Private family trusts are companies which are formed in order to act as the trustee of a single trust or a cluster of related trusts. The best part about Private Family Trusts is that the family members can take part in the decisions of the trust which need to be taken for discharging its functions as the trustee of the private family trust. Such decisions would be related to the control and regulation of the various companies which are owned by the private family trust.

This sort of liberty which the family members enjoy would not be allowed in a trust which is not a private family trust but an independent trust company.

In a private family trust the settler is allowed to exercise a lot more control over the affairs of the trust.

In a Private Family Trust the settler can be appointed as a member of the Board of Directors. The same is applicable in case of the family members of the settler and also his advisor. The advantage of this inclusion is that the settler and his family can monitor the administration of the Trust. The constitution of the Board of Directors is flexible and can be changed from time to time in order to include the new generation into the management of the Trust. This setup is very desirable as the family has full knowledge about the family trust. If at any point of time a need of changing the direction of the trust is felt then that can be achieved by changing the members of the Board of Directors.

It is true that the settler can become a director of the trust but this decision calls for a good thought. The reason for this is the fact that inclusion of the settler as a Board member may adversely affect the tax status of the trust. The same is true for the family members and advisors of the settler. Before appointing them too a good thought has to be given as to whether or not this inclusion would affect the tax status of the trust.

The general rule states that if an offshore trust is managed by a trust company which is managed and controlled offshore then that offshore trust will be subjected to only offshore tax system. For qualifying a trust as an offshore trust the majority of its directors will have to be offshore residents.

In order to avoid the tax implications, the private family trust should be created as a company limited by guarantee. Its membership laws should be flexible. For example appointment of new members, removal of existing member, and cease of membership on death or at the attainment of a certain age should be allowed. In this way the final control of the trust will stay in the hands of the settler and his family. In this way the settler can also avoid the tension about probate. He can simply forget about the possible dangers of transferring the shares of a Board member to someone else on the death of that member.

In this way the aim of having the ultimate control of the trust is never compromised even if no member of the settler’s family is represented in the Board of Directors of the trust. This will be true as long as the settler owns the trust.

So we find that followings are the most important characteristics of the Private Family Trust:-

1. They are set up as companies limited by guarantee.

2. The ownership of the trust and therefore the control of the same lie with the settler or his family members.

3. The directors of the trust may be family members but the trust must have a majority of directors who stay offshore and some of them must be trust experts.

4. The trust company can have administrative power over only family trust or trusts. In no circumstance can the company provide service to public trusts.

5. The same careful drafting as always is required for the terms of the trust which are administered by the Private Family Trust.

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