What is the FDIC?
How can I check whether my bank is insured
by FDIC?
What types of accounts are eligible for
FDIC insurance?
How can I keep my deposits within the
FDIC insurance limit?
What are the basic FDIC coverage limits?
Is it possible to have more than $100,000
at one FDIC-insured bank and still be fully covered?
What is a single account?
What is a joint account?
What is meant by certain retirement accounts?
What is a revocable trust account?
What happens to my money if my bank should
fail?
More in-depth information on types of
deposit accounts
Glossary of Terms
What Is the FDIC?
The FDIC (Federal Deposit Insurance Corporation) is an independent
agency of the United States government that protects you against the loss
of your deposits if an FDIC-insured bank or savings association fails.
FDIC insurance is backed by the full faith and credit of the United States
government. Since the FDIC's creation in 1933, no depositor has ever lost
even one penny of FDIC-insured funds.
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How can I check whether my bank is insured by FDIC?
Before using EDIE, use Bank Find or call toll-free 1-877-ASK-FDIC
to make sure your bank or savings association is insured by the FDIC.
The FDIC insures deposits in most, but not all, banks and savings associations.
Deposits in separate branches of an insured bank are not separately insured.
Deposits in one insured bank are insured separately from deposits in another
insured bank. All insured institutions must display an official FDIC sign
at each teller window or teller station.
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What types of accounts are eligible for FDIC insurance?
FDIC insurance covers all deposit accounts at insured banks and savings
associations, including checking, NOW, and savings accounts, money market
deposit accounts and certificates of deposit (CDs) up to the insurance
limit.
The FDIC does not insure the money you invest in stocks, bonds,
mutual funds, life insurance policies, annuities or municipal securities,
even if you purchased these products from an insured bank or savings association.
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How can I keep my deposits within FDIC insurance
limits?
If you and your family have $100,000 or less in all of your deposit
accounts at the same insured bank or savings association, you do not need
to worry about your insurance coverage — your deposits are fully
insured. A depositor can have more than $100,000 at one insured bank or
savings association and still be fully insured provided the accounts meet
certain requirements. In addition, federal law provides for insurance coverage
of up to $250,000 for certain retirement accounts.
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What are the basic FDIC coverage limits?*
Single Accounts (owned by one person): $100,000 per owner
Joint Accounts (two or more persons): $100,000 per co-owner
IRAs and certain other retirement accounts: $250,000 per owner
Revocable trust accounts: Each owner is insured up to $100,000 for
the interests of each beneficiary, subject to specific limitations and
requirements
*These deposit insurance coverage limits refer to the total of all
deposits that account holders have at each FDIC-insured bank. The listing
above shows only the most common ownership categories that apply to individual
and family deposits, and assumes that all FDIC requirements are met.
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Is it possible to have more than $100,000 at one
insured bank and still be fully covered?
You may qualify for more than $100,000 in coverage at one insured
bank or savings association if you own deposit accounts in different ownership
categories. The most common account ownership categories for individual
and family deposits are single accounts, joint accounts, revocable trusts
accounts and certain retirement accounts.
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What is a single account?
This is a deposit account owned by one person and titled in that
person's name only, with no beneficiaries. All of your single accounts
at the same insured bank are added together and the total is insured up
to $100,000. For example, if you have a checking account and a CD at the
same insured bank, and both accounts are in your name only, the two accounts
are added together and the total is insured up to $100,000. Note that
retirement accounts and qualifying trust accounts are not included in
this ownership category.
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What is a joint account?
This is a deposit account owned by two or more people and titled
jointly in the co-owners' names only, with no beneficiaries. If all co-owners
have equal rights to withdraw money from a joint account, a co-owner's
shares of all joint accounts at the same insured bank are added together
and the total is insured up to $100,000. Note that jointly owned revocable
trust accounts are not included in this ownership category.
If a couple has a joint checking account and a joint savings account
at the same insured bank, each co-owner's shares of the two accounts are
added together and insured up to $100,000 per owner, providing up to $200,000
in coverage for the couple's joint accounts.
Example: John and Mary have three joint accounts totaling $220,000
at an insured bank. Under FDIC rules, each co-owner's share of each joint
account is considered equal unless otherwise stated in the bank's records.
John and Mary each own $110,000 in the joint account category, putting
a total of $20,000 ($10,000 for each) over the insurance limit.
