In a recent post we talked about the limits of insurance coverage available for bank deposits in the event your bank, thrift, savings and loan or credit union were to fail.  The government “rescue” or “Bail-out” plan passed in early October increased the insurance limits from $100,000 to $250,000.

Our earlier blog was specifically focused on the amount of insurance available to folks who have their accounts titled in the name of a Revocable Living Trust.  You may recall in that blog, that the amount of insurance was calculated somewhat differently.

The insurance coverage for Living Trust owned accounts was calculated first by multiplying the number of Creators, or “Settlors” of the Trust times $100,000.  Then multiplying that number by the number of “Qualifying Beneficiaries”, to come up with your total insurance.

E.g.  If the Trust has a husband and a wife as the (2) creators or “Settlors” of the Trust, the first calculation is 2 x $100,000 = $200,000.  If the husband and wife have 3 children named as Successor Beneficiaries of the Trust, then the second part of the calculation is $200,000 x 3 (qualifying beneficiaries) = $600,000 TOTAL AMOUNT OF INSURANCE COVERAGE.  With the higher insurance limits passed in early October, these calculations will change as follows:

Under the new law the calculation will use the higher insurance limit of $250,000, and would therefore look something like this:

First calculation:  2 x $250,000 = $500,000

Second Calculation:  $500,000 x 3 (children as qualifying beneficiaries) = $1,500,000 TOTAL AMOUNT OF INSURANCE COVERAGE.

In addition, you may recall that there were two additional conditions imposed in order to qualify for the full amount of insurance as calculated above.

1. The beneficies of your trust had to be “Qualified beneficiaries” , meaning the spouse, child, grandchild, parent or sibling of a Settlor.
2. The beneficiaries names must be listed on your account paperwork kept at the bank.

The new law eliminates the use and definition of “Qualifying Beneficiary” so that now if you have a friend, relative such as Aunts, Uncles or Cousins, or even a charity, for example, named as a beneficiary of your trust, that the full additional $250,000 worth of insurance coverage for each such name listed will be available.

Tags: FDIC Insurance, Finance by Greg Reese
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During the early summer of 2008, largely as a result of predatory lending practices and reckless borrowing by homeowners, the US Banking system is under significant pressure. The US Senate Banking Committee has identified 90 banks, S&L’s or Thrifts as having marginal reserves to stay in business. One of the biggest US Thrifts, IndyMac Bank, has recently failed and has been seized by Regulators. IndyMac depositors are understandably anxious and many have made a run on the bank to get their deposits out, which was the final straw in the Thrifts collapse. The good news for depositors is that their accounts are insured up to a point. In general, an individual or couple is insured for up to $100,000 for all of their accounts, perhaps more depending on how you hold title to multiple accounts at one institution. But what about accounts owned in the name of a Revocable Living Trust?

The Federal Deposit Insurance Corporation has it’s own rules that pertain to insurance coverage’s for various types of accounts. Their rules for Trusts can sometimes be confusing. We cannot give you any absolute advice on how much insurance is available under FDIC rules. In addition, the FDIC does not generally review individual trusts and tell you how much insurance would be available. What we can do is include here the general rules put out by the FDIC, and give you some questions to pose to your bank for an idea from them on how much insurance is provided. If you cannot get clarification to your satisfaction, you can be absolutely assured of complete protection if you keep no more than $100,000 in the name of your trust in any one bank.

The following information was obtained from the Federal Deposit Insurance Corporation (FDIC) as it relates to Bank and Savings & Loan deposits and how they are insured upon retitling into the name of a trust. [Read more →]

Tags: FDIC Insurance, Finance by Greg Reese
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