The FDIC provides separate insurance coverage for a depositor’s funds at the same insured bank if the funds are held in different ownership categories. To qualify for this expanded coverage, the requirements for insurance coverage in each ownership category must be met.

The example below illustrates how a family of four – a husband and wife with two children – could qualify for up to $3 million in FDIC coverage at one insured bank. This example assumes that the funds are in qualified deposit products at an insured bank and these are the only accounts that the family has at the bank.

Explanation:
Single Account Ownership Category: The FDIC combines all single accounts owned by the same person at the same bank and insures the total up to $250,000. The Husband’s single account deposits do not exceed $250,000 so his funds are fully insured. The same facts apply to the Wife’s single account deposits. Both accounts are fully insured.

Certain Retirement Account Ownership Category: The FDIC adds together all certain retirement accounts owned by the same person at the same bank and insures the total up to $250,000. The Husband and Wife each have an IRA deposit at the bank with a balance of $250,000. Because each account is within the insurance limit, the funds are fully insured.

Joint Account Ownership Category: Husband and Wife have one joint account at the bank. The FDIC combines each co-owner’s shares of all joint accounts at the bank and insures each co-owner’s total up to $250,000. Husband’s ownership share in all joint accounts at the bank equals ½ of the joint account or $250,000, so his share is fully insured. Wife’s ownership share in all joint accounts at the bank equals ½ of the joint account or $250,000, so her share is fully insured.

Revocable Trust Account Ownership Category: To determine insurance coverage of revocable trust accounts, the FDIC first determines the amount of the trust’s deposits belonging to each owner. In this example:

• Husband’s share = $750,000 (100% of the Husband’s POD account naming Wife as beneficiary and 50% of the Husband and Wife Living Trust account identifying Child 1 and Child 2 as beneficiaries)
• Wife’s share = $750,000 (100% of the Wife’s POD account naming Husband as beneficiary and 50% of the Husband and Wife Living Trust account identifying Child 1 and Child 2 as beneficiaries)

Second, the FDIC determines the number of beneficiaries for each owner. In this example, each owner has three different beneficiaries (Spouse, Child 1 and Child 2). When a revocable trust owner has five or fewer different beneficiaries, the owner is insured up to $250,000 for each different beneficiary. Husband’s share of the revocable trust deposits is insured up to $750,000 ($250,000 times three beneficiaries = $750,000). Wife’s share of the revocable trust deposits is insured up to $750,000 ($250,000 times three beneficiaries = $750,000).

Death of an Account Owner or Beneficiary

2. What happens to insurance coverage after an account owner dies?

The FDIC insures a deceased person's accounts as if the person were still alive for six months after the death of the account holder. During this grace period, the insurance coverage of the owner's accounts will not change unless the accounts are restructured by those authorized to do so. Also, the FDIC will not apply this grace period if it would result in less coverage.

3. How does the death of a beneficiary of an informal revocable trust (e.g., POD account) affect insurance coverage?

There is no grace period if the beneficiary of a POD account dies. In most cases, insurance coverage for the deposits would be reduced immediately.

For example: A mother deposits $500,000 in a POD account at an insured bank with her two children named as the beneficiaries in the account records of the bank. While the owner and both beneficiaries are alive, the account is insured up to $500,000 ($250,000 times two beneficiaries = $500,000). If one beneficiary dies, insurance coverage for the mother’s POD account is immediately reduced to $250,000 ($250,000 times one beneficiary = $250,000).

4. How does the death of a beneficiary of a formal revocable trust affect the insurance coverage?

Like informal revocable trusts, the six-month grace period does not apply to the death of a beneficiary named in a formal revocable trust account. However, the terms of the formal revocable trust may provide for a successor beneficiary or some other redistribution of the trust deposits. Depending on these terms, the insurance coverage may or may not change.

Merger of Insured Banks

5. What happens to my insurance coverage if I have deposits at two insured banks that merge?

When two or more insured banks merge, deposits from the assumed bank are separately insured from deposits at the assuming bank for at least six months after the merger. This grace period gives a depositor the opportunity to restructure his or her accounts, if necessary.

CDs from the assumed bank are separately insured until the earliest maturity date after the end of the six-month grace period. CDs that mature during the six-month period and are renewed for the same term and in the same dollar amount (either with or without accrued interest) continue to be separately insured until the first maturity date after the six-month period. If a CD matures during the six-month grace period and is renewed on any other basis, it would be separately insured only until the end of the six-month grace period.

Fiduciary Accounts

6. What are fiduciary accounts?

Fiduciary accounts are deposit accounts owned by one party but held in a fiduciary capacity by another party. Fiduciary relationships may include, but are not limited to, an agent, nominee, guardian, executor or custodian. Common fiduciary accounts include Uniform Transfers to Minors Act accounts, escrow accounts, Interest On Lawyer Trust Accounts and deposit accounts obtained through a broker.

7. What are the FDIC disclosure requirements for fiduciary accounts?

The fiduciary nature of the account must be disclosed in the bank's deposit account records (e.g., "Jane Doe as Custodian for Susie Doe" or "First Real Estate Title Company, Client Escrow Account"). The name and ownership interest of each owner must be ascertainable from the deposit account records of the insured bank or from records maintained by the agent (or by some person or entity that has agreed to maintain records for the agent).

Special disclosure rules apply to multi-tiered fiduciary relationships. If an agent pools the deposits of several owners into one account and the disclosure rules are satisfied, the deposits of each owner will be insured as that owner's deposits.

8. How does the FDIC insure funds deposited by a fiduciary?

Funds deposited by a fiduciary on behalf of a person or entity (the owner) are insured as the deposits of the owner if the disclosure requirements for fiduciary accounts are met.

9. Are funds deposited by a fiduciary insured separately from an owner's other deposit accounts at the same bank?

Funds deposited by a fiduciary on behalf of a person or entity (the owner) are added to any other deposits the owner holds in the same ownership category at the same bank and insured up to the applicable limit.

For example: A broker purchases a CD for $250,000 on a customer's behalf at ABC Bank. The customer already has a checking account in his or her name at ABC Bank for $15,000. The two accounts are added together and insured up to $250,000 in the single ownership account category. Since the customer’s single ownership deposits total $265,000, $15,000 is uninsured.