4000 - Advisory Opinions
Insurance Coverage of Accounts Held by Trustee in Bankruptcy for Chapter 13 Debtors
May 19, 1988
Patti C. Fox, Attorney
I have been asked to respond to your inquiry regarding the deposit insurance coverage of accounts held by the trustee in bankruptcy for chapter 13 debtors at ***.
Each depositor is insured for all deposits held in the same right and capacity in the same insured bank. 12 U.S.C. 1813(m)(1). "Right and capacity" describes the ownership capacity in which an account is held such as individual ownership, joint ownership, or beneficial ownership in a trust. Whether the accounts are held in checking, savings, or time deposit accounts such as NOW accounts, money market accounts, or certificates of deposits make no difference for deposit insurance purposes.
Funds held by a trustee in bankruptcy are insured as trust funds pursuant to section 330.10 of FDIC regulations. 12 C.F.R. 330.10. Because the debtor is deemed to be the beneficiary of the trust, the trust estate of each debtor would be separately insured to $100,000, even where the funds of various trust estates are commingled in one account. Any funds which cannot be allocated to a debtor's estate will be aggregated and insured to $100,000 as the funds of the trustee in his capacity as trustee.
In order to obtain such coverage, the recordkeeping requirements of section 330.1(b) must be met. The deposit account records of the bank must disclose the existence of a trust relationship, and the details of the relationship and the interests of the beneficial owners in the accounts must be ascertainable from either the records of the bank or the records of the trustee/depositor maintained in good faith and in the regular course of business.