What is a trust company?
A trust company is a legal entity that acts as a fiduciary, agent, or trustee on behalf of a person or business for administration, management, and the eventual transfer of assets to a beneficial party. The trust company is a custodian for trusts, estates, custodial arrangements, asset management, stock transfers, beneficial ownership registration, and other related arrangements.
How Trust Companies Work
While a person is usually designated as the trustee for a trust, a trust corporation may also serve in this role. Although a trust corporation may legally manage assets on behalf of other parties, it does not control the assets its clients entrust to its care.
A commercial bank’s division or affiliated business is often home to a trust firm or department. Trusts and similar agreements maintained for future transfer are run for profit, which may be deducted from the assets yearly or when transferred to a third party who will benefit from them.
There are several trust corporations of various sizes and costs to choose from. Although they provide more goods and services, more prominent trust firms can have a different level of individual attention than smaller ones. A few of the more prominent trust firms include U.S. Trust, which is now a subsidiary of Bank of America Corporation; Bessemer Trust; and Northern Trust. Depending on the size of the trust, these trusts often base their fees on a percentage of assets, which may range from 0.25% to 2.0%.
What Trusted Businesses Provide
Trust firms provide various services, including the day-to-day management of the trust’s operations. Additionally, trust businesses may serve as trustees for various trust types, including charitable trusts.
- One of the most popular purposes for a trust corporation is asset management services, which include investment management and wealth preservation to ensure that a client’s future generations have the money when needed.
- Trust corporations provide asset-management services, such as check writing and bill payment.
- In addition, trust organizations provide their customers with a broad range of assets via brokerage services.
- Depending on the amount of service required, several trust businesses may create financial plans for their customers for extra costs.
- Trust firms are also used in estate planning. When no surviving family members can manage the family finances, a trust business may be appointed as the successor trustee. The trust corporation will take over as trustee once the grantor passes away and administer the assets according to the trust’s guidelines.
Trust businesses also offer a wide range of estate-related services, such as guardianship, estate settlement, and non-financial asset management.
Advantages of a Trust Business
Employing a trust corporation entitles you to fiduciary services, which means they work on your behalf and won’t exploit you. Consequently, a trusted business can work in the client’s best interest and make all financial choices. If you are still getting familiar with the financial markets, trust that businesses may provide you with investment management services that can be beneficial.
A trusted firm might also be helpful to customers who don’t want or care to handle their daily financial matters.
Regarding inheritance and estate planning, trust corporations are often excellent substitutes that help avoid future family disputes. A trust business may be an impartial third party when allocating an estate’s assets, which might upset the family.
Conclusion
- A trust company is a firm that manages a trust on behalf of an individual or organization by serving as a fiduciary, agent, or trustee.
- Generally, a trust firm manages, administers, and transfers assets to beneficiaries.
- A trusted firm is a custodian for trusts, estates, custodial arrangements, asset management, stock transfers, and beneficial ownership registration.
- Trusts are run for financial gain, which may be distributed to the beneficial third party upon transfer or as an annual deduction from the assets.
