Should I Use a Trust Company?

12.20.19Consumers often find themselves with investments with one company, insurance with another, a financial advisor with a third company and one or maybe more banks. Depending upon the asset level, it may make sense to put all of this under one roof.

Trust companies provide clients with a variety of services, so that they are all managed in one place, by one individual or one team of professionals. Trust companies manage trusts, trust funds and estates for individuals, businesses and other types of entities. They also provide investment, tax and estate planning services.

Wealth Advisor’s recent article, “Understanding How Top Trust Companies Operate,” gives us a high-level overview of the nature and function of trust companies, as well as the services they provide.

A trust company is a separate corporate entity owned by a bank or other financial institution, or by a law firm or independent partnership. It can manage trusts, trust funds and estates for individuals, businesses and other entities. Most trust company's assets are held in actual trusts, with the trust company named as the trustee. They typically use several types of financial professionals, including financial planners, attorneys, portfolio managers, CPAs, and other tax professionals, trust officers, real estate experts and administrative personnel.

Trust companies perform a wide variety of services related to investment and asset management. One of their main tasks is managing the investment portfolios within the trusts of their clients. There’s also a variety of investments, such as individual securities, mutual funds and real estate, that can be employed to achieve growth or income.

Trust companies also can provide safekeeping services within secure vaults for other types of tangible investments or valuables, like jewelry.

Escrow services and holding accounts for proceeds from 1031 exchange real estate transactions can be provided, if necessary. A section 1031 is an Internal Revenue Code rule that allows taxes to be deferred on qualifying assets, such as real estate. They can also provide estate settlement services, such as valuation, dispersion and re-titling of assets, payment of debts, and expenses, estate tax return preparation and the sale of closely held businesses.

Trust companies frequently work with their clients' heirs to provide the same types of services to the estate assets' recipients as to the donor.

They also take full fiduciary responsibility for their clients' financial well-being. This means that the clients' best interests are always considered in each service and transaction performed.

Most major banks offer trust services through a separate department, but there are also trust companies that operate independently. Usually there is a financial requirement that the couple or individual have a high level of net worth before the trust company will consider taking them as clients.

Reference: Wealth Advisor (December 10, 2019) “Understanding How Top Trust Companies Operate”

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