4000 - Advisory Opinions
Questions regarding a husband and wife who own two "family trust" accounts.
April 12, 2005
Joseph A. DiNuzzo, Counsel
This is in response to your letter asking about the deposit insurance coverage available on two accounts that you and your husband have at an FDIC-insured depository institution. The first is a revocable "family trust" account established by you and your husband naming your two children as beneficiaries. The second is an account labeled "ITF" naming the "*** Family Trust" as the beneficiary.
Under the FDIC's regulations, revocable trust accounts are insured up to $100,000 per owner per "qualifying beneficiary," assuming specified procedural requirements are met. 12 CFR 330.10. There are two types of revocable trust accounts addressed in our regulations: informal revocable trusts (usually referred to as payable-on-death ("POD") or in-trust-for ("ITF") accounts) and formal revocable trusts (commonly referred to as living trust accounts). Under the regulations, both types of revocable trusts are within the same category of ownership; thus, coverage is limited to $100,000 per owner per qualifying beneficiary regardless of how many revocable trust accounts an owner has naming the same beneficiary (ies). (As to the procedural requirements, the account title for both a POD and living trust account must designate the account, in some way, as a revocable trust account. Also, for POD accounts the bank's records must indicate the names of the qualifying beneficiaries; this requirement does not apply to living trust accounts). You and your husband have both types of revocable trust accounts: a living trust account and an ITF account.
The *** Family Trust account, of course, is the living trust account. It has two owners (or grantors) and names two qualifying beneficiaries, your children. As such, assuming the procedural and substantive requirements of the regulations are satisfied, coverage could be up to be $400,000--$100,000 per owner per qualifying beneficiary. Before reaching this conclusion, however, we have to consider the ITF account because, as noted, that also is a revocable trust account insured under the same FDIC ownership category.
The account is entitled "X ITF The *** Family Trust." The beneficiary named in the account is not a "qualifying beneficiary." Qualifying beneficiaries are defined in the regulations to include the account owner's spouse, children, grandchildren, parents and siblings. 12 CFR 330.10(a). When a revocable trust names a non-qualifying beneficiary, the account funds are insured as the owner's single-ownership funds. As such, the funds are combined with any other single-ownership funds the owner has at the same FDIC-insured institution and insured to a limit of $100,000. 12 CFR 330.10(c). Single-ownership account coverage is separate from the insurance coverage available on revocable trust accounts held by the same owner(s). As such, assuming you have no other single-ownership accounts at the same institution, the funds in the "ITF" account would be insured for up to $100,000, separately from the coverage available to you and your husband on the living trust account.
Summarizing, the funds in your living trust account would be eligible for coverage up to $100,000 per owner per qualifying beneficiary--in this case, $400,000. The funds in the ITF account would be eligible for additional coverage up to $100,000.
I hope this information is helpful. Feel free to call me at (202) 898-7389 with any additional questions or comments.