Are My Trust’s Bank Accounts Fully Insured?
Recently we have been receiving questions from our clients about the amount of Federal Deposit Insurance Corporation (FDIC) insurance coverage their revocable trusts have on their bank accounts. This article is the first in a series of blog posts written to explain the current FDIC deposit insurance rules, and in particular how they apply to trusts. While this information is current at the time of writing, the rules for irrevocable trusts will be changing on April 1, 2024, to bring them into conformity with the revocable trust rules.
The information in this series was derived from the FDIC’s website, as well as an email exchange between Insight Law and the FDIC.
Federal Deposit Insurance Fundamentals
The standard deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.
The FDIC provides separate insurance coverage for funds depositors may have in different classes of legal ownership. The FDIC refers to these different classes as “ownership categories.” This means that a bank customer who has multiple accounts may qualify for more than $250,000 in insurance coverage if the customer’s funds are deposited in different ownership categories and the requirements for each ownership category are met.
Ownership Categories
The following are the ownership categories recognized by the FDIC. Clicking on each category takes you to the FDIC website and a discussion of that category. A short description of each relevant category is provided below for your convenience.
Accounts owned by a single individual and that do not contain a POD (Payable on Death) designation.
Accounts owned by multiple individuals such as an account owned as Tenants in Common, Joint Tenants with Right of Survivorship or Tenants by the Entireties.
Accounts owned by trustees of a formal revocable living trust or owned by an individual and the account has a valid POD designation.
Accounts owned by trustees of a formal written irrevocable trust (Trustmaker has no power to cancel the trust).