Delaware’s New Family Trust Company Act
On July 13, 2026, Delaware Governor Matthew S. Meyer signed into law groundbreaking legislation for high-net-worth families interested in establishing a private trust company to take advantage of Delaware’s attractive trust laws. The Delaware Family Trust Company Act, Senate Bill 327 (the “Act”), enables families to form a new type of Delaware-chartered trust company called a “family trust company” with lesser capital and operational requirements and enhanced privacy than other types of Delaware trust companies.
For decades, Delaware has been widely regarded as the premier jurisdiction in the United States, and indeed in the world, for settlors to create trusts and for existing trusts to transfer situs to take advantage of the modern and flexible Delaware trust law. The well-developed trust law and infrastructure of the trust industry within Delaware provides consistency, reliability, flexibility and depth. Unlike many jurisdictions, Delaware has a well-developed body of published case law applicable to trusts that spans more than a century. Delaware’s trust statutes have evolved as a very detailed and clear body of law concerning Delaware common law trusts. The Delaware legislature is quick to react to new developments and respond to concerns and has attempted to create flexible trust laws that are best able to effectuate the wishes of trust settlors and meet the needs of trust beneficiaries. The Delaware Court of Chancery, the court recognized worldwide for its reputation in corporate and commercial matters, is the same court with primary jurisdiction over Delaware trusts. Cases in the Court of Chancery are appealed directly to the Delaware Supreme Court, which is also a court highly regarded around the world for its thoughtful and sophisticated decisions. The attractiveness of the trust law in Delaware has resulted in a strong community of trust lawyers able to assist clients with creating and relocating trusts to Delaware and an ample supply of qualified trust management professionals.
Changes to Delaware’s bank regulatory laws in 1996 spurred dramatic growth in the Delaware trust industry, with over 60 trust offices of nationally recognized financial institutions now located in Delaware. However, until now, Delaware law imposed burdens on the formation and operation of trust companies that often dissuaded a family seeking to establish a private trust company to service only its family members from doing so in Delaware. The Act significantly reduces such burdens, including providing confidentiality and eliminating the requirement for a public hearing in connection with the application to form a family trust company, easing employment and office space requirements, and reducing the level of capital and surplus a family trust company must maintain. These changes should enable a quicker, less onerous formation process with fewer ongoing obligations for family trust companies.
The Family Trust Company Act provides a compelling new opportunity in Delaware for high-net-worth families. In recent years, jurisdictions like South Dakota, Nevada and Wyoming have seen an increase in private family trust companies. Now those families can look to Delaware as an alternative that offers the most robust trust infrastructure available in the country.
Formation
A family trust company is a corporation or limited liability company that: (1) acts or proposes to act as a fiduciary; (2) is organized under the laws of Delaware as a family trust company pursuant to the Act; (3) does not transact trust company business with, solicit trust company business from, or propose to act as a fiduciary for, the general public or any person who is not a “family member”; and (4) has one “designated relative,” who is a living or deceased person or a living or deceased person and their spouse, surviving spouse or former spouse. The class of persons to whom the family trust company may provide services is determined based on a certain number of degrees of consanguinity from the designated relative.
Incorporators must file an application for a certificate of authority to establish a family trust company with the Delaware State Bank Commissioner (the “Commissioner”). The application will identify the “designated relative” in the application. The form of this application will be prescribed by the Commissioner. The form of application has not yet been established by the Commissioner, but under the effective dates of the Act, the implementation of the Act must occur within a year after enactment.
Family Members
As described above, a family trust company can only conduct a trust business for those who satisfy the definition of “family member” and there must be one “designated relative” identified for the family trust company who is the linchpin for identifying family members. As a general matter, the class of family members for whom the family trust company can provide trust services is very broad and includes individuals (including spouses), trusts, estates, charitable foundations and entities. It includes any person within 10 degrees of consanguinity of lineal descent and within 10 degrees of consanguinity of collateral kinship to the designated relative, and 5 degrees of consanguinity of lineal kinship to a spouse, surviving spouse or former spouse of any of the foregoing. It also includes trusts established or funded by family members or a person who is not a family member for the benefit of family members and includes estates of family members or estates of a person who is not a family member for the benefit of family members. The Commissioner also has discretion to determine any other individual whom the family trust company requests that has a close, family-like relationship with the family. The definition of “family member” under the Act is broad enough to allow a family trust company to serve all the members of a multigenerational family and their associated entities. While the scope of beneficiaries that a family trust company may serve is broad, adjustments to the “designated relative” may be required over time, particularly with perpetual trusts. That can be accomplished by filing an application with the Commissioner.
Principal Place of Business
The Act requires a family trust company to have its “principal place of business” within Delaware. The principal place of business could belong solely to the family trust company, but the Act also allows the principal place of business to be located within the premises of a bank, trust company, or other outside service provider acceptable to the Commissioner that is providing services to the family trust company.
The family trust company must perform the following functions at its principal place of business:
- Maintain original or true copies of all material business records and accounts of the family trust company that are made available for inspection to the Commissioner.
- Conduct operations through its directors, officers or employees, or through a bank, trust company, or other outside service provider acceptable to the Commissioner as necessary to:
- accept and administer trusts in Delaware;
- meet the applicable legal standards for Delaware law to govern the administration of the trusts for which the family trust company acts as a fiduciary; and
- hold confidential, private meetings.
