THE RIGHT WEALTH PLANNING STRUCTURE STARTS WITH THE RIGHT QUESTIONS: WHAT JURISDICTION AND WHICH TYPE OF STRUCTURE? IN THIS ARTICLE, WE LOOK AT SOME OF THE STRUCTURES THAT MAY BE AVAILABLE TO HIGH-NET-WORTH INDIVIDUALS AND FAMILIES.
Trusts, foundations, private trust companies (PTCs) and protectors play different roles. Understanding those roles can help advisers consider a framework that reflects each client’s objectives, circumstances and longer-term plans.
WHY ARE THESE STRUCTURES USED?
Families often use wealth planning structures to organise the ownership and administration of assets, support succession planning, provide continuity across generations, and establish a clear governance framework. Depending on the client’s circumstances and the applicable law, a structure may also support asset protection, privacy, professional administration, and the orderly transfer of wealth.
A client may hold a family business, an investment portfolio, real estate, insurance policies, art or other assets across several jurisdictions. The most appropriate approach will depend on the nature and location of those assets, the family’s objectives, and the legal and tax advice received in each relevant jurisdiction.
At a glance:
A trust is a legal relationship under which a trustee holds and administers assets for beneficiaries under the terms of the trust
A foundation is generally a legal entity that owns assets in its own name and is governed in accordance with applicable law and its constitutional documents.
A private trust company is a company established to act as trustee for one or more trusts connected to a particular family or related group.
A protector is an oversight role that may be incorporated into a trust structure and whose powers are defined by the relevant trust or foundation documents.
These options are not always alternatives. Depending on the jurisdiction and the family’s needs, they can be combined within a wider structure to balance professional administration, family participation, continuity, and independent oversight.
TRUSTS
A trust is a legal relationship in which a settlor transfers legal ownership of assets to a trustee, who holds and administers them in accordance with the trust instrument and applicable law for the benefit of specified beneficiaries or, in certain types of trust, for a defined purpose. A professional trustee can bring continuity, experience, record-keeping, and independent judgement to the structure.
Depending on applicable law and the nature of the assets, trusts can hold a broad range of assets, including cash and investments, shares in private companies, real estate, insurance policies, and tangible assets such as art, jewellery, and collectibles. Whether the assets can be transferred, and the way they should be held, require specialist advise based on the relevant jurisdictions.
When might a trust be considered?
To establish a framework for the management and distribution of assets
To support succession and multigenerational planning
To provide continuity if the settlor dies or becomes unable to manage their affairs
To introduce professional and independent administration
To support privacy, asset protection, or estate planning where permitted by applicable law
FOUNDATIONS
A foundation is generally an independent legal entity that owns assets in its own name. It is typically established by a founder and managed by a foundation council or comparable governing body, subject to the relevant law and the foundation’s constitutional documents.
The precise form and content of a foundation’s governing documents vary by jurisdiction, but commonly set out its purpose, governance arrangements, decision-making powers, beneficiaries or objects, and the rules for administering and distributing its assets. These documents may include a charter, articles, regulations, or by-laws.
Foundations may be particularly familiar to clients from civil law jurisdictions because they have separate legal personality and a governance model with some corporate characteristics. They may be used to hold investments or family business interests, support succession planning, pursue philanthropic purposes, or provide long-term ownership continuity.
When might a foundation be considered?
The client prefers a structure with separate legal personality
The family wants governance through a council or similar governing body
The structure is intended to hold family business shares or other long-term assets, where permitted
The client wants to incorporate succession, family participation, or philanthropic objectives in the governing documents
Long-term continuity beyond the involvement of an individual founder is an important objective
PRIVATE TRUST COMPANIES
A private trust company is a company established to act as trustee for one or more trusts connected to a particular family or related group. Rather than appointing a third-party trustee directly, a PTC structure can allow the family to participate in trust governance through the PTC’s board, often alongside experienced independent professionals.
A PTC can support continuity, informed decision-making, and greater family involvement, particularly where trusts hold an active family business, specialised assets, or several related trusts. It also requires a robust governance framework. Board composition, conflicts of interest, ownership of the PTC, regulatory requirements, and the respective roles of family members and independent directors all need careful considerations.
When might a PTC be appropriate within a trust structure?
The family’s wealth and circumstances call for a dedicated governance structure
The trust holds a family business or specialised assets that require informed oversight
Several related family trusts could be administered through a common trustee framework
The family wants appropriate participation in decision-making while retaining clear fiduciary controls
Continuity and preparation of the next generation are important objectives
PROTECTORS
A protector is an oversight role that may be included in a trust or, depending on the jurisdiction, a foundation. The protector’s powers derive from the governing documents and applicable law, and should be tailored to the purpose and governance of the structure.
In a trust, a protector may be granted powers relating to specified trustee decisions, appointing or removing trustees, or overseeing particular aspects of administration. In a foundation, a protector or guardian may oversee the foundation council or help ensure that the foundation operates in accordance with its purpose.
A protector may be an individual, a professional adviser, a corporate entity, or a committee, where permitted. The appointment requires careful consideration because broad powers can create governance, conflict-of-interest, tax, or administrative issues. The role, decision-making process, succession arrangements, and limits of authority should therefore be clearly documented.
CHOOSING THE RIGHT FRAMEWORK
The decision is rarely a simple choice between a trust, a foundation, and a PTC or a protector. It begins with a wider conversation about ownership, governance, decision-making, oversight, family participation, succession, and the nature and location of the assets.
A well-designed structure may use more than one of these elements. For example, a trust can incorporate the use of a protector or use a PTC as trustee. The appropriate combination will depend on the client’s objectives and the laws of every relevant jurisdiction.
There is no single structure that is right for every family. Before establishing or changing any structure, clients should obtain independent legal and tax advice. The legal, regulatory and tax treatment of trusts, foundations and PTCs varies between jurisdictions.
Get in touch with Armando Daza, Business Development Manager, and Peter Leppard, Director, Client Services, from our Private Clients team in Latin America to discuss your or your clients’ international planning objectives.