# Understanding Trust Companies: Roles, Services, and Benefits

![Trust Company: A legal entity that acts as fiduciary, agent, or trustee on behalf of a person or business.](https://www.investopedia.com/thmb/GWK2QEd3CFALBBvSUJ_KwywUBFA=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/trustcompany.asp-FINAL-1-63810e50ee1e4a12b74497b545173d9e.png)

*— Investopedia / Joules Garcia*

> **Definition**
>
> A trust company is a legal entity that acts as a fiduciary, managing and administering assets on behalf of individuals or businesses for eventual transfer to beneficiaries.

## 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. It can act as the custodian for a trust or estate, managing assets and property according to the instructions of the trustor on behalf of their eventual benefactors.

Trust companies typically charge a fee for their services, which can be either a flat fee or a percentage of their assets.

### Key Takeaways

*   Trust companies act as fiduciaries, managing and transferring assets for individuals, businesses, and estates.  
    
*   These companies offer services such as wealth and asset management, handling tasks like bill paying and estate planning.  
    
*   Trust companies charge fees, often based on a percentage of assets or a flat annual rate.  
    
*   They are regulated by the Office of the Comptroller of the Currency and, if applicable, other financial regulatory bodies.  
    
*   Employing a trust company can help prevent family disputes over estate planning by serving as a neutral third party.

## Understanding the Function of a Trust Company

Although trusts often have an individual as the trustee, a trust company can also serve in this role. For example, a trust company can be a successor trustee for a trust when there are no financially responsible family members available to take on that role.

When the grantor, the person who created the trust, passes away, the trust company becomes the new trustee and manages the assets according to the trust's terms.

A trust company doesn't own the assets assigned to it but has a legal duty to care for them on behalf of others.

Trust companies manage trusts and similar arrangements for a fee, deducted annually or upon asset transfer to beneficiaries.

Various trusts, including charitable ones, can use trust companies as trustees.

### Exploring Different Types of Trust Companies

A trust company may be part of a commercial bank or financial institution or be a separate entity owned by a law firm or [partnership](https://www.investopedia.com/terms/p/partnership.asp).

Trust companies vary in size and fees; larger ones offer more products and services but might lack personal interactions that smaller institutions provide.

Major trust companies include Northern Trust, Bessemer Trust, and U.S. Trust, which is [part of Bank of America Corporation](https://www.investopedia.com/5-companies-owned-by-bac-5093698). These trust companies generally charge fees that are based on a percentage of assets, which may range from 1.00% to 2.0%, depending on the size of the trust.

## Services Provided by Trust Companies

Trust companies manage daily operational tasks and provide various services related to [managing the trust](https://www.investopedia.com/articles/retirement/08/trust-company.asp).

Some services include:

*   Wealth management services, which include investment management and wealth preservation for a client's future generations
*   Asset management services, such as bill paying, check writing, and other features
*   Brokerage services, with a wide array of investments available to clients
*   Financial planning, for additional fees, depending on the level of service needed
*   Tax planning
*   Estate planning and/or estate settlement  
    

> **Important**
>
> Trust companies provide estate services like guardianship and managing non-financial assets.

## Advantages of Using a Trust Company

*   A trust company acts as a fiduciary, meaning it is legally obligated to act on your behalf and in your best interests.
*   As a result, clients should feel confident in a trust company making [investment](https://www.investopedia.com/terms/i/investment.asp) and management decisions, as it is legally prohibited from taking advantage of you.
*   The investment management services offered by trust companies can be helpful to those who are not experienced in, or knowledgeable about, the financial markets.
*   Clients who cannot or don’t care to manage their day-to-day finances can hand that responsibility to a trust company.
*   Trust companies may prevent future family squabbles over estate planning and inheritances. A trust company can act as a neutral third party that divides up and distributes the assets of an [estate](https://www.investopedia.com/terms/e/estate.asp).

## What Does a Trust Company Charge?

A trust company can charge for its services in various ways. Some trust companies may charge a fee that is a percentage of assets, say 1%, for a trust with substantial assets or that requires a lot of management. (The percentage can range from 0.25% to 2%.) Other trust companies may offer to charge a flat annual fee, which may make better sense for a trust that requires minimal work.

## Who Regulates Trust Companies in the U.S.?

Trust companies are chartered and regulated by the Office of the Comptroller of the Currency (OCC), which is an independent bureau of the Department of the Treasury. According to the [Federal Deposit Insurance Corporation (FDIC)](https://www.investopedia.com/terms/f/fdic.asp), "Trust companies which are owned by a bank holding company are also subject to supervision by the Federal Reserve Board. Trust companies that are owned by banks are subject to examination and supervision by the parent bank's primary regulator."

## What Are the Assets of a Trust Company?

The majority of a trust company's assets are those held in the specific trusts of clients (for which the trust company has been named the trustee).

## The Bottom Line

A trust company serves as trustee for a trust and manages the trust assets on behalf of its clients, according to the terms of the trust. Trust companies have a fiduciary relationship to their clients, meaning that they are required to act in the financial best interests of the trust.

In addition to trust administration, these companies also offer a variety of services, including wealth management, tax advice, and estate planning. These services can be particularly useful for those who are not experienced in financial management. They can also help wealthy families avoid disputes in estate distribution.

> **Article Sources**
>
> 1.  FDIC. "[Trust Examination Manual](https://www.fdic.gov/regulations/examinations/trust-examination-manual/section-10-other-trust-matters/index.html)."