Under the new rules, the FDIC will provide insurance coverage for payable-on-death (see Payable-on-Death Accounts) and living trust accounts combined for up to $100,000 for each qualifying beneficiary even if the living trust contains conditions on the inheritance, such as a requirement that a beneficiary must graduate from college before receiving any money. This is an important change because the old FDIC rules imposed limits on the insurance coverage if the trust contained such conditions, and that distinction was a source of confusion for both consumers and bankers. "This simplification of the rules will make it much more likely that families with living trust accounts will be fully protected by the FDIC if their bank fails," says FDIC Chairman Don Powell.

In addition, Martin Becker, a senior official in the FDIC division that handles bank failures, says that "the new rules should speed up deposit insurance determinations on living trusts and, therefore, enable these depositors to obtain their insured funds more quickly."

The new rules also eliminate a previous requirement that beneficiaries of living trust accounts be named in the bank's records. This means that banks no longer have to keep copies of the depositor's living trust document. However, the account title must indicate that the funds are held by a living trust.