compliant discretion, not secrecy.

Do I need both?

Sometimes. I’ve seen foundations used as “holding hubs” atop operating companies, with a PTC running trusts for branch-specific benefits. The choice depends on complexity and appetite for administration.

Will a foundation avoid forced heirship?

Many jurisdictions provide firewall statutes for both foundations and trusts. You still need proper timing, clean funding, and local advice where heirs might litigate.

When is it too early to set up a PTC?

If assets are under $50 million or governance energy is low, consider a professional trustee first. You can migrate to a PTC later when scale and complexity justify it.

A Simple Decision Map

Choose a PTC if:

You want trustee-level control over multiple trusts.

You own complex operating businesses or assets that need hands-on fiduciary management.

The family is ready to staff a real board and pay for ongoing substance.

Choose a foundation if:

You want a single legal person to own assets with a clear charter.

Your family comes from a civil law background or prefers company-like structures.

You aim for a simple center with defined founder powers (carefully calibrated).

Consider a hybrid if:

You need a central charter and entity (foundation) but also want trust-based benefits management per branch via a PTC as trustee of subordinate trusts.

What a High-Quality Implementation Looks Like

Clear, written purpose

Everyone on the board and in the family can state the mission in a sentence or two.

Documented, debated policies

Investment, distributions, conflicts, and valuation policies that were debated and agreed—then reviewed annually.

Independent oversight

At least one independent director or council member with teeth, not a rubber stamp.

Clean tax posture

Classification memos on file. Reporting is on time. Beneficiaries’ filings are supported with usable information.

Real meeting rhythm

Quarterly meetings with timely packs, minutes that reflect genuine deliberation, and follow-up action tracking.

Measurable outcomes

Agreed metrics: liquidity coverage, concentration limits, inter-branch equity measures, philanthropic grant ratios, and succession readiness.

Final Thoughts

Both private trust companies and foundations can serve as a durable “family operating system” for wealth. The most satisfying structures I’ve been part of share the same DNA: thoughtful governance, clarity of purpose, and the humility to revise when circumstances change. Get the tax and legal architecture right, absolutely—but invest just as much in the human architecture. The board you build and the policies you live by will matter far more over 30 years than the logo on the registry.