How Safe Is the Money in Your Bank Account?
UNDERSTANDING FDIC PROTECTION FOR TRUST ACCOUNTS
The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress for the purpose of maintaining stability and public confidence in the United States financial system. One of the most important features of the FDIC is that it insures deposits made at qualified banks. Is your bank FDIC insured? Not all banks are insured by the FDIC. There are several ways you can find out if your bank is covered. First, you can look for the FDIC sign where you deposit your money. Second, you can call the FDIC’s toll-free number: 1-877-275-3342. Third, you can search for your specific bank using the FDIC’s “BankFind” tool by visiting Banks.Data.FDIC.gov/bankfind-suite/ bankfind (or Google “FDIC BANKFIND”). How much of your bank account is protected? All your personal bank accounts should be registered in the name of your Trust. When the account is registered in the name of your Trust, it is called a Formal Revocable Trust Account. The amount of coverage for all your Formal Revocable Trust Accounts at each bank is dependent on the number of primary beneficiaries listed in your Trust. If you have five or fewer primary beneficiaries (individuals or charities), your account(s) will be insured for $250,000 per beneficiary (regardless of the dollar amount or percentage designated for each beneficiary in your Trust). For example, if you have three primary beneficiaries, your deposits at any qualified bank are insured for $750,000 (or for the entire balance of all your accounts at that bank if the balance is less than $750,000). If you have six or more primary beneficiaries in your Trust, the formula changes depending on whether the beneficiaries are all receiving an equal interest. If everyone is receiving an equal interest, the account is insured for $250,000 per beneficiary (same as if you have five or fewer beneficiaries). If beneficiaries are receiving unequal shares, your deposits are insured for the greater of either: (a) the sum of each beneficiary’s actual interests up to $250,000 for each beneficiary, or (b) a minimum coverage amount of $1,250,000. Please note that these rules apply to accounts registered in Revocable Trusts. There are different rules for Irrevocable Trusts, but that is beyond the scope of this article.
If you have questions about your coverage, the FDIC offers free guidance. Just call 1-877-ASK-FDIC.
2 PrestonEstatePlanning.com
Made with FlippingBook Ebook Creator