A trust company is a
corporation
A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and ...
that acts as a
fiduciary
A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person. One party, for examp ...
,
trustee
Trustee (or the holding of a trusteeship) is a legal term which, in its broadest sense, is a synonym for anyone in a position of trust and so can refer to any individual who holds property, authority, or a position of trust or responsibility to ...
or agent of trusts and agencies. A
professional
A professional is a member of a profession or any person who works in a specified professional activity. The term also describes the standards of education and training that prepare members of the profession with the particular knowledge and ski ...
trust company may be independently owned or owned by, for example, a bank or a
law firm, and which specializes in being a trustee of various kinds of trusts.
The "trust" name refers to the ability to act as a
trustee
Trustee (or the holding of a trusteeship) is a legal term which, in its broadest sense, is a synonym for anyone in a position of trust and so can refer to any individual who holds property, authority, or a position of trust or responsibility to ...
– someone who administers financial assets on behalf of another. The assets are typically held in the form of a
trust
Trust often refers to:
* Trust (social science), confidence in or dependence on a person or quality
It may also refer to:
Business and law
* Trust law, a body of law under which one person holds property for the benefit of another
* Trust (bus ...
, a legal instrument that spells out who the beneficiaries are and what the money can be spent for.
A trustee will manage investments, keep records, manage assets, prepare court accounting, pay bills (depending on the nature of the trust), medical expenses, charitable gifts, inheritances or other distributions of income and principal.
Estate administration
A trust company can be named as an
executor or personal representative in a
last will and testament
A will or testament is a legal document that expresses a person's (testator) wishes as to how their property ( estate) is to be distributed after their death and as to which person ( executor) is to manage the property until its final distributi ...
. The responsibilities of an
executor in settling the estate of a
deceased
Death is the irreversible cessation of all biological functions that sustain an organism. For organisms with a brain, death can also be defined as the irreversible cessation of functioning of the whole brain, including brainstem, and brain ...
person include collecting
debt
Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...
s, settling claims for
debt
Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...
and
tax
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...
es, accounting for assets to the courts and distributing wealth to beneficiaries.
Estate planning is usually also offered to allow clients to structure their affairs so as to minimize inheritance taxes and
probate costs. In the United States, one of the primary profit centers for a trust company is commissions earned from selling various types of insurance products designed to minimize the estate tax charged to a person.
A trust officer may provide guardian and conservator services, acting as guardian of a minor's property until adulthood or as conservator of the estate of an adult unable to handle his or her own finances.
Environmental and historic preservation trusts
Some trust companies are formed not merely for the benefit of a minor or an individual trustee, but for the preservation of nature or historic sites.
Asset management
A trust department provides investment management, including
securities market
Security market is a component of the wider financial market where securities can be bought and sold between subjects of the economy, on the basis of demand and supply. Security markets encompasses stock markets, bond markets and derivatives mar ...
advice, investment
strategy and portfolio
management
Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a Government agency, government body. It is the art and science of managing resources of the business.
Management includ ...
, management of
real estate
Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more general ...
and safekeeping of valuables.
Escrow services
The trust company may also provide
escrow
An escrow is a contractual arrangement in which a third party (the stakeholder or escrow agent) receives and disburses money or property for the primary transacting parties, with the disbursement dependent on conditions agreed to by the transacti ...
services, invest
education
Education is a purposeful activity directed at achieving certain aims, such as transmitting knowledge or fostering skills and character traits. These aims may include the development of understanding, rationality, kindness, and honesty ...
or
retirement
Retirement is the withdrawal from one's position or occupation or from one's active working life. A person may also semi-retire by reducing work hours or workload.
Many people choose to retire when they are elderly or incapable of doing their j ...
funds or hold
1031 Exchange
Under Section 1031 of the United States Internal Revenue Code (), a taxpayer may defer recognition of capital gains and related federal income tax liability on the exchange of certain types of property, a process known as a 1031 exchange. In 197 ...
proceeds where cash from the sale of US real estate is held in trust (for
tax
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...
purposes) until used to buy replacement land.
Corporate trust services
Trust companies may also perform corporate trust services. Corporate trust services are services which assist, in the fiduciary capacity, in the administration of the corporation's debt. For example, in a normal bank loan, the lender normally lends money to the company (usually with conditions called "
covenants"), accepts payments from the company monthly, and monitors the financial conditions of the company to ensure that it is meeting all its agreed upon conditions (for example, that its ratio of profits to expenses stays above a certain amount). However most large companies borrow money not from banks, but by selling bonds. When the company sells bonds, a corporate trust company can handle the acceptance of payments from the company (which it passes on to the bondholders), and is the entity which monitors the company to ensure it is meeting covenants. In the event of the company's bankruptcy, the corporate trust company represents the interests of the bondholders and acts to recover as much of the loan proceeds as possible.
See also
*
Trust (business)
A trust or corporate trust is a large grouping of business interests with significant market power, which may be embodied as a corporation or as a group of corporations that cooperate with one another in various ways. These ways can include const ...
*
Antitrust
*
Monopolies
A monopoly (from Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situation where a speci ...
*
Nobel Foundation
References
{{Authority control
Financial services organizations
Offshore finance