Joint
Account Example |
Account Title |
Type of Deposit |
Account Balance |
Mary and John Smith |
Checking |
$45,000 |
John or Mary Smith |
Savings |
55,000 |
Mary Smith or John Smith |
CD |
120,000 |
Total Deposits |
$220,000 |
Insurance
coverage for each owner is calculated as follows: |
Account Holders |
Ownership Share |
Amount Insured |
Amount Uninsured |
John |
$110,000 |
$100,000 |
$10,000 |
Mary |
$110,000 |
$100,000 |
$10,000 |
Total |
$220,000 |
$200,000 |
$20,000 |
- Mary's ownership share in all joint accounts equals $110,000 [1/2 of
the checking account ($22,500), 1/2 of the savings account ($27,500),
and 1/2 of the CD ($60,000), for a total of $110,000]. Since her coverage
in the joint ownership category is limited to $100,000, $10,000 is uninsured.
- John's ownership share in all joint accounts is the same as Mary's,
so $10,000 is uninsured.
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What is meant by certain retirement accounts?
These are deposit accounts owned by one person and titled in the
name of that person's retirement plan. Only the following types of retirement
plans are insured in this ownership category:
- Individual Retirement Accounts (IRAs) including traditional IRAs, Roth
IRAs, Simplified Employee Pension (SEP) IRAs, and Savings Incentive Match
Plans for Employees (SIMPLE) IRAs
- Section 457 deferred compensation plan accounts (whether self-directed
or not)
- Self-directed defined contribution plan accounts
- Self-directed Keogh plan (or H.R. 10 plan) accounts
All deposits that an individual has in any of the types of retirement
plans listed above at the same insured bank are added together and the
total is insured up to $250,000. For example, if an individual has an IRA
and a self-directed Keogh account at the same bank, the deposits in both
accounts would be added together and insured up to $250,000.
Note that naming beneficiaries on a retirement account does not
increase deposit insurance coverage.
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What is a revocable trust account?
This is a deposit account that qualifies as a payable on death (POD)
or in trust for (ITF) account or a deposit account established in the
name of a formal revocable trust (also known as a living or family trust
account).
POD and ITF accounts — also known as testamentary or Totten Trust
accounts — are the most common form of revocable trust deposits. These
informal revocable trusts are created when the account owner signs an agreement
— usually part of the bank's signature card — stating that the deposits
will be payable to one or more beneficiaries upon the owner's death.
Living trusts — or family trusts — are formal revocable trusts created
for estate planning purposes. The owner of a living trust controls the
deposits in the trust during his or her lifetime.
Deposit insurance coverage for revocable trust accounts is based
on each owner's trust relationship with each qualifying beneficiary. While
the trust owner is the insured party, coverage is provided for the interests
of each beneficiary in the account. The FDIC insures the interests of each
beneficiary up to $100,000 for each owner if all of the following requirements
are met:
- The beneficiary is the owner's spouse, child, grandchild, parent or
sibling. Adopted and stepchildren, grandchildren, parents and siblings
also qualify. In-laws, grandparents, great-grandchildren, cousins, nieces
and nephews, friends, organizations (including charities) and trusts do
not qualify.
- The account title must indicate the existence of the trust relationship
by including a term such as payable on death, in trust for, trust, living
trust, family trust — or an acronym such as POD or ITF — in the account
title.
- For POD accounts, each beneficiary must be identified by name in the
bank's account records.
If any of these requirements are not met, the entire amount in the account,
or any portion of the account that does not qualify, would be considered
the owner's single account funds and would be added to the owner's other
single accounts, if any, at the same bank and insured up to $100,000. If
the revocable trust account has more than one owner, the FDIC would insure
each owner's nonqualifying share as his or her single account.
Note: Determining coverage for living trust accounts that provide
different interests for the trust beneficiaries can be complicated. Contact
the FDIC at 1-877-275-3342 for information on the insurance coverage of
a living trust that does not provide equal interests for all beneficiaries.
POD Account Example: This example applies to POD accounts only.
(Coverage may be different for some living trusts.) Bill has a $100,000
POD account with his wife Sue as beneficiary. Sue has a $100,000 POD account
with Bill as beneficiary. In addition, Bill and Sue jointly have a $600,000
POD account with their three children as equal beneficiaries.
