As indicated above, the essential feature of a trust is the separation of the use of certain property from its ownership and the division of the use and ownership between two different parties. This concept can be traced back to the thirteenth century, when the decline of the feudal system was vitally affecting the legal view of property rights in England and on the Continent. Although trusts have existed in Europe for several centuries, the trust company is a distinctly American institution, and its history covers a period of only one hundred years. The first trust company was organized in New York City when the state granted a charter to the Farmers' Fire Insurance and Loan Company (later the Farmers' Loan and Trust Company). As the name implies, this corporation was engaged primarily in the business of insurance, but under its charter it was also permitted to execute trusts. Several years later the New York Life Insurance and Trust Company was incorporated with similar powers. Until the outbreak of the Civil War not more than half a dozen trust companies had been organized in the United States. Moreover, their activities were limited both by legal and by economic conditions. Trust companies were usually prohibited from receiving deposits or from conducting any other form of banking business. It must also be remembered that prior to the Civil War, the medium of paying business obligations was not the check drawn against a deposit account, but the note issued by a bank. This operation of circulation could not well be conducted by a trust company. Its fiduciary business was confined mainly to trusts created by individuals, as few business corporations were in existence before the middle of the century.

After the Civil War, new economic conditions exerted a great influence over the nature of the trust company and expanded its powers considerably. This tendency is well represented in the charter of the Rhode Island Hospital Trust Company, which was permitted to execute trusts, accept savings deposits, and exercise all banking powers, with the exception of issuing notes for circulation. With the close of the Reconstruction period and the beginning of industrial expansion during the last quarter of the nineteenth century, there was a rapid accumulation of great private fortunes and widespread growth of large corporations. These tendencies resulted in widening the operations of trust companies, which now conducted safe-deposit vaults for storing the valuables of wealthy individuals, and opened departments for rendering financial services to corporations. New forms of trusts were created with the development of corporate finance during the first decade of the twentieth century, and the extraordinary conditions arising from the war further stimulated fiduciary relations. The growth of trust companies in recent years is evidenced by the fact that the combined resources of all trust companies in the United States amounted to $705,000,000 in 1895, while, in 1915, their assets amounted to $6,000,000,000, and by the middle of 1921 the total aggregated $12,323,000,000.

During this century of development, the operations of trust companies have been considerably changed. In the first place, their original insurance business was gradually abandoned. The passing of these operations may be attributed in part to legislative acts which prohibited trust companies from writing fidelity policies. Moreover, economic tendencies encouraged the growth of corporations specializing only in insurance. With the evolution of this business, it was soon apparent that a concern dealing in one form, such as life insurance or real-estate title insurance, could operate more inexpensively than a corporation which attempted to carry all classes of risks. The loss of this insurance business was compensated by the assumption of new fiduciary powers, including, in time, the administrating of corporate trusts. In addition, trust companies received deposits, granted loans, and finally exercised general banking powers. In consequence the modern trust company may be regarded as a bank which exercises fiduciary functions.