A revocable trust account is a deposit owned by one or more people that indicates an intention that the deposits will belong to one or more named beneficiaries upon the death of the owner(s). A revocable trust account can be revoked (or terminated) at the discretion of the owner. In this section, the term "owner" means the grantor, settlor, or trustor of the trust.

There are both informal and formal revocable trusts. Informal revocable trusts, often called "payable-on-death" (POD), "Totten trust," or "in trust for" (ITF) accounts, are created when the account owner signs an agreement-usually part of the bank's signature card – stating that the deposits are payable to one or more beneficiaries upon the owner's death.

Formal revocable trusts – known as "living" or "family" trusts – are written trusts created for estate planning purposes. The owner controls the deposits and other assets in the trust during his or her lifetime. Upon the owner's death, the trust generally becomes irrevocable.

All deposits that an owner has in both informal and formal revocable trusts are added together for insurance purposes, and the insurance limit is applied to the combined total.

1. The account title must include a commonly accepted term such as "payable-on-death," "in trust for," "as trustee for" or similar language to indicate the existence of a trust relationship. The term may be abbreviated (for example "POD," "ITF" or "ATF").



2. The beneficiaries must be identified by name in the deposit account records of the insured bank.



3. The beneficiaries must be "qualifying," meaning that the beneficiaries must be the owner's spouse, child, grandchild, parent, or sibling. Adopted and step children, grandchildren, parents, and siblings also qualify. Others including in-laws, cousins, nieces and nephews, friends, organizations (including charities) and trusts do not qualify.

A common mistake that depositors make in calculating coverage for revocable trust accounts is assuming that every person named on a revocable trust account – both the owner(s) and the beneficiaries – receives up to $100,000 in insurance coverage. This is not correct. Each owner of a revocable trust may be entitled to insurance coverage up to $100,000 for each qualifying beneficiary that the account owner designates in the revocable trust account.

If all of the beneficiaries are qualifying and have equal interests, the insurance coverage for each owner is calculated by multiplying $100,000 times the number of qualifying beneficiaries, not $100,000 times the number of owners plus the number of beneficiaries.

If the beneficiaries are not all qualifying, or have unequal interests, the above calculation should not be used. All funds attributable to non-qualifying beneficiaries are aggregated and insured up to $100,000 as the single account funds of the trust owner. In addition, if the trust specifies different interests for the beneficiaries, the owner is insured only up to each beneficiary's actual interest in the trust.

Another misunderstanding is that the trust agreement itself is entitled to an additional $100,000 of deposit insurance coverage. This is not correct.

If a POD account has more than one owner (e.g., husband and wife) or is held for multiple beneficiaries, the insured balance of the account can exceed $100,000. The FDIC will assume that the owners' shares are equal unless the deposit account records state otherwise. Similarly, if there are multiple beneficiaries, the FDIC will assume the beneficiaries' interests are equal unless otherwise stated in the deposit account records.

Note: The $100,000 per beneficiary insurance limit applies to all formal and informal revocable trust accounts that an owner has at the same bank.

If any of the requirements for coverage in the revocable trust account category are not met:

• The entire amount in the account, or any portion of the account that does not qualify, would be added to the owner's other single accounts, if any, at the same insured bank and insured up to $100,000.



• If the account has more than one owner, the FDIC would insure each owner's share as his or her single account

1. The account title at the bank must indicate that the account is held pursuant to a trust relationship. This rule can be met by using the term "living trust," "family trust," or similar language in the account title.



2. The beneficiaries must be "qualifying" as defined for POD accounts earlier.

While the owners of a trust may benefit from the trust during their lifetimes, they are not considered beneficiaries for the purpose of calculating deposit insurance coverage. Beneficiaries are those identified by the owner to receive an interest in the trust assets when the last owner dies. Unlike POD accounts, the beneficiaries do not have to be identified by name in the deposit account records of the bank.

In general, determining insurance coverage for living/ family trust accounts is more difficult than for POD accounts because these formal trusts often identify multiple beneficiaries who may have unequal or dissimilar interests in the trust.

Deposit insurance coverage for a revocable living trust account depends upon the answers to the following specific questions:

• Does the account title at the bank indicate that the account is held by a trust? This requirement can easily be met by using the words "living trust," or "family trust," or similar terms in the account title.



• Who are the owners of the trust? The owners are commonly referred to in the formal revocable trust document as trustors, grantors or settlors. For the purpose of calculating deposit insurance coverage only, the trustees, co-trustees, and successor trustees are not relevant. They are administrators and have no impact on deposit insurance coverage unless they are also the owners of the trust.



• Who are the beneficiaries of the trust? The beneficiaries are the people or entities entitled to an interest in the trust when the last owner dies. Contingent or alternative trust beneficiaries are not considered to have an interest in the trust deposits and other assets as long as the primary or initial beneficiaries are still living, with the exception of revocable living trusts with a life estate interest.



• Do the beneficiaries meet the kinship requirement - that is, are they qualifying? To qualify for revocable trust coverage, a trust beneficiary must be the owner's spouse, child, grandchild, parent or sibling. Stepparents and stepchildren, adopted children and similar relationships also qualify. However, ex-spouses, in-laws, cousins, nieces and nephews, friends, and charitable organizations do not qualify. Also, if the trust itself is named as the beneficiary, the qualifying beneficiary requirement is not met.



• What dollar amount or percentage interest has the owner allocated to each beneficiary? The amount of coverage is based on the actual interests of each qualifying beneficiary. Unless the trust states otherwise, the FDIC will assume that the beneficiaries have equal interests in the living trust account. If the interest or the dollar amount that each beneficiary receives is unequal, it will affect the amount of deposit insurance coverage.