Account Title |
Account Balance |
Amount Insured |
Amount Uninsured |
Bill POD to Sue |
$100,000 |
$100,000 |
$0 |
Sue POD to Bill |
$100,000 |
$100,000 |
$0 |
Bill and Sue POD to 3 children |
$600,000 |
$600,000 |
$0 |
Total |
$800,000 |
$800,000 |
$0 |
These three accounts totaling $800,000 are fully insured because each
owner is entitled to $100,000 of coverage for the interests of each qualifying
beneficiary who will receive the deposits when the owners die. Bill has
$400,000 of insurance coverage ($100,000 for the interests of each qualifying
beneficiary — his wife in the first account and his three children in the
third account). Sue also has $400,000 of insurance coverage ($100,000 for
the interests of each qualifying beneficiary — her husband in the second
account and her three children in the third account).
When calculating coverage for revocable trust accounts, be careful
to avoid these common mistakes:
- Do not assume that coverage is calculated as $100,000 times the number
of people — owner(s) and beneficiary(ies) — named on a trust account.
Coverage is provided only for the interests of the beneficiaries named
by each owner. Additional coverage is not provided for the owner. For
example, if a father owns a $300,000 POD account naming his two sons as
equal beneficiaries, the account is insured for $200,000 only — $100,000
for the interest of each qualifying beneficiary. The remaining $100,000
is uninsured.
- Do not assume that the FDIC insures POD and living trust accounts separately.
In applying the $100,000 per beneficiary insurance limit, the FDIC combines
an owner's POD accounts with the living trust accounts that name the same
beneficiaries at the same bank.
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What happens to my money if my bank should fail?
If your insured bank fails, FDIC insurance would cover your deposits,
dollar for dollar, including principal and any accrued interest, up to
the insurance limit. Historically, insured deposits are available to customers
of a failed bank within just a few days. Deposits in excess of FDIC limits
are not insured. If any of your deposits exceed the insurance limit, you
first receive all of your insured funds at the time the bank fails, then
you would have the right to share with other uninsured depositors in the
distribution of proceeds, if any, from the sale of the failed bank's assets.
Since FDIC's creation in 1933, no depositor has ever lost even one
penny of insured deposits. Knowing how FDIC insurance works, and staying
within FDIC coverage limits, is your best protection.
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More in-depth information on types of deposit accounts
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Single Accounts
- What is a single account?
A single account is a deposit account owned by one person, with
no beneficiaries. Such accounts include deposits titled in the owner's
name alone, deposits established for the benefit of the owner by agents,
nominees, guardians, custodians or conservators, and deposits belonging
to the owner of a sole proprietorship.
- How are single accounts insured?
All single accounts established by, or for the benefit of, the
same person are added together. The total is insured up to a maximum
of $100,000, including principal and interest.
Example
of Insurance Coverage for Single Accounts |
Depositor |
Type of Deposit |
Amount Deposited |
Jane Smith |
Savings account |
$25,000 |
Jane Smith |
Certificate of Deposit |
$100,000 |
Jane Smith |
NOW account |
$25,000 |
Jane Smith's sole proprietorship |
Checking account |
$25,000 |
Total Deposited |
$175,000 |
Insurance Available |
$100,000 |
Uninsured Amount |
$75,000 |
- What is the Uniform Transfer to Minor Act and how are deposit accounts
established under this law insured?
The Uniform Transfer to Minor Act is a state law that allows an
adult to make a gift to a minor. Funds given to a minor by this method
are held in the name of a custodian for the minor's benefit. Funds deposited
for the minor's benefit under the Act are added to any other single accounts
of the minor, and the total is insured up to a maximum of $100,000.
- How are sole proprietorship accounts insured?
These are deposits owned by an unincorporated business, in contrast
to a business that is incorporated or a partnership. Deposit accounts
owned by a sole proprietor are insured as the single funds of the person
who owns the business. So, if an individual has an account in his name
alone and another account in the name of his sole proprietorship, the
balances in those accounts would be combined and insured to a limit of
$100,000 in the single account category.
- How are decedent estate accounts insured?
