Date: Jan 09 2018
From a historical perspective, the private family trust company (or PFTC) is a relatively recent structure employed by successful, strategically-oriented families. Those who manage these structures have been, in most cases, focused on those entities’ organizational and operational requirements. However, many of those managing PFTCs have been quick studies and are now looking beyond their entities’ most pressing, initial needs—proper organization and implementation of effective operations and risk management—to focus on how their PFTCs can help trust beneficiaries live better, more satisfying lives.
As the managers of PFTCs know, much of the structure of a PFTC is designed—and many of its resources deployed—to manage and grow the assets of a trust and to reduce the risk inherent in being a fiduciary for someone else. In the commercial fiduciary world, few resources were historically devoted to making decisions on behalf of beneficiaries, much less to mentoring a beneficiary or helping him/her lead a more fulfilling life. Customarily, the attention given to beneficiaries and to distributions to or for them centered around gathering information about a beneficiary’s current circumstances, determining whether a particular distribution was permitted by the trust instrument at issue, understanding the tax consequences of a proposed or scheduled distribution, and confirming that distributions were used for their intended purposes. Those were, and are, obviously important activities and should not be discounted. However, other than providing funds to satisfy a beneficiary’s needs or wants, those activities have done very little in most cases to assist the beneficiary in leading a more fulfilling, richer life.
Up to this point, this has also been true for PFTCs to a certain extent. However, a change seems to be taking root. Through the mechanism of the Distribution Committee (sometimes called the Distributive Committee or Distribution and Mentoring Committee), PFTCs are proactively and consciously focusing resources on mentoring beneficiaries and assisting them in becoming the human beings that they aspire to be.
How do we see this happening?
- To varying degrees, PFTCs are engaging individuals to be members of these distribution committees who are trained specifically for (or are naturally inclined towards) inter-personal work, rather than defaulting to staffing such committees with members of management or the long-time advisors to the family (particularly to senior family members);
- These committee members are attempting to approach the relationship with a beneficiary without (or with few) preconceived notions of the beneficiary and with the understanding that the beneficiary—if in his/her teens or older—is already his/her own fully-distinct individual;
- These committee members also understand intuitively that even (or especially) members of the same family will have varying personal histories and narratives of the family, possibly mental score-cards tracking a member’s relationship with other family members and family advisors, and sometimes very powerful needs; and
- These committee members recognize that, in many cases, they will need to facilitate the beneficiary’s building skills and capacities that do not yet exist.
The above is neither an exhaustive list, nor is it organized in order of importance. However, what seems clear is that, at its best, assisting a beneficiary in becoming the human being that he or she aspires to be will be a very long journey with him or her. Moreover, maintaining the commitment to do the hard work and to allocate the resources (financial, emotional, intellectual and otherwise) needed to sustain the journey with beneficiaries may well be the greatest challenge for PFTC management, the family generally and indeed the members of those distribution committees. However, if these journeys develop successfully, then the promise of PFTCs and the purpose of the family’s wealth—that is, increasing the likelihood that family members will have, and capitalize upon, opportunities to make their lives better—may well be achieved.
Miles Padgett (Partner, Kozusko Harris Duncan) will be speaking at the 2018 FOX PFTC Workshop in a session titled, “Choosing the Right PFTC Charter State.” Click here to learn more.