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4000 - Advisory Opinions

Insurance Coverage Afforded Four Options for Beneficiary of Decedent's IRA Where Beneficiary Maintains His or Her Own IRA in the Same Insured Depository Institution

FDIC 91-43 May 14, 1991 Roger A. Hood, Assistant General Counsel

This is in response to your letter of April 8, 1991, in which you request, on behalf of the ***, an interpretation of section 330.13 of the FDIC's deposit insurance regulations (12 C.F.R. § 330.13) under the following circumstances.

You posit a situation where A and B have each established a separate Individual Retirement Account ("IRA") in Bank X, and each account has a balance of $100,000. A dies, having named B as beneficiary of A's IRA. You state that B has the following four options upon A's demise:

(1)  B may withdraw the full amount in A's IRA. In such case, A's IRA would cease to exist.

(2)  B may begin receiving installment payments from A's IRA over the appropriate period of time (which may be A's remaining life expectancy or B's life expectancy, for example). In such case, A's IRA would continue to exist until all amounts were distributed to B.

(3)  If B is A's surviving spouse, B may roll over the funds into an IRA in B's name (either in Bank X or with another IRA trustee). The funds in A's IRA would then become part of an IRA belonging to B.

(4)  If B is A's surviving spouse, B may treat the IRA as his or her own IRA. A's IRA would then become B's IRA.

It is your understanding that, with respect to option #1, the funds withdrawn from A's IRA would no longer be entitled to separate insurance coverage, but would instead be insured as B's single ownership funds if they remain deposited with Bank X. Your understanding is correct.

For options #3 and #4, you state that the funds, if left on deposit with Bank X, would be aggregated with any existing IRAs maintained by B at the same depository institution and insured up to $100,000 as B's IRA. Again, your understanding is correct.

Your primary concern appears to be option #2, and you suggest three possible interpretations of insurance coverage under this scenario. Your third interpretation is correct. So long as the two IRA accounts remain separate, one in A's name and the other in B's name, the FDIC would provide deposit insurance coverage for each account in the amount of up to $100,000 until A's IRA is depleted and ceases to exist.

I trust that the foregoing has been responsive to your inquiry.

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