What is a Trust Company?
A trust company is a corporation organized to perform the fiduciary functions of a trust and agencies. There is normally three types of trustees, an independent trust company, a trust department within 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 and do not need to perform all of the duties of a trust company in another jurisdiction.
The "trust" name refers to the ability of the institution's trust department to act as a trustee – one who administers financial assets on behalf of another. The assets are typically held in the form of a trust which defines the beneficiaries and how the assets will be distributed.
A trustee can manage the investments directly or hire an outside Investment Advisor, maintain records, prepare investment performance reports, distribute income and principal and depending on the nature of the trust can pay bills medical expenses, charitable gifts.
A trust company can be named as an executor of a will and can settle the estate of a deceased person include collecting settling claims for debt and taxes, accounting for assets to the courts and distributing remaining assets to beneficiaries.
A trust is usually also offered to allow clients to structure their affairs so as to minimize inheritance taxes and probate costs. 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.
Corporate Trust Services
Trust companies may also perform corporate trust services. Corporate trust services are services which assist in the administration of the corporation's debt or as a directed trustee for a qualified retirement plan. When a trust company functions as a directed trust company it takes the direction from the name fiduciary and plan administrator is not a discretionary trustee. Trust companies can also represent the bond holders and accepts payments from the company who has issued the bond in order to pass the payments on to the bondholders. 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 and is the entity which monitors the company to ensure it is responding to covenants.
A trust involves the administration of assets on behalf of another institution or individual(s) whether living or deceased. A living trust appoints a trustee to manage assets during the lifetime of the grantor which allows for distribution of wealth even if the settlor becomes incapacitated or unable to act personally. Upon death, the trust controls how and when assets are used and distributed to and for beneficiaries 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.