Almost every city has a bank trust company. A bank trust company is a corporation that acts as an agent, fiduciary or trustee. It is a trust company within a bank. Examples of a bank trust company are:  CoAmerica, JP Morgan Trust Company, SunTrust and Frost Trust Company. The term “bank” usually refers to those institutions dealing strictly with deposits, and loans. A trust company is a corporate trustee that can be tied or not tied to a bank and just offers trustee services.

What is a Trust?

  1. Owns assets of any type for other people and has a ton of power.
  2. Created under your Will and/or created while you are alive.
  3. Creating a trust is as simple as tying y our shoelaces OR as complex as explaining the money multiplier banking system to a teenager.
  4. Can control future family behavior. Delicate balance.
  5. Needs to provide unflappable yet flexible guidance.

People think that only the super-rich have trust funds, that is not the case. Creating a trust fund can be a great way to safe guard assets for future generations. A trust agreement or  document assigns the rules on how the trust will operate for all parties involved.   The objective of a trust rests on the needs of particular family’s situation.  Generally the purpose of the trust would be to reduce estate tax,  keep assets out of probate, and decide how future generations will enjoy the wealth owned by the trust.

What services does a bank trust company offer?

A bank trust company typically specializes in two services trust administration and investment management. Most bank trust companies will offer Executor services as well. A  bank trust company performing  trust administration will generally provide reasonable customized solutions which differs by case. The duties of trust administration outlined by the trust document includes:

  1. Distributions – following the intent of the grantor (person who funded the trust) for when, why, and how beneficiaries should receive distributions.  The hardest part of any bank trust company duties.
  2. Taxes – Filing the trust tax return with Federal and State tax authorities and doing tax compliance.  A bank trust company does not do any tax planning.  They don’t mention that and people don’t realize that.  Better to pay a CPA to do the tax planning and tax compliance for a trust tax return.
  3. Fiduciary role – Can act as the sole trustee or as a co-trustee with individuals.  Very important not to have Co-Trustees agree on distributions and investments as then a stalemate exists and nothing gets done.  Individual co-trustees work best for providing guidance and perspective on distributions and keeping the bank trust company in line with client service etc.
  4.  Investments – A bank trust company will invest trust assets either in stocks, bonds, mutual funds, ETFs and/or handle unique assets owned by the trust (e.g. real estate, businesses etc.)

What fees does a bank trust company charge?

Any bank trust company or department will have two fees that you will see: Investment management and trust administration.  You will not see the costs of the back-office trust operations group nor the extra bells and whistles the bank trust company spends on marketing and client educational services.  That becomes for individuals to decide what they want to pay for and when.  If you want the unique and white glove service than the perfect would be a well-known bank trust company such as Bessesmer Trust, JP Morgan Trust Company or Northern Trust.  If you want bare bones and cost efficient then seek a local bank trust company.  Anybody can learn how to  negotiate cost efficient trustee fees.

How to choose a Bank Trust Company?

Individuals get frustrated choosing a Bank Trust Company because there are so many options. As a result, it is easiest to just use the bank trust department where you might have assets already. However, it is important to understand that may not be the best option for your specific needs. Bank trust departments are one of the oldest areas of a traditional bank. Other than their fees, when choosing a Bank Trust Company look at their DNA. Are they innovative? Are they easy to use? Will they make your life and your future generations life easier? These are just a few of the questions you should ask.  The right answer should be based on what you want, not what they want you to want.

For more steps on how to pick a Corporate Trustee check out this blog.