Some Family Offices May Face Restructuring Due to Dodd-Frank

6:49 pm Asset Protection, California Trusts, Estate Planning

generations e1333046933360 Some Family Offices May Face Restructuring Due to Dodd FrankSome Family Offices may be required to register with the Securities and Exchange Commission as investment advisers thanks to new Dodd-Frank regulations.  A Family Office is a private legal entity that manages investments and trusts for a single family; faced with the new regulations, some Family Offices may elect to reorganize as a private trust company (PTC).

A recent Trusts and Estates newsletter article on this topic listed both advantages and disadvantages to restructuring as a PTC.  Some of the advantages include:

  • Retention of family control, privacy and liability protection for decision makers;
  • Can be set up in a state that doesn’t have state income or capital gains taxes on trusts;
  • If PTC is regulated by state law and submits to some kind of regulatory oversight, it may be exempt from registration as an investment adviser;
  • Flexibility in managing and investing trust assets;
  • If regulated, a PTC can create a common trust fund, which offers greater efficiency and economies of scale.

Some of the disadvantages of a PTC include:

  • PTCs are relatively untested.
  • Potential for family conflict if trustee is not free from family control.
  • High initial capitalization, start-up costs, and continuing administration costs;
  • Family members may have no real recourse against a fiduciary in cases of financial mismanagement;
  • Potential tax consequences if some family members have too much control over PTC activities;
  • Additional regulatory and financial reporting requirements.

Weighing the advantages and disadvantages of establishing a private trust company should be undertaken with the expert guidance of a California estate planning attorney. Your California legal and financial planning experts are at your service; Contact us today.


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