Many Bermudians have placed their assets into a trust for the benefit of themselves and their families. One of the first decisions concerns the selection of the trustees. Generally speaking there are three options: institutional trustees, individual trustees, or a private trust company (PTC). Naturally there are advantages and disadvantages of each.

An institutional trustee offers certain advantages over an individual trustee. These include a staff of trust professionals, protection and longevity. However, the institutional trustee will charge a fee, which can often be avoided by using individual trustees (as a general rule individual trustees are unable to provide trust services as a business unless they are licensed). However before you ask a relative to act as your trustee, they should appreciate that a trustee can be personally sued for their actions as a trustee. A trust company with limited liability may be a more attractive option.

One interesting trend is the increased use of a PTC where assets are significant. A PTC is a company with trustee powers that does not require licensing under Bermuda's trust legislation, the Trusts (Regulation of Trust Business) Act 2001, provided that it fulfils two criteria. First, it cannot be carrying on business as a trustee; in essence, it cannot offer its services to the general public. Second, it is empowered to act as trustee of only a limited number of identifiable trusts that would typically be for the benefit of related persons, or family members.

Unlike a public trust company where the minimum capital requirement is $250,000, there is no minimum capital for a PTC, which can be structured as an ordinary Bermuda local or exempted company, or as a company limited by guarantee 'owned' by its members.

Where the PTC is structured as an ordinary local or exempted company, care needs to be exercised in retaining ownership and/or control over it, since doing otherwise could produce adverse tax and other consequences. For this reason it is not uncommon to have the PTC 'orphaned' by having it owned by a Bermuda purpose trust.

A PTC can also be very attractive to institutional trustees who are concerned about the increased risk of litigation focusing on trustees' actions. Often the institutional trustee can earn the same fees by providing 'trustee like services' under a service agreement, and avoid the fiduciary obligations/liabilities imposed on trustees.

A Bermuda PTC has several advantages that are making them increasingly popular. They include: ? There is no expensive licensing process for a PTC in Bermuda as in other jurisdictions, and they are therefore relatively cost effective to set up and administer. For large trusts the running costs are often lower than the fees charged by some institutional trustees that have compliance burdens and overheads. ? Often families from jurisdictions that are unfamiliar with the trust concept appreciate and better understand the PTC concept. These can be compared to structures that are familiar to them, such as a corporate or foundation structure. ? Often people are more comfortable having significant assets administered by a PTC that they have created and possibly own or control by way of representation on the board. ? A PTC affords privacy and confidentiality about the family's assets and their activities. ? The absence of licensing makes it quicker, easier and less expensive to make changes to directors, officers or other structural elements. Changing institutional trustees in a traditional trust structure can be time consuming and costly due to the change in ownership of assets and the retiring trustee's demands for more comprehensive indemnities to protect against litigious beneficiaries and potential onshore tax liabilities. With a PTC often all that is required is a change of directors or the termination of the administrative services agreement with the institutional trust company.

Rather than the institutional trustee making decisions regarding the trust assets, the use of a PTC structure enables family members or trusted advisers to be involved in the decision making process by becoming directors or consultants to the PTC.

? An institutional or professional trustee will always prefer to hold a diversified portfolio of low risk investments. The PTC does not have similar constraints. ? The PTC integrates easily with a family office, an operating company or even a private philanthropic trust. It is possible to share a common name, board of directors and administrative facilities.

A PTC can be a very useful vehicle if the circumstances are right and if it is correctly structured. Speak to your advisor to determine if one is best for you.