Home Business Agency Contract Trust Company (Definition: All You Need To Know)

Trust Company (Definition: All You Need To Know)

What is a Trust Company?

What does a trust company do?

What are the essential elements you should know!

Keep reading as we have gathered exactly the information that you need!

Let’s dig into our company and business knowledge!

Are you ready?

Let’s get started!

What Is A Trust Company

A trust company is a company that acts on behalf of a person or another legal entity to manage or administer certain designated assets.

In many cases, the trust company will take custody of certain assets and manage them in accordance with a trust indenture or agreement.

It’s called a “trust” company as the legal entity is able to act as a “trustee” for another or act on behalf of another.

For example, a trust company can act as the custodian of a trust or even an estate.

Typically, the services of a trust company will be retained to manage and administer certain assets, like real estate assets, stocks, or investments, and eventually transfer such assets to the beneficiaries.

Here are some of the main areas trust companies tend to operate in:

  • Estate administration services
  • Asset management services 
  • Escrow services
  • Corporate trust services 

Trust companies make profits by charging administration fees on the assets under its control or at the moment of a transfer of assets or funds to the beneficiaries.

Operating a trust company is labor intensive, requires lots of logistical coordination, and tracking to ensure that proper trust records are kept, the assets are well managed, there’s clear accounting, bills are paid, and proper distributions are made to the right beneficiaires.

Trust Company Definition

According to Investopedia, a trust company is defined as follows:

A trust company is a legal entity that acts as a fiduciary, agent, or trustee on behalf of a person or business for the purpose of administration, management, and the eventual transfer of assets to a beneficial party.
Author

What’s notable with this definition is that a trust company:

  • Is a legal entity 
  • Acts on behalf of another person or company
  • Manages assets 
  • For the beneficiaires 

Advantages 

Hiring a trust company to manage an estate, administer assets, or protect assets in its custody can be beneficial in various situations.

Hiring a company specialized and experienced in this area is key to ensuring that the assets under custody are well preserved and taken care of.

If a trust company is tasked to manage assets, hold an investment portfolio, or safeguard the beneficiaries’ assets, it can do so in a professional and competent way.

Fiduciaires have a duty to act in the best interest of their client and trust companies are precisely in this business.

In addition, in certain cases, it may be challenging for some individuals or companies to manage assets without the right tools, resources, and capacity.

Dealing with trust companies allows you to tap into their logistical efficiencies, economies of scale, and dedicated resources and capacities in managing assets that may be labor intensive.

Those who are not able to handle the day-to-day of asset management are better off dealing with a trust company than doing it by themselves.

Trust Company Services

There are many companies offering trust company services to businesses and individuals.

You can find large financial institutions offering trust services or smaller companies dedicated to this niche.

In many cases, larger banks will tend to offer trust services allowing them to offer a wide range of services to their clients.

For example, you have large trust companies in the United States such as Computershare Trust, Northern Trust, Equity Trust, and others.

Trust companies can provide different types of services and act as trustees, such as:

  • Wealth management services
  • Asset management services
  • Brokerage services
  • Corporate trust services
  • Personal trust services
  • Escrow services 
  • Estate planning 
  • Charitable donation accounts
  • Employee benefit funding 

Larger companies like Computershare Trust will also provide other types of services like stock transfer services, dividend reinvestment plan services, corporate reorganization services, and more.

Estate Administration Services

Many trust companies offer estate administration services.

In this capacity, they can be named as the executors of an estate to handle the settlement of the estate assets, settling the estate claims, performing the necessary inventory of assets, and making the proper distributions.

A trust company may also conserve assets for minors until the minor reaches the legal age to be able to manage his or her own assets.

Asset Management Services

A custodial trust company can provide asset management services which includes:

  • Investment advice
  • Investment planning
  • Investment strategy 
  • Portfolio management 
  • Safekeeping of stock certificates
  • Securities market advice 

Escrow Services

Escrow services are services where the escrow agent or trust company will keep certain assets in escrow or under its custody.

