Trusts undertaken for individuals are of various kinds and arise for numerous reasons. Persons who feel themselves incompetent to care for their estates, travelers, absentee property-owners, endowed charities or bequests, and others, commit their properties to the care and management of trust companies. Trust companies act as custodians of life insurance policies, collect the proceeds of the policies, and pay them as annuities to beneficiaries. In all such trusts the trustee's fees are stated in the trust contract, and the funds are kept distinct from the trustee's own assets and are held in the name of the trust company as trustee.
In many states the trust company is empowered by law to act as executor, administrator, trustee, guardian, and conservator. An executor is a person appointed by the terms of a will to take and execute an estate according to the terms of that document. An administrator is a person appointed by the probate court to take and execute according to the inheritance laws of the state an estate of one who has died intestate.
An "administrator with the will annexed" is a person appointed by the court to take and execute an estate when the deceased did not name an executor in the will, or when the executor named dies, refuses to act, or is incapacitated from acting. The trust company may serve in any of these capacities and in doing so take charge of the estate, subject to the supervision of the court, to which, after the final distribution of the estate according to the will or the state inheritance laws, the company makes an itemized report of all receipts and expenditures under the trust. The trust company may be appointed a guardian to care for the estates of minors, or a conservator to care for the estates of insane, idiots, habitual drunkards, spendthrifts, or others incapable of looking after their own affairs. All such duties are carried out under the surveillance of the court, to which also reports are made. The fees may be fixed by law or by the court. State statutes generally permit trust companies to act as depositories for court funds and for others acting as executors and the like.
The conduct of the trust functions of a trust company gives occasion for the investment and reinvestment of trust funds; and the trust company has funds of its own to invest. To carry out these investment operations a special department is developed which deals in high-grade securities for itself, its clients who have established trusts with it, and other customers, and functions as a bond house. One favorite line of investments is mortgages or debentures issued by mortgage bond houses, or the trust companies may issue such bonds themselves and sell them to their customers. Under investment-deposit agreements, deposits received from customers are invested in securities which are held in trust for the depositors.
Another type of service is the care of real estate committed to a trust company by private agreement, by will, or by appointment of court. This line of activity may develop into a real estate business engaged in the purchase, sale, and renting of real estate on commission.
Trust companies are permitted in some states to act as assignees, receivers, and trustees in bankruptcy. An assignee or trustee in bankruptcy cares for the just distribution of the assets of insolvent persons, firms, or corporations among their creditors. The assets are taken over, some or all of them are converted into cash, the preferred claims are paid, and the rest of the assets are distributed among the creditors on the basis of their claims. Assignees and trustees are accountable to the court having jurisdiction.
A receiver is a person or a corporation appointed by the court to take charge of a property in dispute. If the shareholders of a company or the partners of a firm are dissatisfied with its management the court may be asked to handle the property until the dispute is settled. Sometimes, although a company is insolvent, the prospect for early rehabilitation may be good and the court may appoint a receiver to handle the property during the period of recovery. On the other hand, the company may be so insolvent as to be hopeless, and the receiver may be appointed to cut down fixed charges, assess the present holders, borrow funds, and put the reorganized company on its feet again. The trust company, by reason of its experience, good credit, and financial responsibility, is well fitted to act in any of these cases.