Trust Company

TRUST COMPANY, is a financial institution organized to perform duties and functions for corporations and private indi viduals and to assume the general responsibilities imposed upon individuals and corporations under the law of trusts. While the principal business of these companies in their formative period early in the last century was the supervision of personal estates ind the negotiation of insurance, the insurance function has dis ippeared, and the trust companies have become a major factor in commercial banking for both domestic and foreign business, in addition to being corporate fiduciaries. The broad financial powers that the trust companies enjoy have earned for them the name of department store banks, and their growth in the United States has been rapid since the opening of the 2oth century.

As organized to-day, trust companies in the United States per form in many instances a complete commercial banking service and many also maintain complete savings departments, but their trust functions are distinct from their general banking services and cover two separate fields, namely, personal trusts and cor porate trusts.

Personal Trust Department.—In its personal trust depart ment, the trust company, either as executor or administrator, set tles estates of individuals. As trustee, it manages property under the laws pertaining to trusts, distributing income and principal to beneficiaries designated in the wills or trust deeds under which it operates. A trust company may be designated as trustee either by the terms of a will, or by the terms of an agreement entered into during the life of an individual. The latter form of trust is usually known as a living trust or a voluntary trust, and when made to cover policies of life insurance it is designated as a life insurance trust. In its personal trust department, the trust com pany also acts as a guardian of property for minors, and as com mittee of property of incompetent persons.

The fundamental duty of a trust company is sound manage ment of property placed under its care and application of in come and distribution of principal in strict accordance with the terms of the instrument under which it acts. An additional serv

ice to individuals which a trust company performs is caring for securities in safekeeping or custody. Through this service, the trust company attending to the collection of income and maturing principal, the details of routine care and watching for changes in the status of holdings, such as redemptions, conversion privi leges, etc.—the securities, however, are always under the control of the owner and may be withdrawn or added to.

Corporate Trust

Department.—In its corporate trust depart ment, the trust company plays a vital part in the issuance of bonds, the registration and transfer of stocks, the handling of property under escrows, the exchange of securities under capital readjustments and changes, as fiscal agent for governments and corporations, and in other capacities. It renders important serv ice in corporate reorganizations, under bondholders' or stock holders' protective agreements; consolidations, dissolutions and reorganizations; voting trust agreements; creditors' agreements; receipt of subscriptions to securities offered in the form of rights and disbursements of liquidating dividends. As paying agent for corporations it pays interest on bonds, also the principal of ma tured or called bonds; it also handles the disbursement of divi dends for corporations. The trust company also holds securities for corporations in safekeeping, affording the same service as that to individuals described previously. An important feature of trust company service, as it is organized by the larger trust com panies, includes special service to municipal, county, State and Government officials, as trustee and paying agent under bond issues, registrar of bond issues, and in other fiduciary capacities. Early History.—Early in the 19th century the first trust com panies made their appearance in the United States and carried on a business of insurance and trusteeship for estates and individuals.