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Insuring trust beneficiaries: how it works

Say you deposit $250,000 in trust for two grandchildren, Paul and Lynn, at a CDIC member institution. You have met all of CDIC’s trust disclosure rules. This includes ensuring the beneficiaries’ names and addresses are on record with the bank. The bank also has recorded that you want the money divided equally between Paul and Lynn ($125,000 each).

In this case, if the bank fails:

Paul and Lynn are each insured up to CDIC’s limit of $100,000 for the eligible deposits in your trust account (for a total of up to $200,000). The remainder is above the CDIC limit and is uninsured.

Check out these other examples of how insurance works for trusts.

Examples: insuring trusts

The examples show the importance of meeting CDIC’s trust disclosure rules.

Example 1: fully insured for $230,000

Joe has deposits with a CDIC member institution that has failed. These include:

  • a $180,000, three year GIC in trust for his two children (Joe is trustee and meets CDIC’s disclosure rules each year) with:
    • beneficiary Sam is on record to receive $90,000
    • beneficiary Sue is on record to receive $90,000
  • $50,000 in chequing and savings accounts in Joe’s own name
  • Total: $230,000 in deposits fully insured for $230,000

What’s insured & why:

Because Joe has met the disclosure rules, CDIC covers the trust beneficiaries’ interest for up to $100,000 each (in this case, $90,000 each) and considers Joe’s savings and chequing accounts as separate from the trust account. In this case, $230,000 is covered.

Example 2: $130K exposed to risk

In the same scenario as above, Joe fails to meet CDIC’s disclosure rules. Joe’s deposits include:

  • a $180,000, three-year GIC but Joe does not disclose it is in trust for his
    two children (two beneficiaries)
    • Joe does not meet CDIC’s disclosure rules each year
  • $50,000 in chequing and savings accounts in Joe’s own name
  • Total: $230,000 of which $100,000 is insured; $130,000 is uninsured.

What’s not insured and why not:

Joe’s three-year GIC could have been covered separately, as a deposit in trust, for up to $100,000 per beneficiary, but because Joe has failed to meet CDIC’s disclosure rules, deposits in his own name have been combined with the trust account and he has only $100,000 in total coverage.

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