Trusteeships under special agreement, taking effect during the grantor's life, may be undertaken for the same purposes for which testamentary trusts may be created-for any lawful purpose-and may be of the same duration. In case the trust becomes in force at once, the grantor may reserve the right to general oversight of the management of the property and the power to alter or revoke the trust instrument during his or her life, or the trust may be irrevocable. Trusts of this kind are created to establish a fund for charitable purposes, to provide for support of incompetent individuals or of individuals who do not wish to manage their own business affairs. Sometimes the trust is created by the grantor for his own benefit, to avoid care and responsibility. The variety of trusts of this character is increasing as the adaptability of the trust company to their handling becomes better understood. A plan that is growing in favor is that of appointing a trust company as trustee of the proceeds of life insurance policies. By this means the insured is enabled to direct the disposition of such funds after his death as he wishes, and at the same time place the funds in the hands of a company amply able to manage them in a business-like manner. The company collects and invests the proceeds of the policy or policies, and pays to the beneficiaries the income; or if the amount is not sufficient to provide the income needed for support of the beneficiaries, arrangement may be made for the payment of an annuity for a certain number of years, using the income and gradually reducing the principal. In order to keep the remaining part of the fund always invested, the trust may be given participation in a mortgage or group of mortgages. In the creation of such a trust, the trust company is named in the policy as beneficiary in trust for whomsoever the grantor may wish, and at the same time there is executed a deed of trust vesting title in the trustee and directing the use of the funds.

Another form of trust made possible by the development of the trust company is the accumulation of a fund for the purchase or building or maintenance of a home for the wife or children or other beneficiaries of the donor.

In a similar way, churches and educational or charitable institutions may choose a trust company as trustee for the accumulation and investment of an endowment or building fund, thereby being relieved of the care of the moneys and being assured of speedy and safe investment thereof. The trust company is able to invest the funds in small and odd amounts, interest included, by means of participations in mortgages or other securities.

The instrument creating a trusteeship by agreement specifies in detail the duties of the trustee, which may be much the same as those of a testamentary trustee.

GUARDIAN, CONSERVATOR, ETC.

As guardian of the estates of minors, or conservator, committee or curator of the estates of the incompetent, the duties are similar to those

of testamentary trustee, though in many states the provisions of law, especially as to investments, are more stringent. In general, the guardian or conservator is obligated to preserve the property, to keep it on a safe income-producing basis, to use the income discreetly for the benefit of the ward, and at the termination of the trust to turn over the balance on hand. The guardianship of a minor is terminated when the ward becomes of age; that of a person of unsound mind terminates at death, or may be terminated if the ward regains his reason. The duties require an intimate knowledge of the needs of the ward as to living expenses, education, etc. Guardianship by trust companies is in most states limited to the estate, but in a few states may be either of the person or of the estate or of both. When of the person, the duties involve close personal supervision of the ward, as in the case of an individual acting as guardian. The guardian or conservator is under the jurisdiction of the court, and as in the case of the testamentary trustee makes frequent statements to the court.

THE INVESTMENT OF TRUST FUNDS.

The investment of the funds held in trust in various fiduciary capacities is a matter requiring intelligent judgment. In most states the laws on the subject are quite fully developed both as to the investments authorized and those forbidden, and the first duty of the trust company undertaking such work is to thoroughly inform itself as to the laws of the state or states which govern in the case of each of its trusts. The executor and the administrator are not, as a rule, called upon to invest funds, their duties being rather to convert personal property into cash. Yet there are instances in which the court may authorize them to invest idle funds. On the other hand, trustees, guardians and conservators often find the investment of funds one of their principal duties.

The general principles governing such investments are well established. The fiduciary is plainly under the duty of making the estate produce an income, of keeping the funds invested and not allowing them to remain for an unreasonable length of time merely on deposit, even if drawing interest. Yet the security of the principal must be the first consideration, and the amount of income second. In most states the fiduciary may not take risks in the matter of investments that even a prudent man might take with his own money. Unless specific authority is given in the instrument creating the trust, the funds may not be invested in personal securities, in manufacturing concerns, in trade or business, or in speculation. Investments may not be made in unimproved real estate so as to tie up the funds for long periods. Any specific instructions as to investments in the will or other instrument creating the trust must be followed. The fiduciary may not derive profit from the investment of the trust funds.

In many states the classes of investments permitted are specified by the laws; and in such states the laws must of course be strictly fol

lowed. In some states only general principles are laid down, while in several the matter is left to the discretion of the trustee. But in any

case the investments are subject to the approval of the court; and the trustee may be compelled to make good the loss and pay interest if investments have been made which the court cannot approve. In determining what securities the court will approve, where the classes of investments are not specified in the laws, the fiduciary may often be guided by the classes of investments permitted for savings banks. It sometimes happens that classes of investments are specified for guardians, but not for trustees; in which case the latter may be guided by the rules laid down for the former. It is usually possible, and in the case of guardians often obligatory, to obtain an order of court authorizing certain investments. The most common forms of investments authorized are United States, state and city bonds and first mortgages on productive real estate, and where there is doubt these may be relied upon. The field is gradually widening, however, and some states specifically authorize other forms. of investments, including loans on collateral, land, bank stocks and railroad bonds and stocks.

