Just because the Company has the name “Trust” or “Trustee” in it, doesn’t mean they have authority to act as a Trustee. It can be confusing when searching the market for a Trustee provider, as the cost of Trust services vary widely. Don’t be fooled by lower cost alone. There is more to providing trust services than many people know.
FAA Does not vet Trustees
The hard truth is that many Trust Companies offering trust services are not legally authorized to do so. The FAA DOES NOT VET the entities applying for registration as a Trustee. By law, Corporate Trustees must be granted Trustee authority by either the state banking commissioner or by a court in the Company’s state of incorporation, AND their trust powers must be granted IN their Articles of Incorporation. Unfortunately, the FAA DOES NOT demand verifiable state government issued proof of this authority. The result is that many companies with the words “Trust” or “Trustee” in their name are allowed to register aircraft in trust at the FAA, though they do not have the legal authority to do so.
Furthermore, most valid trust companies are required to have $500,000 to $1,000,000 in capital reserves with the state banking commissioner. On a routine basis, state banking commissioners require a corporate entity asking for Trust powers to either deposit with the state banking commissioner a specified amount of funds OR show thru a certified audit that a fixed amount of capital is available in a specified banking institution as a reserve in order to receive approval to exercise Trust Powers.
Many Trust Companies try to compete on cost alone, but often these companies sacrifice service for cost, leading to slow response times, delays in receiving legal ownership documents, and a general lack of professionalism in dealing with clients.
How to protect yourself:
To protect yourself and your assets, be sure to ask the Trustee provider for written proof of state court confirmation or state bank commissioner granted Trustee power. And don’t be afraid to ask them about their capital reserve requirements and whether or not they have met them.
Just because your Trust Company says they are a trustee, don’t assume they have the authority to act as one. Be informed and educated, and don’t be afraid to ask the right questions. Remember, this is the safety of your money and your property so you have a right to know. Don’t be afraid to ensure that your Trust Company is LEGIT.