|
|
Account Ownership Categories
Joint Accounts
(12 C.F.R. § 330.9)
Definition
Joint accounts are deposits held in the names of two or more persons.
Insurance Limit
All shares that each co-owner owns in joint accounts at one bank are added together and insured up to $100,000, separately from deposits held in other ownership categories, if all of these conditions are met:
- Each co-owner must be a natural person.
- The co-owners must have equal withdrawal rights to the account(s).
- Each co-owner must personally sign the account signature card.
Personal signatures are not required if the account is a certificate of deposit, a negotiable instrument, or is established by an agent.
Important!
- Be careful not to confuse joint accounts with “in trust for,” “payable on death,” and other revocable trust accounts. Although revocable trust accounts may be owned jointly by two or more persons, they are not insured as joint accounts.
- Deposit accounts owned by a partnership or corporation are not insured as joint accounts even though more than one partner or corporate official may have signed the account signature card. Deposits owned by partnerships, corporations and unincorporated associations are insured in another insurance category.
- Co-owners do not need to be related to qualify for joint account coverage.
Example #9:
Helen and Jack Smith have one joint account, a CD, at Plymouth Bank and Trust for $200,000. The account is fully insured since each owner's share of joint accounts at the bank is covered for $100,000 or a total of $200,000 for both co-owners.
Rearranging Names or Account Titles Does Not Increase Coverage
The insurance coverage of joint accounts is not increased by rearranging the owners' names or by changing the styling of their names. Similarly, the use of "or," "and," or "and/or" to separate the names of co-owners in multiple joint account titles does not affect the amount of insurance coverage provided. For example, an account titled "Husband and Wife" will not be insured separately from an account titled "Wife or Husband."
Mixed Conjunctions
It is important to be consistent in the use of conjunctions (either the use of "and" or the use of "or") when opening joint accounts with three or more depositors. The names in the account title should be connected consistently by the use of "and" or the use of "or." As an example, an account titled, "John Jones and Sally Jones and Mary Jones" is appropriate. An account titled, "John Jones or Sally Jones or Mary Jones" is also appropriate. Mixing "and" with "or" in the same account title for accounts with three or more depositors can create confusion whether the depositors have equal withdrawal rights. An account titled, "John Jones or Sally Jones and Mary Jones" suggests that Sally and Mary must act together to withdraw funds and therefore may not have equal withdrawal rights with John. Remember, to qualify for deposit insurance coverage in the joint account category, all depositors must have equal withdrawal rights.
Jointly Owned Deposits Held by an Agent or Custodian
Deposits held by an agent for joint account owners will be insured under the joint account category if the recordkeeping requirements for fiduciary accounts are met. For example, deposits held in escrow by a real estate agent for a husband and wife who are buying a house are added to any other joint accounts owned by the husband and wife at the same bank.
How to Calculate the Insurance Coverage of Joint Accounts
The coverage of joint accounts is calculated as follows:
- Determine each co-owner's share of each joint account by dividing the number of owners into the account balance.
- If a person is the co-owner on more than one joint account, add together all of the shares that the person has in joint accounts at the bank. This amount (i.e., the co-owner's share of all joint accounts) is insured to $100,000. Any person's share of joint accounts that exceeds $100,000 will be uninsured, even if other co-owners’ shares are less than $100,000.
| Example #10: |
| Account Title |
Deposit Type |
Balance |
| Charles and Linda Davis |
CD #1 |
$200,000 |
| Linda and Sally Davis |
CD #2 |
200,000 |
| Total |
|
$400,000 |
| Insurance coverage for each owner is calculated as follows: |
| Depositors |
Ownership Share |
Insured Amount |
Uninsured Amount |
| Charles Davis |
$100,000 |
$100,000 |
-0- |
| Linda Davis |
200,000 |
100,000 |
100,000 |
| Sally Davis |
100,000 |
100,000 |
-0- |
| Total |
$400,000 |
$300,000 |
$100,000 |
Explanation:
- Charles' ownership share in all joint accounts equals ½ of CD #1 ($100,000), so his share is fully insured.
- Linda's ownership share in all joint accounts equals ½ of CD #1 ($100,000) and ½ of CD #2 ($100,000). Her total share of all joint accounts is $200,000 of which $100,000 is insured and $100,000 is uninsured.
- Sally's ownership share in all joint accounts equals ½ of CD #2 ($100,000), so her share is fully insured.
| Example #11: |
| Account Title |
Deposit Type |
Balance |
| Mary and John Smith |
NOW |
$25,000 |
| John or Mary Smith |
Savings |
100,000 |
| Mary or John or Robert Smith |
CD |
150,000 |
| Total |
|
$275,000 |
| Insurance coverage for each owner is calculated as follows: |
| Depositors |
Ownership Share |
Insured Amount |
Uninsured Amount |
| Mary |
$112,500 |
$100,000 |
$12,500 |
| John |
112,500 |
100,000 |
12,500 |
| Robert |
50,000 |
50,000 |
-0- |
| Total |
$275,000 |
$250,000 |
$25,000 |
Explanation:
- Mary's ownership share in all joint accounts equals ½ of the NOW account ($12,500), ½ of the savings accounts ($50,000), and ⅓ of the CD ($50,000) for a total of $112,500. Since her coverage in the joint account category is limited to $100,000, $12,500 is uninsured.
- John's ownership share in all joint accounts is the same as Mary's, so $12,500 of John's deposits also is uninsured.
- Robert's ownership share in all joint accounts is $50,000, so his share is fully insured.
|
