Trust company
Encyclopedia
A trust company is a corporation
, especially a commercial bank
, organized to perform the fiduciary of trusts and agencies. It is normally owned by one of three types of structures: an independent partnership, a bank, or a law firm, each of which specializes in being a trustee of various kinds of trusts and in managing estates. Trust companies are not required to exercise all of the powers that they are granted. Further, the fact that a trust company in one jurisdiction does not perform all of the duties of a trust company in another jurisdiction is irrelevant and does not have any bearing on whether either company is truly a "trust company". Therefore, it is safe to say that the term "trust company" must not be narrowly construed.
The "trust" name refers to the ability of the institution's trust department to act as a trustee
– 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 the beneficiaries and what the money can be spent for.
A trustee will manage investments, keep records, manage assets, prepare court accountings, pay bills (depending on the nature of the trust) medical expenses, charitable gifts, inheritances or other distributions of income and principal.
or personal representative in a last will and testament
. The responsibilities of an executor
in settling the estate of a deceased person include collecting debt
s, settling claims for debt
and tax
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 minimise 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.
advice, investment strategy
and portfolio management
, management of real estate
and safekeeping of valuables.
services, invest education
or retirement
funds or hold Starker exchange proceeds where cash from the sale of US real estate is held in trust (for tax
purposes) until used to buy replacement land.
The trust company also provide escrow facilities as an intermediary when it is for good to hold with it (on-behalf)something valuable till specific performance by parties not done as per agreed terms.
"), accepts payments from the company monthly, and watches 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 responding to covenants. In the event of the company's bankruptcy, the corporate trust company fights to get as much money back as it can for the bondholders.
Examples of corporate trust companies include The Northern Trust Company, IL&FS Trust Company Ltd, India,Alter Domus, Intertrust Group
, Deutsche Bank AG, Pentera Trust Company Limited, Bank of New York
, Wells Fargo
, US Bank, Commerce Bancorp NJ, HSBC Bank USA
, Law Debenture
, Union Bank of California
,Trustmoore, Amicorp, CorpNordic,Vistra Trust & Corporate Services, Trust Alliance, BB&T, Trustees Executors Limited, Bank of Utah, One Investment Group
or dead
.
A living trust appoints a trustee to manage assets during the lifetime of the original settlor
; this private arrangement allows for distribution of wealth even if the client becomes incapacitated or unable to act personally. Upon death, the trust controls how and when assets are used and distributed; this can be a substitute for appointment of a legal guardian or conservator to handle assets inherited by young child
ren or others unable to act on their own behalf.
By bypassing the probate process through which a will is handled by the judicial system, a trust may reduce costs or delays, manage real estate, provide more privacy than a bequest in a will and offer possible tax advantages.
A testamentary trust is one created by being written into a will to provide for management of assets to be inherited by beneficiaries.
reserves a power of revocation. Because the settlor can revoke the trust and therefore maintains control over the property, there are normally no tax advantages involved in this arrangement.
An irrevocable trust is often used for charitable purposes
by organizations or millionaire
s ("high net worth
individuals") as well as for the management of inheritances. As the benefactor relinquishes control of the assets upon creating the trust, any charitable activities incur tax benefits even while the assets are invested to provide a financial endowment
for later use by the charitable foundation. This approach has been successfully used by foundations established by well-known and wealthy families such as the Ford
(automobile
), Carnegie
(steel) and Arthur Vining Davis
(aluminium
) families.
A trust may also be an integral part of an institution founded by such an individual or group, created to ensure its long-term financial viability
.
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
, especially a commercial bank
Commercial bank
After the implementation of the Glass–Steagall Act, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S...
, organized to perform the fiduciary of trusts and agencies. It is normally owned by one of three types of structures: an independent partnership, a bank, or a law firm, each of which specializes in being a trustee of various kinds of trusts and in managing estates. Trust companies are not required to exercise all of the powers that they are granted. Further, the fact that a trust company in one jurisdiction does not perform all of the duties of a trust company in another jurisdiction is irrelevant and does not have any bearing on whether either company is truly a "trust company". Therefore, it is safe to say that the term "trust company" must not be narrowly construed.
The "trust" name refers to the ability of the institution's trust department to act as a trustee
Trustee
Trustee is a legal term which, in its broadest sense, can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another...
– 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 the beneficiaries and what the money can be spent for.
A trustee will manage investments, keep records, manage assets, prepare court accountings, 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 executorExecutor
An executor, in the broadest sense, is one who carries something out .-Overview:...
or personal representative in a last will and testament
Will (law)
A will or testament is a legal declaration by which a person, the testator, names one or more persons to manage his/her estate and provides for the transfer of his/her property at death...
