Plain language law

New Zealand law explained for everyone

Deposit Takers Act 2023

Depositor compensation scheme - Entitlement to compensation - Entitlement rules

209: Entitlement rule for deposits held on trust

You could also call this:

"What happens to trust money if a bank or deposit taker fails"

Illustration for Deposit Takers Act 2023

If you have money in a trust, this law applies to you. You might have one or more people looking after the money, called trustees. The trust must not be a special kind of trust that is listed in the regulations.

When it comes to getting compensation from a fund, the law says the trustee or trustees are the ones who hold the deposit. This means if there is one trustee, they are in charge, and if there are many trustees, they work together.

If compensation is paid out for the money in the trust, that compensation is considered part of the trust and must be looked after by the trustees.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

This page was last updated on

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS542891.

Topics:
Money and consumer rights > Banking and loansBusiness > Industry rules
Previous

208: Providers of relevant arrangement not entitled to compensation, or

"If something goes wrong, you can't get compensation for holding someone's deposit, but they might."

Next

210: Protected deposit held under different trusts, or

"Protected deposits in multiple trusts are treated separately for compensation."

Part 6Depositor compensation scheme
Entitlement to compensation: Entitlement rules

209Entitlement rule for deposits held on trust

  1. This section applies if—

  2. 1 or more protected deposits are held—
    1. by 1 or more trustees under 1 trust; or
      1. for, or on behalf, of 1 or more trustees under 1 trust; and
      2. the trust is not either of the following:
        1. a trust under a relevant arrangement:
          1. a trust of a kind that is prescribed by the regulations.

          2. For the purpose of entitlement to compensation from the fund,—

          3. the following must be treated as being the person (A) that holds the deposit (or for which, or on whose behalf, the deposit is held):
            1. if the trust has only 1 trustee, the trustee acting in their capacity as trustee:
              1. if the trust has more than 1 trustee, the trustees acting jointly in their capacity as trustees; and
              2. references to a person holding a deposit in their own right must be treated as including the trustee or trustees holding a deposit on trust.

                1. Compensation that is paid under this Part in respect of the protected deposits held under the trust must be treated as being trust property.