These are funds deposited by an executor or administrator for
the estate of a deceased person. These accounts are insured up to $100,000
as the single account funds of the deceased person. This coverage limit
would include any other funds maintained in the name of the deceased
individual. It is important to note that coverage is not provided on
a per beneficiary basis. So, even though there might be multiple beneficiaries
of the decedent's estate, the account established for the estate would
not be insured for more than $100,000. The funds are, however, insured
separately from the personal funds of the executor or administrator.
Certain Retirement Accounts
- What are certain retirement accounts?
These are deposit accounts owned by one person and titled in the
name of that person's:
- Individual Retirement Account including traditional IRA, Roth IRA,
Simplified Employee Pension (SEP) IRA or Savings Incentive Match Plans
for Employees (SIMPLE) IRA
- Section 457 deferred compensation plan accounts (such as eligible
deferred compensation plans provided by state and local governments
regardless of whether the plan is are self-directed)
- Self- directed defined contribution plan account, such as a self-directed
401(k) plan, a self-directed SIMPLE plan held in the form of a 401(k)
plan, a self-directed defined contribution money purchase plan, or a
self-directed defined contribution profit-sharing plan
- Self-directed Keogh plan accounts (or H.R. 10 plan accounts) designed
for self-employed individuals
- What is the definition of self-directed?
The FDIC defines the term "self-directed" to mean that plan participants
have the right to direct how the money is invested, including the ability
to direct that the deposits be placed at an FDIC-insured bank.
If a participant of a retirement plan has the right to choose a
particular depository institution's deposit accounts as an investment,
the FDIC would consider the account to be self-directed. Also, if a plan
has as its default investment option deposit accounts at a particular
FDIC-insured institution, the FDIC would deem the plan to be self-directed
for deposit insurance purposes because, by inaction, the participant has
directed the placement of such deposits.
However, if a plan's only investment vehicle is the deposit accounts
of a particular bank, so that participants have no choice of investments,
the plan would not be deemed self-directed for deposit insurance purposes.
Finally, if a plan consists only of a single employer/employee, and the
employer establishes the plan with a single-investment option of plan
assets, the plan would be considered self-directed for deposit insurance
purposes.
- How are certain retirement accounts insured?
Each person's deposits in certain retirement accounts at the same
insured bank are added together and insured up to $250,000.
Naming beneficiaries
to a self-directed retirement account does not increase insurance coverage.
- Are Roth IRAs treated the same as traditional IRAs?
A Roth IRA is treated the same as a traditional IRA for deposit
insurance purposes. So, if a depositor has both a Roth IRA and a traditional
IRA at the same insured bank, the funds in both accounts are added together
and insured up to $250,000.
Example
of Insurance Coverage for Self-Directed Retirement Accounts |
Account Title |
Account Balance |
Bob Johnson's Roth IRA |
$110,000 |
Bob Johnson's IRA |
75,000 |
Total |
185,000 |
Amount Insured |
$185,000 |
Explanation: Since Bob's total in all self-directed retirement
accounts at the same bank is less than the $250,000 limit, both IRAs are
fully insured.
- How are Coverdell IRAs or Health Savings Accounts insured?
Coverdell Education Savings Accounts (formerly known as an Education
IRAs), Health Savings Accounts and Medical Savings Accounts are not included
in this ownership category and are not eligible for the increased
coverage limit. Also, accounts established under section 403(b) of the
Internal Revenue Code (annuity contracts for certain employees of public
schools, tax-exempt organizations and ministers) are not eligible
for the $250,000 coverage limit. Defined-benefit plans (benefits predetermined
by an employee's compensation, years of service, and age) are also not
eligible for the $250,000 per-person coverage limit. For information
on these types of accounts, refer to the section on Employee Benefit
Plan accounts below.
Joint Accounts
- What is a joint account?
A joint account is a deposit account owned by two or more individuals,
with no beneficiaries. Federal deposit insurance covers joint accounts
owned in any manner conforming to applicable state law, such as joint
tenants with a right of survivorship, tenants by the entirety, and tenants
in common.
- What are the requirements for joint accounts?
Joint accounts are insured separately from other ownership categories
if all of the following conditions are met:
- All co-owners must be natural persons. This means that legal entities
such as corporations or partnerships are not eligible for joint account
deposit insurance coverage.
- Each of the co-owners must have personally signed a deposit account
signature card. The execution of an account signature card is not required
for certificates of deposit, deposit obligations evidenced by a negotiable
instrument or accounts maintained by an agent, nominee, guardian, custodian,
or conservator, but the deposit must in fact be jointly owned.
