4000 - Advisory Opinions
Insurance Coverage Afforded IRAs Held by Decedent in Two Separately Insured Institutions Which Name Spouse as Beneficiary When Institutions Merge Prior to Maturity Date
FDIC 91-31 April 22, 1991 J. William Via, Jr., Counsel
This is in response to your recent inquiry concerning deposit insurance for individual retirement accounts in the following circumstances. Mr. Doe purchased from an insured institution, Alpha, an IRA certificate of deposit, maturing 04-12-91, and he purchased from another insured institution, Beta, an IRA certificate of deposit, maturing 05-14-91. Alpha acquired Beta by merger on 09-29-88. Mr. Doe died on 01-21-91; the two accounts remain in his name, with the notation "Deceased". Mrs. Doe is the designated beneficiary of each of these accounts; the account that originated in Alpha now totals $90,000 and the account that was assumed in the merger with Beta now totals $60,000. Mrs. Doe maintains her own IRA deposit of $25,000 in Alpha.
Section 11(a)(3) of the Federal Deposit Insurance Act (12 U.S.C. § 1821(a)(3)) provides that IRAs held in time and savings deposits are insured "in the amount of $100,000 per account", separately from any other accounts held at the same depository institution; the term "per account" is defined as "the present vested and ascertainable interest of each beneficiary under the plan, excluding any remainder interest. . . ." (A similar provision applied to FSLIC-insured thrifts; see 12 U.S.C. § 1728(d)(3), as amended November 10, 1978, 92 Stat. 3712.) For deposit insurance purposes, the individual who establishes an IRA is the owner (and beneficiary) of the deposit during his or her lifetime and is insured up to $100,000 for the total of all IRA funds he or she deposits in any given insured institution, separately from the insurance coverage afforded the same person's non-IRA deposits at the same institution. When the individual who established the IRA dies, the succeeding beneficiary previously designated becomes the vested beneficial owner of the IRA funds and is then separately insured up to $100,000. If however, the beneficiary should elect to treat this ownership interest as his or her own IRA deposit, then it would be combined with any other IRA deposits owned by him or her at the same insured institution and insured up to a maximum of $100,000.
The IRA of $25,000 which Mrs. Doe established for herself in Alpha is separately insured from the beneficial interests she owns in the two IRAs that were established by her husband. These two IRAs are insured up to $100,000 each, except that the separate "carry-over" insurance applicable to the IRA certificate of deposit assumed by Alpha in the merger acquisition of Beta will expire upon its maturity date of 05-14-91 (see 12 U.S.C. § 1728(a), as amended October 15, 1982, 96 Stat. 1486; see also 12 U.S.C. § 1818(g); 12 C.F.R. § 330.3(g)(2); 12 C.F.R. § 330.16(b)). At that time, the two IRAs established by Mr. Doe will be insured to $100,000 in the aggregate, leaving an excess of approximately $50,000 uninsured.