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4000 - Advisory Opinions

Prepaid Funeral Expenses in Trust Accounts are Insured to $100,000 for Each Beneficiary


April 29, 1986

Patti C. Fox, Attorney

By letter dated April 7, 1986, you requested information regarding deposit insurance coverage of trust accounts maintained by *** Funeral Home. The funds in the trust accounts consist of prepaid funeral expenses for individuals.

Pursuant to section 330.10 of FDIC regulations, the vested and ascertainable interest of each beneficiary in a trust account at an FDIC-insured bank is insured to $100,000 separately from other deposit accounts held by the beneficiary, settlor, or trustee at that bank. Assuming, therefore, that you are holding the prepaid funeral expenses as trustee under an irrevocable express trust recognizable under applicable state law, each beneficiary's interest in the trust account would be insured to $100,000. The commingling of various beneficiaries' funds in the same trust account does not affect the separate insurance coverage for each beneficiary. In order to obtain this coverage, certain recordkeeping requirements must be met. The details of the trust relationship and the interests of the parties in the account "must be ascertainable from the records of the bank or of the depositor maintained in good faith and in the regular course of business." 12 C.F.R. § 330.1(b)(2). Moreover, the deposit account records of the bank must disclose the name of the settlor and trustee of the trust and contain an account signature card executed by the trustee.

The use of the federal employer's identification number on corporate and trust accounts does not affect their insured status. Any corporate accounts maintained by your firm at the same bank are separately insured in the aggregate to $100,000 apart from the trust accounts for prepaid funeral expenses.

Funds are insured to precisely $100,000 and are usually available to depositors within five business days after a bank has closed. If the failed bank's insured deposits are transferred to another bank in the area, those funds are immediately available from the assuming bank. Accrued interest to the date of the bank's closing is included in calculating the amount of insured deposits.

When a deposit account exceeds $100,000, the insured portion is paid to the depositor who then files a claim for the uninsured portion of the account. Depositors are issued Receiver's Certificates for their uninsured claims and share proportionately in the recovery of a failed bank's assets. The amount and timing of such disbursements depends upon a number of factors, including the extent and priority of other creditor's claims, and the rate of recovery from liquidating the failed bank's assets.

I hope this has answered your questions. Enclosed are our two pamphlets, "When a Bank Fails" and "Your Insured Deposit" for your information.

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