- Each of the co-owners must have a right of withdrawal on the same
basis as the other co-owners.
For example, if one co-owner can withdraw funds on his or her signature
alone, but the other co-owner can withdraw funds only on the signature
of both co-owners, then this requirement has not been satisfied; the co-owners
do not have equal withdrawal rights. Likewise, if a co-owner's right to
withdraw funds is limited to a specified dollar amount, the funds in the
account will be allocated between the co-owners according to their withdrawal
rights and insured as single account funds. For example, if $100,000 is
deposited in the names of A and B, but A has the right to withdraw only
up to $5,000 from the account, $5,000 is allocated to A and the remainder
is allocated to B. The funds, as allocated, are then added to any other
single account funds of A or B, respectively.
- How are joint accounts insured?
An individual's (co-owner's) interests in all qualifying joint
accounts are added together and the total is insured up to the $100,000
maximum. Each co-owner's interest (or share) in a joint account is deemed
equal. The balance of a joint account can exceed $100,000, as long as
no owner's share of joint accounts at the same bank exceeds $100,000.
The use of different Social Security numbers does not determine insurance
coverage, nor does rearranging the owners' names, changing the style
of the names, or using "or" rather than "and" to join the owners' names
in a joint account title.
Example
of Insurance Coverage for Self-Directed Retirement Accounts |
Account |
Owners |
Balance |
#1 |
A and B |
$100,000 |
#2 |
B and A |
25,000 |
#3 |
A and B and C |
75,000 |
#4 |
A and D |
80,000 |
Total |
$280,000 |
Each owner's ownership interests in these four joint accounts follow:
A's Ownership Interest |
1/2 of the balance in account #1 |
$50,000 |
1/2 of the balance in account #2 |
$12,500 |
1/3 of the balance in account #3 |
$25,000 |
1/2 of the balance in account #4 |
$40,000 |
Total of A's Ownership Interest |
$127,500 |
A's ownership interest is limited to $100,000, so $27,500 is uninsured.
B's Ownership Interest |
1/2 of the balance in account #1 |
$50,000 |
1/2 of the balance in account #2 |
$12,500 |
1/3 of the balance in account #3 |
$25,000 |
Total of B's Insured Funds |
$87,500 |
B's ownership interest in the joint account category is $87,500.
That amount is less than the $100,000 maximum, so it is fully insured.
C's Ownership Interest |
1/3 of the balance in account #3 |
$25,000 |
Total of C's Insured Funds |
$25,000 |
C's ownership interest in the joint account category is $25,000.
That amount is less than the $100,000 maximum, so it is fully insured.
D's Ownership Interest |
1/2 of the balance in account #4 |
$40,000 |
Total of D's Insured Funds |
$40,000 |
D's ownership interest in the joint account category is $40,000.
That amount is less than the $100,000 maximum, so it is fully insured.
Summary
of Insurance Coverage for Joint Accounts |
Owner |
Account Balance |
Insured |
Uninsured |
A |
$127,500 |
$100,000 |
$27,500 |
B |
$87,500 |
$87,500 |
0 |
C |
$25,000 |
$25,000 |
0 |
D |
$40,000 |
$40,000 |
0 |
Total |
$280,000 |
$252,500 |
$27,500 |
Revocable Trust Accounts
- What is a revocable trust account?
A revocable trust account is a deposit account that indicates
an intention that the funds will belong to one or more beneficiaries
upon the death of the owner (grantor/settlor/trustor). 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 funds 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 (also
known as a grantor, settlor or trustor) controls the funds in the trust
during his or her lifetime and reserves the right to revoke the trust.
- How are revocable trust accounts insured?
Revocable trust accounts are insured up to $100,000 per owner
for each beneficiary if all of the following requirements are met:
- The account title must include commonly accepted terms such as payable
on death, in trust for, as trustee for, living trust, family trust,
revocable trust, or trust, so as to indicate the existence of a trust
relationship. These terms may be abbreviated (e.g., POD, ITF or ATF).
- The beneficiary must be the spouse, child, grandchild, parent or
sibling of the owner. A beneficiary who meets this requirement is known
as a qualifying beneficiary.
- For informal revocable trusts, the beneficiaries must be identified
by name in the deposit account records of the insured bank. This requirement
would be satisfied if the beneficiaries of an account are listed on
the bank's account signature card.