. The responsibilities of an executor
Executor
An executor, in the broadest sense, is one who carries something out .-Overview:...
in settling the estate of a deceased person include collecting debt
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...
s, settling claims for debt
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...
and tax
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
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 minimise inheritance taxes and probate
Probate
Probate is the legal process of administering the estate of a deceased person by resolving all claims and distributing the deceased person's property under the valid will. A probate court decides the validity of a testator's will...
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.
Asset management
A trust department provides investment management, including securities marketSecurities market
Securities market is an economic institute within which take place sale and purchase transactions of securities between subjects of economy on the base of demand and supply....
advice, investment strategy
Strategy
Strategy, a word of military origin, refers to a plan of action designed to achieve a particular goal. In military usage strategy is distinct from tactics, which are concerned with the conduct of an engagement, while strategy is concerned with how different engagements are linked...
and portfolio management
Management
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...
, management of real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "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; an item of real property; buildings or...
and safekeeping of valuables.
Escrow services
The trust company may also provide escrowEscrow
An escrow is:* an arrangement made under contractual provisions between transacting parties, whereby an independent trusted third party receives and disburses money and/or documents for the transacting parties, with the timing of such disbursement by the third party dependent on the fulfillment of...
services, invest education
Education
Education in its broadest, general sense is the means through which the aims and habits of a group of people lives on from one generation to the next. Generally, it occurs through any experience that has a formative effect on the way one thinks, feels, or acts...
or retirement
Retirement
Retirement is the point where a person stops employment completely. A person may also semi-retire by reducing work hours.Many people choose to retire when they are eligible for private or public pension benefits, although some are forced to retire when physical conditions don't allow the person to...
funds or hold Starker exchange proceeds where cash from the sale of US real estate is held in trust (for tax
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
purposes) until used to buy replacement land.
The trust company also provide escrow facilities as an intermediary when it is for good to hold with it (on-behalf)something valuable till specific performance by parties not done as per agreed terms.
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 "covenantsLoan covenant
A loan covenant is a condition in a commercial loan or bond issue that requires the borrower to fulfill certain conditions or which forbids the borrower from undertaking certain actions, or which possibly restricts certain activities to circumstances when other conditions are met.Typically,...
"), accepts payments from the company monthly, and watches 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 responding to covenants. In the event of the company's bankruptcy, the corporate trust company fights to get as much money back as it can for the bondholders.
Examples of corporate trust companies include The Northern Trust Company, IL&FS Trust Company Ltd, India,Alter Domus, Intertrust Group
Intertrust Group
Intertrust Group is one of the largest providers of Trust and Corporate Services in the world. Intertrust operates with more than 1,000 employees worldwide in over 20 countries...
, Deutsche Bank AG, Pentera Trust Company Limited, Bank of New York
Bank of New York
The Bank of New York was a global financial services company established in 1784 by the American Founding Father Alexander Hamilton. It existed until its merger with the Mellon Financial Corporation on July 2, 2007...
, Wells Fargo
Wells Fargo
Wells Fargo & Company is an American multinational diversified financial services company with operations around the world. Wells Fargo is the fourth largest bank in the U.S. by assets and the largest bank by market capitalization. Wells Fargo is the second largest bank in deposits, home...
, US Bank, Commerce Bancorp NJ, HSBC Bank USA
HSBC Bank USA
HSBC Bank USA, National Association, the American subsidiary of UK-based HSBC Holdings plc, is a bank with its operational head office in New York City and its nominal head office in McLean, Virginia . HSBC Bank USA, N.A...
, Law Debenture
Law Debenture
The Law Debenture Corporation plc is a leading British-based investment trust dedicated to a diversified range of investments. It also provides a range of fiduciary services including appointment of agents, directors and trustees for pension funds, trusts and companies...
, Union Bank of California
Union Bank of California
Union Bank, N.A., formerly known as Union Bank of California, N.A., is a full-service commercial bank providing an array of financial services to individuals, small businesses, middle-market companies, and major corporations...
,Trustmoore, Amicorp, CorpNordic,Vistra Trust & Corporate Services, Trust Alliance, BB&T, Trustees Executors Limited, Bank of Utah, One Investment Group
Trusts
A trust involves the administration of assets on behalf of another: an institution or one or more individuals, livingLife
Life is a characteristic that distinguishes objects that have signaling and self-sustaining processes from those that do not, either because such functions have ceased , or else because they lack such functions and are classified as inanimate...
or dead
Death
Death is the permanent termination of the biological functions that sustain a living organism. Phenomena which commonly bring about death include old age, predation, malnutrition, disease, and accidents or trauma resulting in terminal injury....
