A trust account is one opened and managed by a trustee (an individual, company, association, or group) for the benefit of others (the beneficiary(ies).
The parties to a trust are the:
- Settlor – The person who creates the trust;
- Trustee – the person who manages and administers the assets and liabilities of the trust; and
- Beneficiary – The person for whose benefit the trust is created.
Deposit insurance provides separate coverage to the beneficiaries of a trust account as a depositor for the purpose of deposit insurance entitlement. As such, each beneficiary of a trust is insured up to $1,200,000, separately from the other deposits that are held by the beneficiary in other capacities and other trusts. In a payout, the Corporation shall make payment in the name of the trustee(s) for the respective beneficiary(ies).
Example 1
Michael James was appointed as a trustee to manage the assets of Jonathan Brown (the settlor) for his beneficiaries, Hanna Young and Marvin Crawford. The assets include a sum of money in the amount of $2,800,000 for which Michael James opened a trust account (Account A) at ABC Bank Limited. The account is in the name of Michael James. Hanna Young and Marvin Crawford, as beneficiaries are entitled to $1,400,000 each based on the terms of the trust deed. Additionally, Hanna Young has a certificate of deposit (CD) with a balance of $250,000 (Account B); and Marvin Crawford has a savings account with a balance of $900,000 (Account C).
The following would apply in a payout:
| Deposit Insurance Computation | ||||
|---|---|---|---|---|
| Depositor | Account | Total Deposits | Insured Deposits | Uninsured Deposits |
| Michael James trust account for: | ||||
| Hanna Young and Marvin Crawford | A | $2,800,000 | $1,200,000.00 | $1,600,000.00 |
| Payout entitlement: | ||||
| Hanna Young | A | $1,400,000 | $1,200,000 | $200,000 |
| Hanna Young | B | $250,000 | $250,000 | $0 |
| Marvin Crawford | C | $900,000 | $900,000 | $0 |
The certificate of deposit (CD)held by Hanna Young for $250,000 (Account B) and the savings account held by Marvin Crawford for $900,000 (Account C) would both be insured separately as Individual accounts owned by different persons for $250,000 and $900,000 respectively.
Deposit Insurance Entitlement for Beneficiaries of Trust Accounts with the Same Parties
Two or more trust accounts are considered to have the same deposit insurance entitlement if the: settlor (s); beneficiary (ies); and trustee (s) are the same. Deposits for a beneficiary (ies) in two or more trust accounts with the same parties are added together and insured up to the maximum coverage limit. Of note, these deposits are insured separately from the other deposits of the beneficiary that are maintained in other ownership capacities or other trusts.
Example 2:
Richard Williams was appointed as trustee to manage the assets of a trust established by Daniel Thomas for the benefit of Emily Johnson. The assets include a sum of money in the amount of $1,000,000. Michael James opened two accounts with this amount at ABC Bank Limited and deposited $700,000 in a savings account (Account A) and $300,000 in a certificate of deposit (Account B). The account is in the name of Michael James.
The following would apply in a payout:
| Deposit Insurance Computation | ||||
|---|---|---|---|---|
| Depositor | Account | Total Deposits | Insured Deposits | Uninsured Deposits |
| Richard Williams | ||||
| For Emily Johnson | A & B | $1,000,000 | $1,000,000 | $0 |
Deposit Insurance Entitlement for Beneficiaries of Trust Accounts with Different Parties
Two or more trust accounts are considered to have different deposit insurance entitlement if the settlor (s); beneficiary (ies)); or trustee are not the same. Deposits that are held under different trusts for the same beneficiary (ies) are insured separately from the other deposits held by the same beneficiary (ies) in other trusts or ownership categories.
Example 3:
David Jones was appointed as trustee to manage the assets of a trust established by Mark Johnson for the benefit of Olivia Clarke. The assets include a sum of money in the amount of $1,500,000. David Jones opened a trust account (Account A) with this amount at ABC Bank Limited. The account is in the name of David Jones. Additionally, Sharon Wilson was also appointed to manage a sum of $500,000 for the benefit of Olivia Clarke. This sum of money was also deposited at ABC Bank in a savings account (Account B). The account is held in the name of Susan Simms.
The following would apply in a payout:
| Deposit Insurance Computation | ||||
|---|---|---|---|---|
| Depositor | Account | Total Deposits | Insured Deposits | Uninsured Deposits |
| David Jones: | ||||
| For Olivia Clarke | A | $1,500,000 | $1,200,000 | $300,000 |
| Sharon Wilson: | ||||
| For Olivia Clarke | B | $500,000 | $500,000 | $0 |
