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4000 - Advisory Opinions

Where Two Depositors Intend to Establish a Joint Account Between Only Themselves, Authorized Signer's Name Should Not Be Included in Account Title

FDIC-91-88 December 19, 1991 Adrienne George, Attorney

I am writing in response to your letter on behalf of your customers, [A] and [B]. I regret that it has taken me so long to respond to your questions, but we have been receiving so many letters that we have not been able to answer them as quickly as we would like.

In your letter, you write that [A] and [B] intended to establish a joint account with right of survivorship. They executed a signature card, along with [C]. [C], however is not a co-owner of the funds; instead, she possesses only withdrawal rights--that is, she is authorized to withdraw funds only on behalf of the two co-owners. This intention has been indicated on the signature card by the notation "[n]ot an owner of the funds on deposit" next to her signature. The account, however, is titled "[A] or [B] or [C]."

You ask whether, should the bank fail, one-third of the funds in this account might be wrongfully attributed to [C] (as if she owned them), and therefore aggregated with her interest in other jointly-held funds at your institution for insurance purposes. The answer to this question is yes.

Section 330.5(a) of the FDIC's deposit insurance regulations provides as follows:

If more than one natural person has the right to withdraw funds from an individual account (excluding persons who have the right to withdraw by virtue of a Power of Attorney) the account shall be treated as a joint ownership account and shall be insured in accordance with the provisions of § 330.7 of this part [governing joint ownership accounts], unless the deposit account records clearly indicate, to the satisfaction of the FDIC, that the funds are owned by one individual and that other signatories on the account are merely authorized to withdraw funds on behalf of the owner.

12 C.F.R. § 330.5(a) (1991) (emphasis added).

According to this section, [C] would not be considered an owner of this account for deposit insurance purposes because the signature card clearly indicates that she is not an owner of the deposited funds. Because [C] has no ownership interest, the account would be insured as the jointly-owned funds of [A] and [B] only. Therefore, [C] would have no ownership interest in [A and B's] account to be aggregated with her share in any other joint accounts at your bank.

However, it is possible that confusion may still result because of the account's title. Because [C] is not a co-owner of the account, her name should not appear in the account title. Should your bank go into default, it is possible that the person calculating insurance coverage would look to some computer printout listing only the title of the account. In this case, he or she would never see the annotation on the signature card saying that [C] is not an owner, and in this case, he or she might assume that [C] was, in fact, a co-owner of the account. To prevent this problem, you should remove the name of [C] from the account title; that is, you should list only the co-owners of joint accounts in joint account titles.

I hope that this information will prove useful to you. If I can be of any further help, I can be reached at (202) 898-3859.

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