Significant Changes To Fdic Coverage

On September 26, 2008, the FDIC expanded FDIC coverage for living trust and pay-on-death type accounts. As of October 3, 2008, FDIC insurance coverage limits were increased. Some of these changes are permanent and some are only temporary unless further legislation is passed.

To fully understand the recent FDIC rule changes see our August 2008 article “Understanding FDIC Insurance” for an overview of FDIC coverage.

Increase of Coverage Levels

Effective October 3,2008 through December 31, 2009, the FDIC has increased deposit insurance coverage limits as follows:

Single Accounts (owned by one person) – $250,000 per owner

Joint Accounts (two or more persons) – $250,000 per co-owner

IRAs and certain other retirement accounts – $250,000 per owner

Trust accounts – $250,000 per owner per beneficiary subject to specific limitations and requirements

Except for IRAs and retirement accounts (and subject to the new Trust account rules – see below) , the maximum FDIC coverage will revert to $100,000 after December 31, 2009 unless new legislation is enacted to extend the increased limits. Read official press release from FDIC.

Insuring of Living Trust & POD Accounts

The Federal Deposit Insurance Corporation (FDIC) has adopted an interim rule to simplify the rules for determining the coverage available on revocable trust accounts (living trust or payable-on-death accounts). The interim rule, which is effective as of September 26, 2008, eliminates the concept of “qualifying beneficiaries” (i.e. – only a spouse, a child, a granchild, a parent or a sibling) so that coverage is based on the naming of virtually any beneficiary.

Under the revised rules, coverage for the vast majority of account owners generally is based on the number of beneficiaries named in a depositor’s revocable trust account(s). The maximum insurance limit will still be based on $100,000 per named beneficiary as long as the beneficiary is “a natural person, charity or non-profit organization.”

Under the new rules, a trust account owner with less than $500,000 in revocable trust accounts at one FDIC-insured institution is insured up to a maximum $100,000 per beneficiary. For revocable trust account owners with more than $500,000 in such accounts naming more than five beneficiaries, the coverage is the greater of either $500,000 or the sum of all the named beneficiaries’ proportional interest in the trusts, limited to $100,000 per different beneficiary.

The new rules are effective as of September 26, 2008 and apply to all existing and future revocable trust accounts at FDIC-insured institutions.