- Maintain at least one trust officer who is either an employee of the family trust company or is provided by a bank, trust company, or other outside service provider acceptable to the Commissioner and such additional employees or other qualified personnel provided by a bank, trust company, or other outside service provider acceptable to the Commissioner the Commissioner deems necessary to conduct the operations.
The family trust company must satisfy the conflict of laws standards in order for Delaware law to govern the administration of its trusts. There are different conflict of laws tests related to the law governing administration and the law governing the validity of newly-created trusts. Fortunately, Delaware has well-developed case law and statutes that set forth clear criteria for how to satisfy those conflict of laws tests. Any family trust company will need to ensure that Delaware is the principal place of administration for its trusts and conducts its operations in a way that satisfies the necessary conflict of laws analysis. Insufficient contacts with the jurisdiction selected as a trust’s situs could have undesirable consequences.
Confidentiality
The Act contains strong confidentiality provisions to protect privacy concerns of high-net-worth families. In the application process, there is no public notice or public hearing requirement, which are required for limited purpose trust companies, and thus the process is confidential. Information relating to the family trust company, including the names of its owners, managers, officers, and employees, ownership information, capital contributions, business affiliations and any financial or personal records filed with or obtained by the Commissioner, is treated as confidential and may be disclosed by the Office of the Commissioner only in very limited circumstances. The Commissioner may disclose such information only to authorized agency employees, to state or federal agencies with jurisdiction over the family trust company or where the public interest in disclosure outweighs the privacy interest at stake. The family trust company has the right to object and receive a hearing before any such third-party disclosure occurs.
Capital Requirements
The Commissioner may not require a family trust company to maintain more than $375,000 of capital and surplus unless the Commissioner reasonably determines that the family trust company’s operations would otherwise be unsafe and unsound, or it is necessary for the protection of family members. The additional capital and surplus required may not exceed $1,000,000 unless extraordinary circumstances exist. The capital and surplus of a family trust company must consist of cash, US government obligations, bank deposits or readily marketable securities.
Use of Outside Trust Administration Providers
The Act allows a family trust company to use an outside service provider to provide trust administration services and satisfy its office and employee requirements. This will enable a family trust company to use existing Delaware banks and trust companies, and their office space, to satisfy its statutory requirements. There is no jurisdiction in the country that has as many capable trust companies and trust professionals with the depth and breadth of experience and training as Delaware. A family trust company’s ability to partner with one of the many trust companies in Delaware is a significant business opportunity for Delaware trust companies and an advantage that Delaware family trust companies will have over other jurisdictions across the country. Of course, a Delaware family trust company can have its own office and hire its own trust officer(s) from among the many qualified professionals found in Delaware.
Restrictions
A family trust company is prohibited from (1) having more than one office in the State of Delaware, (2) advertising its services to the general public, or (3) exercising any power of appointment in a manner that is inconsistent with 12 Del. C. 3548 (which protects the family from adverse tax consequences). While a family trust company can have only one office in Delaware, it is permitted to open one or more trust offices in other states, which could create opportunities for families to establish a Delaware family trust company and administer trusts in an office in a different state, if that state permits it.
Fees
The fees associated with forming and operating a family trust company are significantly less than for other types of trust companies. The fees required in connection with an application to establish a family trust company are relatively nominal and generally shouldn’t amount to more than $35,000. In addition, there is an annual license fee of not less than $5,000 nor more than $25,000. The trust company is also required to pay for an annual examination by the Commissioner.
Insurance
A family trust company must maintain at least $1,000,000 of director and officer insurance and general liability and errors and omissions insurance coverage in an amount of at least $5,000,000 per occurrence.
Timeline
While the details of the application and related procedure for establishment of a family trust company still need to be finalized, it appears it should be possible to form a family trust company in a little more than 120 days following submission of the application materials. After submission, the Commissioner is required to determine whether the application is complete within 60 days. When the Commissioner determines the application is complete, the Commissioner must investigate the application to determine that it meets all requirements of the Act within another 60 days.
The Act takes effect immediately but is to be implemented no later than one year from enactment, or upon promulgation of final implementing regulations by the Commissioner if sooner.
Conversions
The Act provides an easy pathway for existing family trust companies in other states to convert to a Delaware family trust company and move their operations to Delaware to take advantage of Delaware’s laws and the attractive trust infrastructure. Also, the Act provides flexibility for an existing Delaware limited purpose trust company to convert to a Delaware family trust company, to take advantage of the lower capital requirements and the ability to outsource statutory office space and employee requirements to Delaware banks and trust companies as outside service providers. Also, a Delaware family trust company can convert to a Delaware limited purpose trust company.
Estate and Gift Tax Protections
Delaware law already includes a statutory safe harbor under Section 3548 of Title 12 of the Delaware Code to prevent any director, officer or shareholder of a limited purposes trust company from being treated as possessing a general power of appointment over the trusts it services. Section 3548 has been updated to provide these protections to family trust companies as well.
Conclusion
The enactment of the Family Trust Company Act is a significant development in Delaware law that will facilitate the establishment of private trust companies to serve high-net-worth families. It is yet another example of Delaware’s continuing quest to remain the leading jurisdiction for trust administration in the United States and beyond.
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