Establishments in this classification are primarily trust companies engaged in fiduciary business, but not regularly engaged in deposit banking. Some of these establishments occasionally hold limited amounts of special types of deposits, and their uninvested trust funds are usually classified as deposits. These nondeposit trust facilities may have either National or State charters. This industry does not include establishments operating under trust company charters, which limit fiduciary business to that incidental to real estate title or mortgage loan activities, which are classified in SIC 6361: Title Insurance.
523991 (Trust, Fiduciary, and Custody Activities)
A trust company is primarily involved in establishing trusts, mechanisms under which the company manages assets for the benefit of a third party. In the establishment of these trusts there are typically three parties. The first is the trustor, who is the party creating the trust and also maybe known as the settlor, grantor, or donor. Second is the beneficiary for whose benefit the trust is established. Finally, the third party is the trustee, who is responsible for the management and preservation of the property of the trust estate.
Trust arrangements became more popular in the 1990s. They are often established to provide for the education of children and provision for old age. Once the trust is created, it is irrevocable, even by the trustor himself, unless there is express provision for revocation or the purposes of the trust have been accomplished. Trusts allow an individual to guard against the dissipation of wealth while still allowing for the necessary use of available funds.
A trust is a fiduciary relationship in which one person or entity is the holder of the legal title to property, subject to the equitable obligation to keep or use the property for the benefit of another. The trust company must use the assets entrusted to it in the best interest of the beneficiary of the trust.
A trust company is a company organized for the purpose of executing such arrangements. The functions of these companies can be divided into two broad categories: individual trusts and corporate trusts. Individual trusts act in several capacities including executor, administrator, trustee, guardian, conservator, custodian, and conservator in lunacy. Corporate trusts act as fiscal agents, registrars of stock, transfer agents, trustees under deed of trusts, depositary for protective committees, reorganization committees, and escrow agents.
Individual trusts are often established for individuals with lack of business experience, people in poor health, absentee property holders, the elderly, and persons traveling or residing in foreign countries. In these cases the trust company will take complete charge of the assets and property of the individual and collect all income due the estate. The trust company must also make all payments required by the estate, such as property taxes, etc.
Corporate trusts are often established to act as a trustee under a mortgage securing an issue of bonds, as a financial or fiscal agent of a municipal or private corporation, as a transfer agent and registrar, as a depositary for protective and reorganization committees, and as an escrow agent. These functions tend to be more specialized and complex than those associated with individual trusts.
The history of the trust can be traced to feudal concepts of property and have become a part of American law through the common law of England. From this early point in time, trusts served the purpose of preserving property so that the beneficiary could benefit as recipient of income from the principal of the trusts.
Many different fields of endeavor are represented in this industry classification. Financial professionals play a key role, just as their supporting functions have played a role in the development of these new financial services. In addition to these, lawyers are heavily represented because this field is so tightly constrained by the principles of property and banking laws.
During the 1990s, the trust field was as competitive as the rest of the financial services marketplace when the Baby Boom generation discovered trusts as a way to safeguard wealth realized during the soaring stock markets of those years. In 1996, 148 nondeposit trust companies managed 560,058 accounts valued at $1.1 trillion. Many banks operated nondeposit trust companies as subsidiaries. Representative nondeposit trust facilities include Amalga Trust Company Inc., which had 1997 assets of $6.1 billion; First of America Trust Co., with 1998 assets of $14.4 billion; Imperial Trust Co., with 1997 assets of $9.3 billion; and Mercantile Trust Company N.A., with 1997 assets of $28.7 billion.
Company profiles in General Business ASAP database.
Statistics compiled by the Federal Deposit Insurance Corporation. Available from http://www2.fdic.gov/structur/trust/tables/table_a1.txt .
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