Trust companies perform a wide range of services related to investment and asset management. Of course, one of the primary functions of most trust companies is managing the investment portfolios within the trusts of their clients. The investment management is done either in-house or by an affiliated third-party manager selected by or recommended to the client.
Regardless of the type of management used, investment management is always customized for each client’s risk tolerance and time horizon.
Types of Trusts
Although there are many different types of trusts, they usually fall into two types of categories.
- Revocable Trust: A revocable trust is a trust that can be changed at any time. For example, the beneficiaries could be changed, or the trust can be dissolved. The owner of a revocable trust maintains control over the trust at all times. The owner or grantor can be the beneficiary or name anyone.
- Irrevocable Trust: An irrevocable trust doesn’t allow any changes nor can the trust be dissolved without the permission from the beneficiary. Irrevocable trusts are helpful in avoiding taxes on gifts or protecting the beneficiary’s inheritance from any legal actions from creditors if the beneficiary has financial issues later in life.
Other types of trusts include:
- Living trust and testamentary trusts
- Second-to-die life insurance trusts
- Charitable trusts (foundations and endowments for the wealthy are usually available as well)
- Intentionally defective trusts
- Incentive trusts
- Generation-skipping trusts
- QTIP trusts
- Qualified personal residence trusts
- Marital trusts
- Educational trusts
- Retirement trust accounts, such as IRAs and qualified plans
Why Use a Trust Company?
Trust companies can provide a wealth of services to clients from one convenient, centralized location. They save their clients time and effort by eliminating the need to coordinate financial assets and information between brokers, financial planners, tax advisors, tax preparers, and attorneys. Trust companies also take full fiduciary responsibility for their clients’ financial well-being, thus assuring that the clients’ best interests are always considered in each service and transaction performed.
The Bottom Line
Trust companies provide a wide array of services, ranging from trust and investment administration to comprehensive wealth management services, such as tax preparation, tax advice, and financial planning services. For consumers seeking a ‘one-stop-shop’ approach to the management of their financial affairs, trust companies may offer the perfect solution.