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$250,000 FDIC Insurance Now Permanent

$250,000 FDIC Insurance Now Permanent

On July 21, 2010, as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the current maximum FDIC deposit insurance amount was permanently raised to $250,000.   FDIC insurance covers all deposit accounts at insured banks and savings associations up to the insurance limit.  The FDIC does not insure money invested in stocks, bonds, annuities, and the like, even if purchased from an insured bank or savings association.

A depositor can have more than $250,000 at one insured bank or savings association and still be fully insured provided that the depositor owns accounts in different ownership categories.  Most common account ownership categories include single accounts, joint accounts, revocable trust accounts and certain retirement accounts.

Our estate planning clients may re-register an existing bank account or open a new account at a bank as follows:  “Client’s name, as Trustee of the Client’s Trust dated _________, 20__.”   The level of FDIC insurance coverage depends on the number of beneficiaries.  If five or fewer beneficiaries, each owner’s share of the revocable trust deposit is insured up to $250,000 for each beneficiary (i.e. $250,000 x the number of different beneficiaries), regardless of the actual interest provided to the beneficiaries.  When the trust has six or more beneficiaries, each owner’s share of the revocable trust deposits is insured for the greater of either (1) coverage based on each beneficiary’s actual interest in the revocable trust deposits, with no beneficiary’s interest to be insured for more than $250,000, or (2) $1,250,000.

To illustrate, husband and wife have a joint revocable living trust leaving all assets equally to their three children upon the death of the surviving spouse.  All deposits held in the name of the trust at one FDIC-insured bank would be covered up to $1,500,000  Each owner receives $750,000 of FDIC insurance coverage because they each have three beneficiaries who will receive the trust deposits when both owners have died.

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