Example
— POD Accounts with One Owner |
Account Title |
Account Balance |
Amount Insured |
Amount Uninsured |
John Smith POD to son |
$100,000 |
$100,000 |
$0 |
Explanation: This revocable trust account is insured up to $100,000
since there is one qualifying beneficiary who will receive the deposit
when the owner dies.
- Who are considered qualifying beneficiaries?
As described above, qualifying beneficiaries are the owner's parent,
brother, sister, spouse, child, or grandchild. Child includes a biological
child, adopted child and stepchild of the owner. Grandchild includes
a biological child, adopted child and stepchild of any of the owner's
children. "Parent" includes a biological parent, adoptive parents and
stepparents of the owner. "Brother" includes a full brother, half brother,
brother through adoption, and stepbrother. "Sister" includes a full sister,
half sister, sister through adoption, and stepsister. Note that the term
"spouse" only means a person of the opposite sex who is a husband or
wife, as defined under the federal Defense of Marriage Act (1 U.S.C.
§ 7).
- Can a revocable trust account have more than $100,000 in insurance
coverage?
If a revocable trust account has more than one owner (e.g., husband
and wife) or is held for more than one qualifying beneficiary, the insured
balance of the account can exceed $100,000 and may be fully insured. If
there is more than one owner, the FDIC will assume that the owners' shares
are equal unless the deposit account records state otherwise. Similarly,
if there is more than one beneficiary, the FDIC will assume the beneficiaries'
interests are equal unless otherwise stated in the deposit account records.
Example
— POD Accounts with Multiple Owners and Beneficiaries |
Account Title |
Account Balance |
Amount Insured |
Amount Uninsured |
Husband and Wife POD
3 children |
$600,000 |
$600,000 |
$0 |
Husband POD wife |
100,000 |
100,000 |
0 |
Wife POD husband |
100,000 |
100,000 |
0 |
Husband POD brother and
father |
200,000 |
200,000 |
$0 |
Husband and wife POD
grandchild |
300,000 |
200,000 |
100,000 |
Total |
$1,300,000 |
$1,200,000 |
$100,000 |
Explanation: All but one account is fully insured. Although all
the beneficiaries named on each account are qualifying beneficiaries to
the husband and wife, the account naming the one grandchild is only insured
up to $200,000 because each owner is only entitled to $100,000 insurance
coverage for each qualifying beneficiary.
Living Trust Example: A husband and wife have a living trust leaving
all trust assets equally to their three children upon the death of the
last owner. This trust's account would be insured up to $600,000. Each
owner is entitled to $300,000 of insurance coverage because they have
identified three qualifying beneficiaries. Unless the trust states otherwise,
the FDIC will assume that the beneficiaries have an equal interest in
the living trust account.
- What is the deposit insurance coverage of a revocable trust account
if any of the requirements are not met?
If any one of the revocable trust account requirements is not
met, the account would not be insured under the revocable trust category.
The account, or the 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 a revocable trust account has more
than one owner, the FDIC would insure each owner's share as his or her
single account. If some beneficiaries named on a revocable trust account
do not meet the relationship requirements and all other requirements are
met, the interests of the qualifying beneficiaries would be insured under
the revocable trust category. The interests of the nonqualifying beneficiaries
would be added to the owner's other single accounts, if any, at the same
bank and insured up to $100,000.
- For a formal living (or family) trust, how is a beneficiary's life
estate interest insured?
Living trusts often 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). When the beneficiary with the life
estate interests dies, the remaining assets pass to other beneficiaries.
Unless otherwise indicated in the trust, the FDIC will assume that a beneficiary
with a life estate interest owns an equal share of the trust with the
other beneficiaries. For example: A husband creates a living trust giving
his wife a life estate interest in the trust with the remaining assets
going to their two children equally upon his wife's death. Deposits for
this trust would be insured up to $300,000 ($100,000 for each qualifying
beneficiary — the wife and two children).
- Are living trust accounts and POD accounts separately insured?
The $100,000 per beneficiary insurance limit applies to all revocable
trust accounts — POD and living trust accounts — that an owner has at
the same bank. For example: A father has a POD account with a balance
of $200,000 naming his son and daughter as beneficiaries and he has a
living trust account with a balance of $150,000 naming the same beneficiaries.
