Trust account (brokerage)

A trust brokerage account holds securities owned by a legal trust rather than by an individual. Three parties are involved: the grantor (also called the settlor or trustor), who creates the trust and funds it; the trustee, who holds legal title and makes investment decisions; and the beneficiary, who receives the economic benefit of the assets.

Because the trustee acts for someone else's benefit, a trust account is a fiduciary account. The trustee must follow the trust document and the prudent investor standard, keep trust assets separate from personal assets, and avoid self-dealing. Before opening the account, the broker-dealer reviews the trust agreement (or a certification of trust) to confirm who has authority to trade, whether margin and options are permitted, and how distributions are handled.

Trusts come in two broad flavors. A revocable trust can be changed or dissolved by the grantor, so its assets typically stay in the grantor's taxable estate; a living revocable trust is often used mainly to avoid probate. An irrevocable trust generally cannot be altered once funded, which removes the assets from the grantor's estate but gives up control. Investment objectives are set for the trust as a whole, not for the trustee personally — a wealthy trustee cannot justify speculative trading for a conservative trust.

Account registrations are a reliable exam topic. The SIE tests trust accounts alongside individual, joint, custodial, and corporate registrations, and expects you to know that the trustee places the orders while the beneficiary owns the benefit, that suitability is judged against the trust's objectives, and that the trust agreement governs what trading is allowed.