Private Trust Company

A private trust company is a company that one family forms and owns to act as trustee of the family’s own trusts, in place of a bank or licensed trust company. State law either charters it as a regulated trust company or exempts it from licensing, family members sit on its board, and it cannot offer trustee services to the public.

Private trust companies solve governance problems for families with roughly $100 million or more: trustee succession, control over concentrated assets, and a seat at the table for the next generation. A private trust company adds no creditor protection of its own, and in an offshore asset protection trust, family control weakens the defense the trust depends on.

How a Private Trust Company Works

A private trust company, sometimes called a family trust company, is owned by the family it serves, either directly or through a purpose trust that holds the company’s shares so ownership sits outside any one member’s estate. The company becomes the trustee of record for some or all of the family’s trusts. It hires investment managers, keeps trust records, files accountings, and approves distributions—work a bank trust department or licensed trust company would otherwise perform for a fee.

The board typically mixes family members with outside advisors, and distribution decisions belong to a distribution committee. IRS guidance on private trust companies, Notice 2008-63, requires family members to stay out of discretionary distribution decisions that affect their own trusts. Without that firewall, a family member’s control over distributions could pull trust assets back into their taxable estate.

Several retail trust companies use “private trust company” in their brand names and sell trustee services to the public. Those are ordinary licensed trust companies. In planning usage, a private trust company means a company the family itself owns, which may not take business from outside the family.

Which States Allow Private Trust Companies?

About fifteen states have private trust company statutes, and Nevada, South Dakota, Wyoming, and New Hampshire attract most formations. The regimes split into two tracks: licensed companies supervised by the state banking regulator, and unlicensed or exempt companies with little or no supervision.

• Nevada. A licensed family trust company needs $300,000 in stockholders’ equity, a Nevada office, and a Nevada-resident officer. Nevada also permits an unlicensed family trust company that simply notifies the state of the family’s designated relative, though it cannot use the word “trust” in its name.
• South Dakota. South Dakota charters every private trust company and requires $200,000 minimum capital, a $100,000 deposit pledged to the state, and an examination at least every 36 months.
• Wyoming. Wyoming offers an unregulated private family trust company with no minimum capital and no state oversight, alongside a chartered version requiring $500,000 in capital and a $1 million surety bond.
• New Hampshire. New Hampshire charters family trust companies with $200,000 minimum capital and lets the family change its designated relative every ten years.

The unregulated tracks cost less but give up the credibility that a banking-department examination provides. Every state’s statute restricts the company to a single family measured from a designated relative, with Wyoming allowing a chartered company to add a second family.

Private Trust Companies in the Cook Islands

Cook Islands law allows a private trustee company: a family-owned international company can act as trustee of up to three Cook Islands international trusts without a trustee license. The company must still be incorporated and administered through a licensed trustee company, which supplies its registered office and company secretary.

Beyond three trusts, the company is in the trustee business, and running an unlicensed trustee business in the Cook Islands is a criminal offense. Licensed Cook Islands trustee companies must meet capitalization, insurance, and fit-and-proper standards under the Trustee Companies Act 2014.

Cook Islands private trustee companies suit families that want a governance vehicle for wealth already outside the United States. A Cook Islands trust designed for creditor protection instead names a licensed, independent trustee. When U.S. family members run a private trustee company, a U.S. court can reach every decision-maker.

Private Trust Company vs. Licensed Trustee

A private trust company is a trustee the family owns and controls; a licensed trustee company is an independent, regulated business that administers trusts for a fee. The choice between them determines who decides distributions, what the structure costs, and whether the trust protects assets when a creditor attacks it.