The funds in both accounts would be added together and $175,000 would
be attributable to each child. Therefore, the two accounts together would
be insured for $200,000 ($100,000 per qualifying beneficiary) and uninsured
for $150,000.
Irrevocable Trust Accounts
- What is an irrevocable trust?
Irrevocable trust accounts are deposits held by a trust established
by statute or a written trust agreement in which the creator of the trust
(grantor/settlor/trustor) contributes funds or property and gives up
all power to cancel or change the trust.
- How are funds deposited pursuant to an irrevocable trust document insured?
The interests of a beneficiary in all deposit accounts established
by the same settlor and held at the same insured bank under an irrevocable
trust are added together and insured up to $100,000, provided all of
the following requirements are met:
- The insured bank's deposit account records must disclose the existence
of the trust relationship
- The beneficiaries and their interests in the trust must be identifiable
from the deposit account records of the bank or from the records of
the trustee
- The amount of each beneficiary's interest must not be "contingent"
as that term is defined by FDIC regulations
- The trust must be valid under state law
Since the amount of insurance for an irrevocable trust depends
upon specific terms and conditions of the trust, owners or trustees of
an irrevocable trust may want to obtain assistance from their legal or
financial advisor.
- Must the beneficiaries of an irrevocable trust be related to the
grantor?
A beneficiary does not have to be related to the grantor to obtain
insurance coverage under the irrevocable trust category.
- What is the insurance coverage if the grantor retains an interest
in the trust?
If the grantor retains an interest in the trust, the amount of
the retained interest would be added to any single accounts owned by the
grantor and the total insured up to $100,000.
- What if the beneficiaries or their interests in such a trust cannot
be ascertained?
When the ownership interests of the beneficiaries cannot be determined,
insurance coverage for the entire trust is generally limited to a maximum
of $100,000.
Employee Benefit Plan Accounts
- What is the deposit insurance coverage for employee benefit plans,
such as pension plans and profit-sharing plans?
The general rule is that deposits belonging to pension plans and
profit-sharing plans receive pass-through insurance, meaning that each
participant's non-contingent and ascertainable interest in a deposit—as
opposed to the deposit as a whole—is insured up to $100,000. In order
for a pension or profit-sharing plan to receive pass-through insurance,
the institution's deposit account records must specifically disclose the
fact that the funds are owned by an employee benefit plan. In addition,
the details of the participants' beneficial interests in the account must
be ascertainable from the institution's deposit account records or from
the records that the plan administrator (or some other person or entity
that has agreed to maintain records for the plan) maintains in good faith
and in the regular course of business.
- Is employee benefit plan coverage based on the number of plan participants?
Coverage for an employee benefit plan's deposits is based on each
participant's share of the plan. Because plan participants normally have
different interests in the plan, insurance coverage cannot be determined
by simply multiply the number of participants' times $100,000. To determine
the maximum amount a plan can have on deposit in a single bank and remain
fully insured, first determine which participant has the largest share
of the plan assets, then divide $100,000 by that percentage. For example,
if a plan has 20 participants, but one participant has an 80% share of
the plan assets, the most that can be on deposit and remain fully insured
is $125,000. ($100,000/.80 = $125,000)
Example
— Employee Benefit Plan that Qualifies for Pass-Through Coverage |
Account
Title |
Balance |
Happy Pet
Clinic Benefit Plan |
$285,000 |
Plan Participants |
Plan Share |
Share of Deposit |
Amount Insured |
Amount Uninsured |
Dr. Todd |
35% |
$99,750 |
$99,750 |
$0 |
Dr. Jones |
30% |
85,500 |
85,500 |
0 |
Tech Evans |
20% |
57,500 |
57,500 |
0 |
Tech Barnes |
15% |
42,750 |
42,750 |
0 |
Plan Total |
100% |
$285,000 |
$285,000 |
$0 |
Explanation:
This employee benefit plan can deposit $285,000 in at a separately
chartered FDIC-insured bank and have all of its participants fully insured.
The $285,000 deposit results in Dr. Todd's interest (the largest participant)
being insured for $ 99,750 (35% of $285,000). When Dr. Todd's interest
is fully insured, the rest of the participants will be insured, since
they have smaller shares of the plan.
Corporation, Partnership, and Unincorporated Association
Accounts
- What are corporations, partnerships and unincorporated association
accounts?
