A trust company is a legal entity that acts as a fiduciary, agent, or trustee on behalf of individuals or businesses for administration, management, and the eventual transfer of assets to a beneficial party. Trust companies serve as custodians for trusts, estates, custodial arrangements, asset management, stock transfers, beneficial ownership registration, and other related services.
Key Takeaways
- A trust company acts as a fiduciary, agent, or trustee for individuals or businesses with trust-related needs.
- They handle administration, management, and asset transfer to beneficiaries.
- Trust companies operate as custodians for trusts, estates, and various financial arrangements.
- Managed trusts are managed for profit, usually taking fees either annually or upon transfer to the beneficiary.
How Trust Companies Work
While individuals can serve as trustees, trust companies can also fulfill this role. These companies do not own the assets they manage; instead, they take on legal responsibilities to manage them on behalf of beneficiaries.
Typically, a trust company is a division or associated wing of a commercial bank. Managed for profit, trusts and other financial arrangements often incur management fees annually or upon transfer to beneficiaries. Services and fees vary significantly among trust companies, with some of the largest names including Northern Trust, Bessemer Trust, and U.S. Trust. Generally, fees range from 0.25% to 2.0%, depending on the trust size.
What Trust Companies Offer
Trust companies provide an array of services, including:
- Wealth Management: Investment management and wealth preservation for future generations.
- Asset Management: Handling tasks like bill payments, check writing, and more.
- Brokerage Services: Access to a wide range of investment options.
- Financial Planning: Crafting financial plans based on client needs, often at an additional cost.
They are also pivotal in estate planning, acting as successor trustees when there are no financially responsible family members available. Post the grantor’s death, the trust company becomes the new trustee, managing assets per the trust’s terms. Moreover, trust companies offer estate-oriented services like guardianship, estate settlement, and non-financial asset management.
Benefits of a Trust Company
- Trust companies act as fiduciaries, always prioritizing the client’s best interests.
- They make informed investment decisions, beneficial for clients lacking market expertise.
- Ideal for clients who prefer not to handle day-to-day financial tasks.
- Provide a neutral third-party solution, reducing potential family conflicts over inheritance and estate divisions.
Trust companies stand as vital financial entities, ensuring smooth management and transfer of assets, structured financial planning, and unbiased handling of estate affairs.
Related Terms: fiduciary, assets, trustee, estate, investment.
