Trust Certificate

DEFINITION of 'Trust Certificate'

A bond or debt investment, usually in a public corporation, that is backed by other assets which serve a purpose similar to collateral. If the company experiences difficulty making payments, the assets may be seized or sold to help specific trust certificate holders recover a portion of their investment. The potential type of company assets used to create a trust certificate can vary, but most typically are other shares of company stock or physical equipment.

BREAKING DOWN 'Trust Certificate'

Investors holding trust certificates usually experience a higher level of safety than investors owning unsecured or uncollateralized bonds. But, they also typically earn a lower level of interest than those investors willing to take greater risks. While that may sound like an attractive balance for some investors, investing in trust certificates can be complex because it requires both an understanding of a company's overall financial situation and the nature of the asset that underlies the trust certificate.

Special caution should be taken when investing in trust certificates with an underlying asset that is the same company's stock. If the company runs into financial trouble, the asset backing the trust certificate can become as worthless as the trust certificate itself.

RELATED TERMS
  1. Voting Trust Certificate

    A certificate issued by the limited-life trust of a corporation ...
  2. Share Certificate

    A share certificate is a written document signed on behalf of ...
  3. Push Out

    One of two ways to effect a stock split. In a push out, new share ...
  4. Currency Certificate

    A note that grants the holder the right to convert a specific ...
  5. Periodic Payment Plan Certificate

    A certificate representing ownership interest in a periodic payment ...
  6. Mutual Investment Certificate

    A certificate issued by a local or municipal authority for the ...
Related Articles
  1. Retirement

    Should You Put Your Faith In A Trust?

    Many institutions want a piece of your portfolio, but trusts can provide a one-stop shop.
  2. Markets

    Unit Investment Trusts Market: 3 Trends in 2016

    Learn more about unit investment trusts (UITs), and discover some of the most common trends in the UIT market to date in the year 2016.
  3. Retirement

    How To Set Up A Trust Fund In Australia

    No, they're not just for the super-rich. But you need to know the rules.
  4. Retirement

    Surprising Ways a Trust Could Help Your Family

    Everything you always wanted to know about setting up trusts, in handy glossary form.
  5. Retirement

    How To Set Up A Trust Fund In The U.K.

    A guide to the whys and wherefores of setting up this most versatile of estate-planning instruments in the United Kingdom.
  6. Financial Advisor

    Irrevocable Trusts: New Trends You Need to Know

    Several improvements and additional provisions have been added to irrevocable trusts in recent years making them considerably more versatile than before.
  7. Financial Advisor

    How Trust Funds Can Safeguard Your Children

    Certain types of trust funds can help to protect your assets from bankruptcies and civil actions, and can be established to safeguard your children and designated beneficiaries.
  8. Retirement

    How to Set Up a Trust Fund in Canada

    You don't have to be rich to make use of a trust fund. Rules can be complex; here's what you'll need to discuss with your lawyer.
  9. Financial Advisor

    Advisors: Tips for When to Employ Living Trusts

    Revocable living trusts accomplish estate planning objectives that aren't possible with a will. Here are some of the cases that show when to use a trust.
  10. Managing Wealth

    Surprising Uses for Trust Funds

    Here are five common situations where a trust fund makes financial sense.
RELATED FAQS
  1. What percentage of withdrawals from a trust fund is taxed?

    I have inherited a trust fund. This is the first time I have considered pulling money from the account.  ... Read Answer >>
  2. Is this stock certificate worthless?

    I bought 50,000 shares of restricted common stock from a company in December 2015 and received a stock certificate. I then ... Read Answer >>
  3. Can I pass on the stock certificates to my son in my will?

    I was told I could get stock certificates from the company that I retired from. Will my son get the st... Read Answer >>
  4. How do you get a hard copy of a stock certificate?

    Before online brokers and personally-directed accounts, holding a physical stock certificate was a necessity, as this was ... Read Answer >>
  5. How do I transfer all the stock of my company to my brother?

    I started a Shell corporation in 2014 with myself as the sole stockholder. There is no revenue to date... Read Answer >>
  6. I hold stock certificates in a company that just had a stock split. What happens ...

    The short answer is that a stock split will have little effect on the holder of stock certificates. In most cases when an ... Read Answer >>
Hot Definitions
  1. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  2. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  3. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  4. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  5. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  6. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
Trading Center