|
Deposit Insurance Coverage
Trust Accounts
Definition of a Trust Account
A Trust Account is an account in respect of which a beneficiary has an interest under an irrevocable express trust created by a written law or by a trust instrument, but does not include any interest retained by the holder.
Funds deposited in an account by a trustee under an irrevocable express trust are insured on the basis of the beneficial interests under such trust.
The interest of each beneficiary established under such a trust is insured up to $75,000, separately from other accounts held by the trustee, the settlor (grantor) or the beneficiary in his individual capacity.
Trust Relationships
Settlor: Person whose property was used to establish the trust.
Trustee: Administrator of the trust, may be a person or an Institution
Beneficiary: Person ultimately entitled to the trust property.
Scenario:
T is a trustee of an irrevocable trust created by S, settlor, for the benefit of A and B in equal shares. T holds an account containing $150,000 in trust funds. A and B, as well as T and S, each maintain individual accounts in the amount of $75,000 each.
Insurance coverage:
Individual Accounts
S $75,000
T $75,000
A $75,000
B $75,000
Trust Account $150,000
- Individual accounts of A, B, T and S are each separately insured up to $75,000.
- Trust account of $150,000 is fully insured, since each of the deemed interest is insured up to $75,000.
Scenario:
S is the settlor of an irrevocable trust for the sole benefit of his son, B. T, the trustee, maintains account in Y institution containing $100,000 in trust funds. S subsequently creates a separate irrevocable trust, also for B’s sole benefit, with X institution as trustee. X institution deposits $5,000 of the trust funds in another account in Y institution.
Insurance Coverage:
B’s interest (First Trust) |
$75,000 |
B’s interest (Second Trust) |
$5,000 |
|
$80,000 |
Maximum coverage |
$75,000 |
Scenario:
S is the settlor of an irrevocable trust fund for the sole benefit of his son B. T, trustee, deposit $75,000 of the trust funds in a trust account. S establishes a revocable trust account in the amount of $75,000 for the sole benefit of B. S also has an individual account of $75,000.
Insurance Coverage:
B’s trust estate (irrevocable trust) $ 75,000 (fully insured)
B’s trust estate (revocable trust) |
$75,000 |
S’s individual account |
$75,000 |
|
$150,000 |
Maximum coverage |
$75,000 |
Impact of Loans on deposit insurance coverage
If a loan and a deposit are held in the name of the same person or organisation, the Corporation will offset the balance on the deposit account, including the excess over $75,000, against the loan balance.
Scenario:
A has a deposit account for $70,000 and a loan account with a balance of $60,000.
Insurance Implications:
Deposit |
$70,000 |
Loan |
$60,000 |
Insured deposit balance |
$10,000 |
Deposit is fully offset against the loan balance.
Scenario:
A has a deposit account for $60,000 and a loan account with a balance of $70,000.
Insurance Implications:
Deposit |
$60,000 |
Loan |
$70,000 |
Outstanding loan balance |
$10,000 |
Deposit is partially offset against the loan balance.
top
|
