Trust is Not a "Natural Person"?

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Question:

Where in the regulations does it state that a trust (family, corporate, etc.) is not considered a "natural person?"

Answer:

See, for example, the rules for FDIC Deposit Insurance Coverage, 12 CFR 330.1(k) "Natural person means a human being." Also, Regulation Z, section 226.2(21) defines the term "Person" and distinguishes between a natural person and an organization. Trusts are included in the list of organzations. Here's the exact wording: "Person" means a natural person or an organization, including a corporation, partnership, proprietorship, association, cooperative, estate, trust, or government unit.

See also Reg. Z Commenatary for section 226.3(a)(7) regarding exempt transactions and "organizational credit" which states, "The exemption for transactions in which the borrower is not a natural person applies, for example, to loans to corporations..." The list provided here is not exhaustive, but would include all organizations listed in section 226.2(21). One exception, however, is a "land trust". Reg. Z Commentary for section 226.3(a)(8) provides that "Credit extended for consumer purposes to a land trust is considered to be credit extended to a natural person rather than credit extended to an organization..."

First published on BankersOnline.com 8/10/09