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 exa ...

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 sk ...

trust company may be independently owned or owned by, for example, a bank or a

law firm A law firm is a business entity formed by one or more lawyers to engage in the practice of law. The primary service rendered by a law firm is to advise clients (individuals or corporations) about their legal rights and responsibilities, and to ...

, and which specializes in being a trustee of various kinds of trusts. The "trust" name refers to the ability to act as a

– someone who administers financial assets on behalf of another. The assets are typically held in the form of a trust, 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 An executor is someone who is responsible for executing, or following through on, an assigned task or duty. The feminine form, executrix, may sometimes be used. Overview An executor is a legal term referring to a person named by the maker of a ...

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 distributio ...

. The responsibilities of an

in settling the estate of a deceased 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

and taxes, 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 Probate is the judicial process whereby a will is "proved" in a court of law and accepted as a valid public document that is the true last testament of the deceased, or whereby the estate is settled according to the laws of intestacy in the st ...

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 advice, investment

strategy Strategy (from Greek στρατηγία ''stratēgia'', "art of troop leader; office of general, command, generalship") is a general plan to achieve one or more long-term or overall goals under conditions of uncertainty. In the sense of the " ...

and portfolio

management Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a government body. It is the art and science of managing resources of the business. Management includes the activitie ...

, 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 genera ...

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 ...

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 proceeds where cash from the sale of US real estate is held in trust (for tax 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.

References