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4000 - Advisory Opinions

Funds Deposited by Fiduciary for Insolvent Are Not Entitled to "Pass-Through" Insurance Coverage Based on Amounts Owed to Creditors


October 27, 1992

Alan J. Kaplan, Assistant General Counsel

This is to advise, in response to your letter of October 21, 1992, that a deposit of funds by a fiduciary for an insolvent (such as by a bankruptcy trustee, a receiver or an assignee for the benefit of creditors) is not entitled to pass-through, or pro rata, deposit insurance based on the amounts owed to various creditors. This is so because the creditors have no ownership interest in the deposits, but only claims against the assets held by the fiduciary for the debts owed. Thus, the insurance limit for such a deposit is $100,000. The same principle applies to a deposit owned by a solvent entity or individual: designating the respective amounts that ultimately will be paid to specific creditors does not change the ownership of the deposit and affords no basis for pass-through, or pro rata, insurance for the benefit of the creditors.

From the standpoint of insurance coverage, it is permissible for a fiduciary to hold a deposit comprised of the funds of several insolvent estates; such a deposit is insurable up to $100,000 per estate, assuming that it is properly identified on the deposit account records of the depository institution as held by a fiduciary and that either the fiduciary or the depository institution duly maintains records to show the interest in the deposit of each insolvent estate, as required by 12 CFR § 330.3(b).

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