• Are all the owners and beneficiaries living? The amount of deposit insurance coverage can change if there is a death of an owner or a beneficiary. Upon the death of an owner, the FDIC provides a grace period up to six months during which the account is insured as if the owner were still living. However, the six month grace period does not apply to the death of a beneficiary named in a living trust account. See section called "FAQs About FDIC Insurance", questions 13-15, for more information.

The following section describes how insurance coverage is determined when a living/family trust has multiple beneficiaries with varying trust interests.

1. If a living trust has multiple beneficiaries, the FDIC will assume the beneficiaries' interests are equal unless otherwise stated in the trust.

   For example:
   A mother has a living trust leaving all trust deposits equally to her three children. A deposit account held by the trust at an insured bank could be insured up to $300,000. Since there are three qualifying beneficiaries who would inherit the trust deposits equally when the owner dies, the owner has created a trust relationship of $100,000 with each of her three children for a total of $300,000.

2. Living trust coverage is based on the interests of qualifying beneficiaries who would become entitled to receive trust assets when the trust owner dies (or if the trust is jointly owned, when the last owner dies). This means that, when determining coverage, the FDIC will ignore any trust beneficiary who would have an interest in the trust assets only after another living beneficiary dies.

   For example:
   A father has a living trust that leaves all of the trust assets to his son. If the son predeceases the father, the trust assets are distributed equally to the son's five children (father's grandchildren). If the bank should fail while the son is still alive, the father's living trust account is insured up to $100,000, because there is one qualifying beneficiary who is entitled to receive the trust assets when the father dies. However, if the son predeceases his father, the five grandchildren are then the beneficiaries and the father's living trust account would be insured up to $500,000 ($100,000 for each of the living five beneficiaries).

3. Some living trusts give a beneficiary the right to receive income from the trust or to use trust assets during the beneficiary's lifetime (known as a life estate interest), and then other beneficiaries receive the remaining trust assets after the first beneficiary dies. In such a case, the FDIC will recognize all beneficiaries in determining insurance coverage. Unless otherwise indicated in the trust, the FDIC will assume that a beneficiary with a life estate interest has an equal share of the trust with the other beneficiaries.

   For example:
   A husband has a living trust giving his wife a life estate interest in the trust deposits, with the remainder going to their two children equally upon his wife's death. The husband's living trust would be insured up to $300,000. In this example, the FDIC's insurance rules recognize the wife and two children as equal beneficiaries. Since there is one trust owner who has three qualifying beneficiaries, the husband's trust account at an insured bank would be insured up to $300,000.

4. Some living trusts allocate unequal interests to the beneficiaries. The deposit insurance coverage for these living trusts requires a different calculation.

   For example:
   A mother has a revocable trust providing that upon her death, the deposits and other assets pass to her two children, Mary and Ed, but not on an equal basis – Mary has a 2/3 interest and Ed has a 1/3 interest.

   To determine the maximum insurance coverage for this trust account, the deposits attributable to the beneficiary with the largest interest cannot exceed $100,000. In this example, Mary's interest in the mother's trust account cannot exceed $100,000, so the maximum amount the mother can deposit at one bank with full insurance coverage is $150,000. If the mother's trust deposits at one bank total $150,000, Mary's share would be $100,000 (2/3 of $150,000) and Ed's share would be $50,000 (1/3 of $150,000). Since both beneficiaries' interests are within the insurance limit, all of the trust deposits are fully insured.

5. If a living trust has multiple owners, coverage would be up to $100,000 per qualifying beneficiary for each owner, provided the beneficiary would be entitled to receive the trust assets when the last owner dies.

   For example:
   A husband and wife are co-owners of a living trust. The trust states that upon the death of one spouse the assets will pass to the surviving spouse, and upon the death of the last owner the assets will pass to their three children equally. This trust's deposit account would be insured up to $600,000. Since each owner names three qualifying beneficiaries, the owners (husband and wife) will be insured up to $300,000 each.

6. If any of the requirements for insurance coverage under the revocable trust account category are not met:

   The entire amount in the account, or any portion of the account that does not qualify, would be added to the owner's other single accounts, if any, at the same insured bank and insured up to $100,000.

   If the revocable trust account has more than one owner, the FDIC would insure each owner's share as his or her single account.

   For example:
   David Stein has a living trust naming his son and nephew as equal beneficiaries of all trust assets. In this case, the trust has one qualifying beneficiary (the son) and one non-qualifying beneficiary (the nephew). Since one of the requirements for insurance coverage under the revocable trust account category is not met for one beneficiary -- that is, one beneficiary is not qualifying - only the portion of David's trust deposits attributable to his son qualifies for insurance coverage as a revocable trust account. The portion of the trust deposits attributable to David's nephew is insured as David's single ownership account.

   If David has no other revocable trust accounts at the same bank that name his son as a beneficiary, the portion of the trust account attributable to his son would be insured up to $100,000 in the revocable trust account category. If David has no other single accounts at the same bank, the portion of the trust account attributable to his nephew would be insured up to $100,000 as David's single ownership account. Thus, this trust account could be insured up to $200,000 through a combination of coverage in the single ownership account and revocable trust account categories.

7. The $100,000 per beneficiary insurance limit applies to all formal and informal revocable trust accounts that an owner has at the same bank.

   For example:
   A father has a POD account naming his son and daughter as equal beneficiaries and he also has a living trust account naming the same beneficiaries. In this case, the deposits in both the POD account and living trust account would be added together and the total insured up to $200,000 ($100,000 per owner per qualifying beneficiary).