For example, the escrow agent can keep physical assets in custody for the benefit of the beneficiaries.

The escrow services can also include services to maintain and preserve an investment portfolio or other assets that require ongoing management.

Corporate Trust Services

Corporate trust services are services offered by trust companies to corporations where they are required to act in their capacity as fiduciary or trustee.

For example, companies that issue bonds or debentures may enter into a trust indenture where they will provide for the mechanism to make payments from bondholders to companies and vice versa.

A trust company will receive the funds from the issuance of the bonds to the bondholders and make a payment to the corporation and will then receive the company funds to pay bondholders, such as interest payment or the face value of the bond.

The trust company will also monitor the covenants outlined in the trust indenture to ensure that the company meets such covenants at all time.

The Trust Company Takeaways 

So, what do trust companies do?

Let’s look at a summary of our findings.

Financial Trust Company

  • A “trust company” is a legal entity that acts as the fiduciary or custodian for another by managing assets for the beneficiaries 
  • Trust companies do not own the assets under their custody but have the legal obligation to manage them, safeguard, protect, or administer them 
  • Financial institutions, law firms, and accountants can act as fiduciaries for others
  • The main services offered by trust companies are asset management, escrow services, estate management, corporate trust services, custody services, retirement services, and more
Agency contract 
Corporate agent
Credit union 
Holding company 
Insurance company 
Investment bank 
Investment company 
Mutual funds 
Parent company 
Private equity entity 
Promissory note
Real estate company
Real estate mortgage 
Rollover accounts
Self-directed IRA
Trading account 
Trust business
Author
Antitrust 
Asset management 
Bankruptcy trustee
Beneficial ownership 
Company trustee
Fiduciary duty
Investment fund 
Monopolies 
Pension fund 
Restrictive covenant 
Stock transfer
Trust company officer
Author

Editorial Staff
Hello Nation! I'm a lawyer by trade and an entrepreneur by spirit. I specialize in law, business, marketing, and technology (and love it!). I'm an expert SEO and content marketer where I deeply enjoy writing content in highly competitive fields. On this blog, I share my experiences, knowledge, and provide you with golden nuggets of useful information. Enjoy!

Most Popular

Form LLC-12 (What It Is And How It Works: All You Need To Know)

Form LLC-12 (What It Is And How It Works: All You Need To Know)

Form SI-550 (What It Is And How It Works: All You Need To Know)

Form SI-550 (What It Is And How It Works: All You Need To Know)

Biennial Statement (New York: What It Is And How It Works)

Biennial Statement (New York: What It Is And How It Works)

Tender of Delivery (Legal Definition: All You Need To Know)

Tender of Delivery (Legal Definition: All You Need To Know)

UCC 2 601 (Explained: Buyer’s Rights on Improper Delivery)

UCC 2 601 (Explained: Buyer’s Rights on Improper Delivery)

UCC 2 508 (Explained: Cure By Seller of Improper Tender)

UCC 2 508 (Explained: Cure By Seller of Improper Tender)

UCC 2 612 (Explained: Installment Contracts And Its Breach)

UCC 2 612 (Explained: Installment Contracts And Its Breach)

Substantial Performance (Contract Law: All You Need To Know)

Substantial Performance (Contract Law: All You Need To Know)

Editor's Picks

Teenies (Financial Definition: All You Need To Know)

Teenies (Financial Definition: All You Need To Know)

SS4 Form (What It Is And Why It’s Important: All You Need To Know)

SS4 Form (What It Is And Why It’s Important: All You Need To Know)

Contract Pricing (Overview of Pricing Types And Models)

Contract Pricing (Overview of Pricing Types And Models)

System Audit Basics (Understand The System Auditing Process)

System Audit Basics (Understand The System Auditing Process)

Types of Businesses (Best Overview of Business Structures)

Types of Businesses (Best Overview of Business Structures)

Alaska Corporation Search (Step-By-Step)

Alaska Corporation Search (Step-By-Step)