Understanding Trust Companies
What is a trust company?
A trust company is a legal entity that acts as a fiduciary or trustee to manage and administer assets on behalf of individuals, families, businesses, or estates. It holds and manages trust assets according to the trust document and the grantor’s instructions, with a legal duty to act in beneficiaries’ best interests.
Explore More Resources
How trust companies work
- They serve as trustee or successor trustee when an individual trustee is unavailable or when a neutral professional is preferred.
- They do not own trust assets; they hold and manage them for the benefit of the named beneficiaries.
- Compensation is charged for administration and management services, either as a percentage of assets or a flat fee.
Types of trust companies
- Bank-affiliated trust companies (part of commercial banks or bank holding companies).
- Independent trust companies (standalone entities or firms affiliated with law offices or partnerships).
- Sizes and service models vary: larger firms offer extensive product lines and institutional resources; smaller firms may provide more personalized service.
Common services offered
- Trust administration and estate settlement
- Investment and wealth management (portfolio management, wealth preservation)
- Asset management tasks (bill paying, check writing, custody services)
- Brokerage and access to investment products
- Financial and tax planning (often for an additional fee)
- Estate planning support and charitable trust administration
- Guardianship and management of nonfinancial assets when applicable
Fees
- Typical fee structures: percentage of assets under management or a flat annual fee.
- Percentage ranges commonly fall between roughly 0.25% and 2.0%, depending on asset size and complexity.
- Flat fees may be preferable for smaller, low-maintenance trusts.
Regulation
- Trust companies are chartered and regulated by the Office of the Comptroller of the Currency (OCC).
- If owned by a bank holding company or a bank, they are also subject to supervision by the Federal Reserve and the parent bank’s primary regulator.
- Regulatory and supervisory arrangements can vary by corporate structure and state laws.
Benefits of using a trust company
- Fiduciary duty: legally required to act in beneficiaries’ best interests.
- Professional management of investments and administrative tasks for those without the time or expertise.
- Neutral third party to reduce family conflicts over estate administration and distributions.
- Continuity of administration through successor trustee services.
When to consider a trust company
- Complex estates, multi-generational wealth preservation, or tax-sensitive trusts.
- Lack of a suitable individual trustee or desire for impartial administration.
- Need for ongoing professional investment management, bill paying, and recordkeeping.
Bottom line
Trust companies provide professional fiduciary services to manage, protect, and distribute assets according to trust terms. They offer a broad range of administrative, investment, tax, and estate services, typically for a fee, and are regulated to uphold fiduciary standards. For individuals or families seeking impartial, long-term management of trust assets, a trust company can offer expertise, continuity, and conflict mitigation.