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4000 - Advisory Opinions


Insurance Coverage of Account Maintained by Trustees of Revocable Trust

FDIC-88-60

September 12, 1988

Roger A. Hood, Assistant General Counsel

This is in response to your letter, dated August 9, 1988, concerning the insurance coverage that would be afforded to an account maintained by the trustees of the *** Revocable Trust.

I have reviewed the *** Revocable Trust instrument in its entirety. The basic terms of the trust can be summarized as follows:

*** is the grantor and a co-trustee (along with *** the other co-trustee) of this revocable inter-vivos trust. During the lifetime of the grantor, all of the net income from the trust estate is to be paid to her and the corpus of the trust estate may be invaded for her benefit at her request. Upon her death, if she is survived by her husband *** the trust estate is to be divided equally between a marital trust and a family trust. If her husband does not survive her, the trust estate is not divided and the entire trust estate is to be treated in accordance with the provisions governing the family trust. Assuming that the grantor's husband survives the grantor, then, during his lifetime, all of the net income from the marital trust is to be paid to him and the corpus of the marital trust may be invaded for his benefit if the trustee deems it necessary or advisable to do so. Upon the death of the grantor's husband, any remaining principal in the marital trust becomes part of the family trust. With respect to the family trust, the trustee is authorized to accumulate the net income of said trust and to pay so much of the income and/or principal of the trust to the grantor's husband and children as the trustee, in her sole discretion, deems advisable. Upon the death of the survivor of the grantor and her husband, the trustee is directed to pay so much of the net income and/or principal of the family trust as she, in her sole discretion, deems necessary for the care, support and maintenance of the couple's three children. The principal of the family trust is to be distributed when the children reach stated ages.

Section 330.3 of the FDIC rules and regulations, 12 C.F.R. § 330.3, would be applicable to any bank accounts established pursuant to the *** Revocable Trust. Subsection (a) states, in relevant part, that:

Funds owned by an individual and deposited in a revocable trust account. . .evidencing an intention that on his death the funds shall belong to his spouse, child or grandchild shall be insured up to $100,000 in the aggregate as to each such named beneficiary, separately from any other accounts of the owner.

12 C.F.R. § 330.3(a)

In this case, the *** Revocable Trust instrument provides that, upon the death of the grantor, the trust estate is to be divided into the two trusts described above. The grantor's husband is the primary beneficiary of the marital trust since he is to receive all of the net income from that trust and the corpus may be invaded for his benefit if the trustee deems it necessary or advisable to do so. The Family trust may also inure to the benefit of the grantor's husband since the trustee is authorized to pay so much of the income and/or principal of the trust to the grantor's husband as the trustee deems advisable. Deposit accounts established pursuant to the *** Revocable Trust would thus qualify for the separate insurance coverage provided for testamentary trust accounts since it would evidence the requisite intention that, upon the death of the owner ***, the funds would belong to the owner's spouse. Therefore, such deposit accounts would be insured, up to $100,000 in the aggregate, separately from any individual or joint accounts maintained by *** with the same bank.

The interests of their three children in any such deposit accounts are, however, too contingent to qualify for separate insurance coverage. As noted above, the trust instrument directs that after the grantor's death, the grantor's husband (assuming he survives the grantor) is to receive all of the net income from the marital trust and so much of the corpus of that trust as the trustee deems advisable. In addition, the trustee may pay so much of the income and/or principal of the family trust to the grantor's husband as the trustee deems advisable. Thus, there is no assurance that upon the death of the grantor, the funds "shall belong" to the couple's children. In fact, the contingencies and other provisions of the *** Trust instrument could prevent the children from receiving any part whatsoever of the trust estate upon the death of the grantor and/or the grantor's husband. Therefore, the children's interests in any deposit accounts established pursuant to this trust are too contingent to be recognized as separately insured interests.

For the above-noted reasons, it is my opinion that any deposit accounts established pursuant to the *** Trust would be insured, up to $100,000 in the aggregate, separately from any other accounts maintained by the grantor or her husband at the same bank.


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