Finance Questions

Archive for the ‘FDIC’ Category

How is an irrevocable trust treated for FDIC insurance purposes?

Irrevocable trusts are another legal ownership category. The interest of each beneficiary in an account established under an irrevocable trust is insured up to $100,000 separately from other accounts held by the grantor, trustee, or beneficiary, if all FDIC requirements are met. Check with the institution holding the account for more information. 

How are Totten trusts and POD and ITF accounts treated for FDIC insurance purposes?

An Informal revocable trust, often called "payable-on death" (POD), "Totten trust," or "in trust for" (ITF) account is 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. 
All deposits that an owner has in both informal (POD, Totten and ITF accounts) and formal (written living or family) revocable trusts are added together for insurance purposes, and the insurance limit is applied to the combined total. 

How are treasury securities (bills, notes, bonds) treated for FDIC insurance purposes?

Treasury securities (bills, notes, and bonds) purchased by an insured depository institution on a customer's behalf are not FDIC insured. However, the securities remain property of the customer even if the institution closes and is placed in receivership.

How are CD s treated for FDIC insurance purposes?

CD s are insured by the FDIC for up to $100,000 (principal and interest combined) per depositor, per issuer, for each account type (e.g. individual, joint, IRA). 

For example, a joint account owned by two people could be insured for up to $200,000 (if it is the only joint account they own at that institution). 

While Equity-Indexed CD principal is always fully insured, interest is not eligible for FDIC insurance before the final valuation date.

How is a revocable living trust treated for FDIC insurance purposes?

Effective April 1, 2004 the owner of a living trust account will be insured up to $100,000 per beneficiary if all of the following requirements are met:

• The beneficiary must be the owner's spouse, child, grandchild, parent or sibling,
• The beneficiary must become entitled to his or her interest in the trust when the owner dies, and
• The account title at the bank must indicate the account is held by a living trust.

Example: A father has a living trust leaving all trust assets equally to his three children. This trust 's account would be insured up to $300,000 since there are three qualifying beneficiaries who would become owners of the trust assets when the owner dies.

If a living trust has more than one owner, coverage would be up to $100,000 per qualifying beneficiary.

Example; A husband and wife are co-owners of a living trust. The trust provides that upon the death of the last owner the funds will pass to their three children equally. This trust 's deposit account would be insured up to $600,000.

The trust interest of a non-qualifying beneficiary (not the owner's spouse, child, grandchild, parent or sibling) is included in any coverage that the owner is eligible for at that same bank.

For more information see New Rules for Revocable Living Trusts on the FDIC web site.