These are accounts established by businesses and organizations
— including for-profit and not-for-profit organizations — engaged in an
independent activity, meaning that the entity is operated primarily for
some purpose other than to increase insurance coverage.
- What are unincorporated associations?
Unincorporated associations typically include religious, community
and civic organizations and social clubs that are not incorporated.
- What is the deposit insurance coverage for funds deposited by a
corporation, partnership, or unincorporated association?
Funds deposited by a corporation, partnership, or unincorporated
association are insured up to a maximum of $100,000. Funds deposited by
a corporation, partnership, or unincorporated association are insured
separately from the personal accounts of the stockholders, partners or
members. To qualify for this coverage, the entity must be engaged in an
independent activity, meaning that the entity is operated primarily for
some purpose other than to increase deposit insurance.
- Is there any way that a business can qualify for additional insurance
coverage?
No, there is not way that a corporation, partnership or unincorporated
association can qualify for more than $100,000 in insurance coverage for
its deposits at one bank. Separate accounts owned by the same entity,
but designated for different purposes, are not separately insured. Instead,
such accounts are added together and insured up to $100,000. So, if a
corporation has divisions or units that are not separately incorporated,
the deposit accounts of those divisions or units will be added to any
other deposit accounts of the corporation for purposes of determining
deposit insurance coverage.
- Does the number of partners, members or account signatories increase
deposit insurance coverage?
The number of partners, members or account signatories that a
corporation, partnership, or unincorporated association has does not affect
coverage. For example, funds owned by a homeowners association are insured
up to $100,000 in total, not $100,000 for each member of the association.
- How are deposits of a sole-proprietorship insured?
Funds owned by a business that is a sole proprietorship are not
insured under this category. Rather, they are insured as the single account
funds of the person who is the sole proprietor. So, funds deposited in
the sole proprietorship's name are added to any other single accounts
of the sole proprietor and the total is insured to a maximum of $100,000.
Government Accounts
- What are government accounts?
Government accounts are also known as public unit accounts. This
category includes deposit accounts of the United States, any state, county,
municipality (or a political subdivision of any state, county, or municipality),
the District of Columbia, Puerto Rico and other government possessions
and territories, or an Indian tribe
- How are public unit accounts insured?
Insurance coverage of a public unit account differs from a corporation,
partnership, or unincorporated association account in that the coverage
extends to the official custodian of the funds belonging to the public
unit rather than the public unit itself. The insurance coverage of public
unit accounts depends upon (1) the type of deposit, and (2) the location
of the insured depository institution. All time and savings deposits
owned by a public unit and held by the same official custodian in an
insured depository institution within the State in which the public unit
is located are added together and insured up to $100,000. Separately,
all demand deposits owned by a public unit and held by the same official
custodian in an insured depository institution within the State in which
the public unit is located are added together and insured up to $100,000.
For the purpose of these rules, the term "savings deposits" includes
NOW accounts, money market deposit accounts and other interest-bearing
checking accounts.
- Does the insurance coverage differ if the public unit maintains funds
in an out of state bank?
The insurance coverage of public unit accounts
is different if the depository institution is located outside the State
in which the public unit is located. In that case, all deposits owned
by the public unit and held by the same official custodian are added together
and insured up to $100,000. Time and savings deposits are not insured
separately from demand deposits.
- What is the definition of a political subdivision?
The term "political
subdivision" is defined to include drainage, irrigation, navigation, improvement,
levee, sanitary, school or power districts, and bridge or port authorities
and other special districts created by state statute or compacts between
the states. The term "political subdivision" also includes any subdivision
or principal department of a public unit (state, county, or municipality)
if the subdivision or department meets the following tests:
- The creation of the subdivision or department has been expressly
authorized by the law of such public unit;
- Some functions of government have been delegated to the subdivision
or department by such law; and
- The subdivision or department is empowered to exercise exclusive
control over funds for its exclusive use.
- What is the definition of an official custodian?
An "official custodian" is
an officer, employee or agent of a public unit having official custody
of public funds and lawfully depositing the funds in an insured institution.
In order to qualify as an official custodian, a person must have plenary
authority — including control — over the funds. Control of public funds
includes possession as well as the authority to establish accounts in
insured depository institutions and to make deposits, withdrawals and
disbursements.
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