Prompted by the recent takeover of Silicon Valley Bank, the Federal Deposit Insurance Corporation (\u201cFDIC\u201d) has published guidance regarding the calculation of insured funds at a particular insured depository institution (\u201cIDI\u201d).<\/p>\n
This article summarizes some of the key points of the FDIC\u2019s guidance regarding bank accounts<\/em><\/strong> held by a revocable living trust<\/em><\/strong>.<\/p>\n The FDIC is an independent federal agency that provides deposit insurance to protect depositors in case an insured bank or savings institution fails. The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.<\/p>\n This means that if an individual<\/em><\/strong> has multiple accounts at the same bank, they may be insured up to $250,000 per account ownership category<\/u><\/em>, but not more than $250,000 in total for all accounts<\/u><\/em> at that bank.<\/p>\n As to calculating the deposit insurance for accounts held in trust, two types of trusts are considered: informal revocable trust and formal revocable trusts.\u00a0 Informal revocable trusts<\/em> are accounts that are payable on death (\u201cPOD\u201d), in trust for (\u201cITF\u201d), as trustee for (\u201cATF\u201d), or\u00a0Totten trust\u00a0accounts.\u00a0 Formal revocable trusts<\/em> are created with the assistance of an attorney, such as your revocable living trust.<\/p>\n In order to be eligible for FDIC insurance, the assets held in a revocable living trust<\/em><\/strong> must be properly structured and titled.<\/p>\n When calculating deposit insurance, all revocable trust accounts<\/em><\/strong> at a particular IDI, both formal and informal, and the unique primary beneficiaries<\/u><\/em> of those accounts are taken together.<\/p>\n The Brady Bunch Mike and Carol own the following accounts at One Bank:<\/p>\n $2,500,000<\/td>\n<\/tr>\n POD<\/u> to Greg, Peter, Bobby, Marsha, Jan, Cindy, equally<\/em><\/p>\n <\/td>\n What is the maximum amount of FDIC coverage can Mike and Carol get for their bank accounts held in their joint revocable living trust at their one bank?<\/p>\n Rules<\/u><\/strong>:<\/p>\n (a) When owners of one or more revocable trust accounts name six or more beneficiaries\u00a0who are entitled to an equal distribution from the account(s), each owner\u2019s shares of the\u00a0multiple trust accounts are added together and each owner receives up to $250,000 in\u00a0insurance coverage for each unique beneficiary.<\/p>\n (b) The calculation to determine coverage is the number of owners multiplied by the\u00a0number of unique eligible beneficiaries multiplied by $250,000 equals the insurable\u00a0amount.<\/p>\n Even though there are 2 different account types, there are only 6 unique beneficiaries between these 2 accounts<\/em><\/td>\n x $250,000<\/strong><\/p>\n <\/td>\n<\/tr>\n x\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 2<\/u><\/strong><\/td>\n<\/tr>\n Mike and Carol Brady\u2019s two accounts at One Bank, totaling $2,700,000, will be 100% covered by FDIC insurance.<\/p>\n This article provides only a summary of some very complicated rules regarding the calculation of FDIC insurance coverage for accounts.\u00a0 If you have any questions, please do not hesitate to call our office to set up a time to speak with one of our estate planning attorneys.<\/p>\n You can find the full FDIC guide by clicking this link:\u00a0 https:\/\/www.fdic.gov\/deposit\/diguidebankers\/documents\/revocable.pdf<\/a><\/p>\n\n
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\ncollapse are counted. For example, your trust provides that, upon your death, your trust estate goes to your child, and if your child predeceases you, your share goes to their children. If your child is living at the time of the IDI\u2019s collapse, your child would be a primary beneficiary<\/em>. If your child has predeceased you when the IDI collapses, then that child\u2019s children (your grandchildren) would be counted for insurance coverage purposes.<\/li>\n<\/ol>\n
\n<\/strong>Mike and Carol Brady have a joint revocable living trust.\u00a0 Mike and Carol have 6 children, combined, and their trust provides for distributions to these six children in EQUAL amounts. (Calculations for trust with more than 5 beneficiaries with distributions in unequal amounts get different treatment.<\/em>)<\/p>\n\n\n
\n Account Type<\/strong><\/td>\n How Account is Titled<\/strong><\/td>\n Account Balance<\/strong><\/td>\n<\/tr>\n \n CD<\/td>\n Mike and Carol Brady, Trustees of the Brady Bunch Living Trust<\/u> (Greg, Peter, Bobby, Marsha, Jan, Cindy)<\/em><\/td>\n <\/p>\n \n Savings Account<\/td>\n <\/p>\n $200,000<\/td>\n<\/tr>\n \n <\/td>\n Total Amount at One Bank:<\/strong><\/td>\n $2,700,000<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n \n\n
\n Number of Unique<\/u> Beneficiaries?<\/strong><\/p>\n \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 6<\/strong><\/td>\n<\/tr>\n \n How much maximum coverage for each\u00a0<\/strong>unique beneficiary?<\/strong><\/td>\n <\/p>\n \n How many owners of the account?<\/strong>Mike and Carol Brady<\/em><\/td>\n <\/p>\n \n Maximum Total FDIC Coverage<\/strong><\/td>\n $3,000,000<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n