A fundamental principle is that investments of trust funds must not be mingled with the assets of the company, and the investments belonging to each trust must be kept separate, so that the owner may be readily identified. The fiduciary is, of course, responsible for the safe-keeping of the securities. It is common to allow access to trust securities only to two officers of the company jointly, and removal of such securities from the vault only upon written requisition duly signed.

The troublesome problem of the investment of odd amounts and of amounts too small to permit of the purchase of a bond or a mortgage is being solved satisfactorily by giving the estate a participation in a mortgage or in a group of securities. By this means any amount that an estate may have in hand may be made to produce an income without great delay.

When securities are purchased at a premium over their face value, the interesting question arises whether the present beneficiary is entitled to the full income, or whether a portion of the income must be reserved as a sinking fund, so that at maturity of the security the principal will be intact. The question is of great importance where there is a life tenant to whom the income is to be paid, the principal at the death of the life tenant to go to another party. The question is sometimes settled in advance by the provisions of the instrument under which the fiduciary acts; but when it is not so settled, the safer plan is to withhold enough of the income to keep the principal intact.

CHAPTER XVII.

TRUST COMPANIES OUTSIDE OF THE UNITED STATES.

THE

HE trust company has attained its greatest development, by far, in the United States, and in the form in which it exists here may with propriety be looked upon as peculiarly an American institution. The germ of the trust company idea, however, has not been altogether lacking in other parts of the world; and Australia has developed corporations which adhere strictly to the original and distinctive function of the trust company-fiduciary business.

As far back as the beginning of the nineteenth century, the idea of providing corporate agencies for the transaction of business as trustee and agent was put into practice in India by the "Agency Houses." "These were concerns organized to transact business for trustees or individuals, to receive moneys on deposit, and to administer estates;" and a knowledge of their operations inspired the undertaking of this class of business, as early as 1836, by one of the earliest of American trust companies."1

During their second occupation of Cape Colony, South Africa, at the beginning of the nineteenth century, it appears that the Dutch established public corporations for the management of the estates of deceased persons; an idea which the English adopted, after their reoccupation of the Cape, by the establishment of their first "Trustee and Executor Company" in 1832. This company had a capital of £29,400, divided into 168 shares of £175 each. "It combined a purely trust business with a form of banking, and apparently had power to allow interest on trust funds, and to trade with them.92 There are now four trust companies. in Johannesburg, South Africa, two of which also do a life insurance business, like the early trust companies of the United States.93

THE AUSTRALIAN TRUSTEE COMPANY.

Trust companies, as corporations for the transaction of trustee business, pure and simple, are well established in Australia, and their business is steadily growing. They appear to have been uninfluenced by the trust companies of the United States, partaking of none of the characteristics: of the "financial department store," but adhering to one general line of business.

The records of the first of these companies-The Trustees, Executors. and Agency Co., Ltd., of Melbourne-show that its organization was

91 Sketch of The Pennsylvania Company for Insurance on Lives and Granting Annuities, Philadelphia, pp. 32-35.

92 The Age, Melbourne, Australia, January 21, 1907. See also "Dalgety's Review," Melbourne, August, 1906.

93 Ernest Heaton: The Trust Company Idea and Its Development, p. 34.

inspired by a knowledge of the success of the trustee and executor companies of South Africa. It was established in 1878, making progress rather slowly for the first few years, during which it had practically no competition. About 1885 the public began to awaken to the value of such institutions, and between that date and 1893 thirteen more companies were organized in various parts of the Commonwealth, all of which are still in existence, making a total of fourteen companies now doing business in Australia. Of these, seven are located in Victoria, two each in New South Wales and Tasmania, and one each in Queensland, South Australia and West Australia. The table presented herewith, taken from the Year Book of Australia for 1907, gives a list of these companies, with the latest available statistics. The amounts of the estates which are held under administration is published by only seven of the companies, the total for the seven being £21,429,246. The Year Book estimates the total for the other companies at from £8,000,000 to £10,000,000, making a probable total of estates held for administration by all the trustee companies of Australia of about £30,000,000. As will be seen from the table, the dividends ranged from 41/2 per cent. to 11 per cent.-averaging over 8 per cent.—while in some cases the excess of the net earnings over the amounts of the dividends permitted substantial additions. to the "reserve funds" and undivided profits.

The statistics given in the table reflect the different character of the Australian trustee company as compared with the American trust company in one important particular-there are no deposits. The Australian trustee company does not receive deposits, and does neither a commercial nor a savings banking business. Nor does it exercise any of the other auxiliary powers common to trust companies in the United States, except that in a few cases safe deposit vaults are maintained, which are found unprofitable because the banks do such business free of charge. As will be seen below, the functions of these companies are practically limited to those exercised by the probate division of the trust department of the American trust company.

The fourteen companies are chartered and their powers and limitations are defined in every case by private act; but in Victoria there is also some general legislation designed to regulate the business. The acts are all essentially the same, and their general character may be seen from an outline of the act conferring powers upon the original company -The Trustees, Executors and Agency Company, Limited, of Melbourne, which is also the largest Australian trustee company, and probably the largest company in the world carrying on exclusively the administration of estates. It has a paid-up capital of £90,000, reserve fund and undivided profits of £26,826, and the amount at credit of estates, trusts and clients on December 31, 1906, was £8,754,551.

The act conferring powers upon this company starts with a preamble setting forth that, "Whereas, from the uncertainty of human life and from other causes great difficulty often arises in securing the services of suit