If You Would Like to Know Whether Your Bank Deposits are Protected by FDIC Insurance, Read This E-Alert

November 17, 2008

In light of the financial troubles in the U.S. market, many individuals are concerned about the security of assets they have deposited at financial institutions. The FDIC – short for the Federal Deposit Insurance Corporation – is an independent agency of the United States government that protects you against the loss of deposits if an FDIC-insured bank or savings association fails.
The base amount of insurance for deposits at a single bank was recently increased from $100,000 to $250,000. This increase in insurance protection is scheduled to last until December 31, 2009. However, the total amount of coverage available depends upon the form of ownership of deposits. The following is a summary of the basic FDIC rules:

How much insurance is available for my individual accounts? Accounts titled in the name of a single individual at a single bank are insured for up to $250,000.
How much insurance is available for my joint accounts? Each owner of a joint account is entitled to a total of $250,000 of coverage at a single bank for all joint accounts of which they are a co-owner. For example, if A, B, and C open up Joint Account 1, the maximum amount of coverage for the account would be $750,000 (see Example 1).

If A also had Joint Account 2 with D, A would still only have $250,000 of coverage for deposits in both accounts (see Example 2).

How much insurance is available for accounts titled in the name of my revocable trusts? The amount of insurance coverage for accounts titled in the names of revocable trusts, whether formal, like a revocable grantor trust, or informal, like a payable-on-death account, depends upon the number of beneficiaries.

One to Five Beneficiaries. Revocable trust accounts are entitled to $250,000 of insurance coverage for every donor-beneficiary pair. For example, A establishes a trust with his three children as beneficiaries. The account is entitled to $750,000 of coverage because there are three donor-beneficiary pairs (see Example 3).


More than Five Beneficiaries. Coverage for revocable trust accounts that fall into this category depends upon the balance of the account. If the balance is less than $1,250,000 per donor, the trust is insured under the rules described above. If the balance exceeds $1,250,000 per donor, the maximum coverage is the greater of: (a) $1,250,000 per donor or (b) the aggregate ownership interests of the beneficiaries (up to a limit of $250,000 per beneficiary per donor).
If any portion of a revocable trust account becomes irrevocable upon the death of a donor, this does not alter insurance coverage. Revocable trust accounts continue to be insured under revocable trust rules even after they have become irrevocable.
If you have any questions regarding your personal bank deposits, or would like advice regarding how to maximize your FDIC insurance coverage by creating new accounts at a single bank or depositing assets at multiple separately-insured institutions, please contact Melissa Kampmann, the author of this article, or any of the attorneys in the Trusts & Estates Practice Group of Ruder Ware.

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This document provides information of a general nature regarding legislative or other legal developments, and is based on the state of the law at the time of the original publication of this article. None of the information contained herein is intended as legal advice or opinion relative to specific matters, facts, situations, or issues, and additional facts and information or future developments may affect the subjects addressed. You should not act upon the information in this document without discussing your specific situation with legal counsel.

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