.
A living trust appoints a trustee to manage assets during the lifetime of the original settlor
Settlor
In law a settlor is a person who settles property on trust law for the benefit of beneficiaries. In some legal systems, a settlor is also referred to as a trustor, or occasionally, a grantor or donor. Where the trust is a testamentary trust, the settlor is usually referred to as the testator...
; this private arrangement allows for distribution of wealth even if the client becomes incapacitated or unable to act personally. Upon death, the trust controls how and when assets are used and distributed; this can be a substitute for appointment of a legal guardian or conservator to handle assets inherited by young child
Child
Biologically, a child is generally a human between the stages of birth and puberty. Some vernacular definitions of a child include the fetus, as being an unborn child. The legal definition of "child" generally refers to a minor, otherwise known as a person younger than the age of majority...
ren or others unable to act on their own behalf.
By bypassing the probate process through which a will is handled by the judicial system, a trust may reduce costs or delays, manage real estate, provide more privacy than a bequest in a will and offer possible tax advantages.
A testamentary trust is one created by being written into a will to provide for management of assets to be inherited by beneficiaries.
Revocable trusts
A revocable trust is one in which assets are owned by the trustee, but the settlorSettlor
In law a settlor is a person who settles property on trust law for the benefit of beneficiaries. In some legal systems, a settlor is also referred to as a trustor, or occasionally, a grantor or donor. Where the trust is a testamentary trust, the settlor is usually referred to as the testator...
reserves a power of revocation. Because the settlor can revoke the trust and therefore maintains control over the property, there are normally no tax advantages involved in this arrangement.
Irrevocable trusts
An irrevocable trust is often used for charitable purposes
Charitable organization
A charitable organization is a type of non-profit organization . It differs from other types of NPOs in that it centers on philanthropic goals A charitable organization is a type of non-profit organization (NPO). It differs from other types of NPOs in that it centers on philanthropic goals A...
by organizations or millionaire
Millionaire
A millionaire is an individual whose net worth or wealth is equal to or exceeds one million units of currency. It can also be a person who owns one million units of currency in a bank account or savings account...
s ("high net worth
Net worth
In business, net worth is the total assets minus total outside liabilities of an individual or a company. For a company, this is called shareholders' preference and may be referred to as book value. Net worth is stated as at a particular year in time...
individuals") as well as for the management of inheritances. As the benefactor relinquishes control of the assets upon creating the trust, any charitable activities incur tax benefits even while the assets are invested to provide a financial endowment
Financial endowment
A financial endowment is a transfer of money or property donated to an institution. The total value of an institution's investments is often referred to as the institution's endowment and is typically organized as a public charity, private foundation, or trust....
for later use by the charitable foundation. This approach has been successfully used by foundations established by well-known and wealthy families such as the Ford
Ford Motor Company
Ford Motor Company is an American multinational automaker based in Dearborn, Michigan, a suburb of Detroit. The automaker was founded by Henry Ford and incorporated on June 16, 1903. In addition to the Ford and Lincoln brands, Ford also owns a small stake in Mazda in Japan and Aston Martin in the UK...
(automobile
Automobile
An automobile, autocar, motor car or car is a wheeled motor vehicle used for transporting passengers, which also carries its own engine or motor...
), Carnegie
Carnegie
Carnegie may refer to:*Andrew Carnegie, Scottish-American industrialist and philanthropist, for whom many entries on this page are named*Dale Carnegie, motivational speaker and author*David Carnegie , Scottish-Swedish industrialist...
(steel) and Arthur Vining Davis
Arthur Vining Davis
Arthur Vining Davis was an American industrialist and philanthropist.-Early history:Arthur Vining Davis was born in Sharon, Massachusetts, the son of Perley B. Davis, a Congregational minister, and Mary Frances...
(aluminium
Alcoa
Alcoa Inc. is the world's third largest producer of aluminum, behind Rio Tinto Alcan and Rusal. From its operational headquarters in Pittsburgh, Pennsylvania, Alcoa conducts operations in 31 countries...
) families.
A trust may also be an integral part of an institution founded by such an individual or group, created to ensure its long-term financial viability
Viability
Viable or viability is the ability of a thing to maintain itself or recover its potentialities.Viable or viability may also refer to:...
.