Each depositor insured to at least $250,000 per insured bank

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4000 - Advisory Opinions


Insurance Coverage for a County District Court Trust Account

FDIC-87-12

September 14, 1987

Claude A. Rollin, Attorney

This is in response to your letter of August 20, 1987, by which you requested a legal opinion concerning the extent to which an account styled as "*** County District Court Trust Account" would be entitled to FDIC insurance coverage.

In your letter, you indicate that the account in question contains funds from several litigants and you ask whether the account would be fully insured, regardless of its balance, as long as the interest of each person for whom funds are being held does not exceed $100,000. In our subsequent telephone conversation, you further informed me that the funds in this account are not being held pursuant to any trust agreement and that the ownership of the funds in this account may or may not be in dispute.

From the facts which you have provided, it seems clear that the funds in the *** County District Court Trust Account do not belong to the district court itself, but rather, they belong to several different parties. The district court is simply commingling these funds in the subject account until it determines the proper distribution of the funds. Therefore, it appears that the district court is acting as a mere custodian of funds for the rightful owners thereof.

If the bank's records disclose the existence of this custodial relationship and the separate interest of each party in the subject account is ascertainable from either the bank's records or the depositor's records, then the interest of each rightful owner of funds in the subject account would be separately insured up to the $100,000 limit. 12 C.F.R. § 330.1(b). The fact that the name of the subject account includes the words "trust account'' reveals that the funds therein may belong to parties other than the district court itself. The bank's records thus disclose the existence of some custodial relationship which would cause the FDIC to look beyond the name of the account to determine which parties are the rightful owners of funds entitled to deposit insurance. Therefore, if the records of the bank or the district court detail the separate interest of each party in the subject account, then each party's interest therein would be separately insured up to the $100,000 limit.


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