Our clients often inquire whether their trust owned accounts are insured by the FDIC. The FDIC is the Federal Deposit Insurance Corporation and ensures stability in the U.S. financial system by insuring deposits in bank accounts, trust accounts, and institutions in the event a bank or institution fails. The FDIC does not cover mutual funds, securities, or other investments; but they do insure Revocable Trusts. The standard insurance coverage by the FDIC is $250,000 per depositor; but for accounts held by a Revocable Trust, the calculation is different.
- The owners of the trust account (or account titled in the name of the trust) are not insured.
- The beneficiaries of the trust are insured, up to $250,000 to EACH beneficiary, for EACH account owner. The mathematical equation is the number of owners multiplied by the number of beneficiaries, multiplied by $250,000.
- e.- if Joe and Jane have a joint trust (worth about $800,000) and two children who are the beneficiaries of their trust, Joe is considered to own $400,000 of the joint trust and, since he has two beneficiaries, gets up to $500,000 in protected assets; and Jane is considered to own $400,000 of the joint trust and gets up to $500,000 in protected assets ( if all the children were entitled to equal division of property).
- If, however, the assets were not evenly divided and child A was to receive $300,000 of the trust, and child B was to receive $100,000 of the trust; then $250,000 of child A’s assets would be protected by the FDIC and all of child B’s assets would be covered.
- The rules change if there are more than 5 individual beneficiaries.
- A beneficiary can be a person, charity, or non-profit organization.
- A Helpful tool – “Edie the Estimator” with the FDIC will allow you to put in your information and will calculate to determine if your accounts are fully insured. https://www5.fdic.gov/edie/calculator.html
- Keep in mind, with a joint account, once one trustee dies, the amount insured changes as only one person is now an owner of the account.
- e.- Joe and Jane have a joint trust and three children as beneficiaries. The trust holds $900,000. During their joint lifetimes, they each are determined to own $450,000 of the trust and each beneficiary is covered up to $250,000, which fully insures every child. Once Joe dies, Jane is considered the sole owner of the full amount of $900,000 and each child is covered up to $250,000, which means that only $250,000 of the $300,000 for each child is covered.
While these are the basics of FDIC coverage for Revocable Trusts, remember the rules and calculations get more complex with 6 or more beneficiaries and if the splitting of the assets is not equal among the beneficiaries. At Grissom Law, LLC, we can help you establish your Revocable Trust and explain how the FDIC will insure your assets as your fund your trust, call us today at (678)781-9230 to schedule an appointment.
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This Blog/Web Site is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide legal advice. By using this blog site you understand that there is no attorney client relationship between you and Grissom Law, LLC.