	Private trust company	Licensed trustee company
Ownership	The family, directly or through a purpose trust	Independent owners in the trustee business
Control	Family board directs trust decisions	Trustee decides independently; the settlor requests
Cost	$200,000–$500,000 in capital, plus staff and compliance	About $5,000 per year for a Cook Islands trust
Oversight	State charter and examinations, or none on the unregulated track	Government licensing, audits, and insurance requirements
Asset protection	Weak: family control is reachable by U.S. courts	Strong: independence supports the impossibility defense

The cost difference settles the question for most people. A licensed Cook Islands trustee charges about $5,000 per year, and the full Cook Islands trust costs about $21,000 to establish. A private trust company posts $200,000 to $500,000 in regulatory capital before accepting its first trust, and a full-scale operation spends well over $1 million each year covering staff, compliance, and examinations.

The Cook Islands has ten licensed trustee companies, each regulated by the government’s Financial Supervisory Commission and focused on administering asset protection trusts for foreign settlors. For an asset protection trust, we recommend a licensed, independent Cook Islands trustee over any family-controlled arrangement, because an offshore trust protects assets only when the trustee sits beyond the reach of U.S. courts.

A private trust company is the better trustee for a family whose real problem is governance: an operating business no institutional trustee wants to hold, dozens of trusts across generations, and trustee succession the family intends to control.

When Does a Private Trust Company Make Sense?

A private trust company makes sense for a family wealthy enough to run a small trust business as overhead. The practical floor sits around $100 million, and many families that form one hold far more. Below that scale, the capital requirements, examinations, and staffing cost more than decades of licensed-trustee fees.

Three situations justify the overhead. The first is assets institutional trustees handle badly: an operating company, a ranch, or a concentrated stock position that a bank trustee would press to diversify. South Dakota’s statute expressly permits a private trust company to hold concentrated positions without diversifying. The second is volume, where one family has dozens of trusts across multiple generations and pays separate institutional fees on each. The third is succession, because a company survives the individuals who run it, so the family never repeats a search for a successor trustee.

The private trust company question we hear most often comes from business owners who have read family-office material and want the control a private trust company promises. The number that settles it is scale: the same governance that is rounding-error overhead on $500 million is a second full-time business on $5 million.

Offshore trust planning makes sense once a family holds about $1 million in total assets or $500,000 in liquid assets; private trust company territory begins near nine figures. Between those two numbers, the licensed-trustee model does the same fiduciary work at a fraction of the cost.

Can a Private Trust Company Protect Assets from Creditors?

No. A private trust company provides no creditor protection by itself, and family control can weaken the trusts it administers.

Protection lives in the trust, not in the trustee’s corporate form. An offshore trust protects assets because the trustee is independent of the settlor and outside U.S. jurisdiction. When a judge orders the settlor to repatriate trust assets, the settlor’s defense is impossibility: an independent trustee controls the assets and refuses to comply. That defense works only when it is true.

A domestic private trust company forfeits the defense entirely. A U.S.-chartered trust company is subject to U.S. jurisdiction, so a court can order the company itself, not just the settlor, to turn over trust assets. The family members who direct the company face contempt personally if it refuses.

Moving the company offshore changes little when its directors stay home. A Cook Islands private trustee company whose directors are U.S. family members leaves every decision-maker personally subject to U.S. court orders. The court in FTC v. Affordable Media affirmed contempt against settlors who had kept co-trustee and protector roles in their own Cook Islands trust: the control they retained made compliance possible, so their impossibility claim failed. Courts run the same analysis through an entity, asking who can make the trustee act rather than whose name appears on the trustee’s letterhead.

We are asked a few times a year whether a family-owned company as trustee can restore the control a settlor gives up to a foreign trustee. What we see in the case law is that any path back to control becomes the creditor’s path too: the same board seat that lets a settlor direct the trustee lets a judge direct the settlor. A settlor cannot be the trustee of their own offshore trust for the same reason, and an entity in the middle does not change who holds the power.

Families wealthy enough for a private trust company sometimes run both structures: a domestic private trust company to govern the family’s estate planning trusts, and a separate offshore trust with a licensed, independent trustee for the assets that need creditor protection. The offshore trust holds the protected assets precisely because no one in the family can be ordered to reach them.