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FDIC Insurance Coverage of Living Trust Accounts … - fdic coverage calculator adding beneficiaries

FDIC Insurance Coverage of Living Trust Accounts …-fdic coverage calculator adding beneficiaries

FDIC Financial Institution Letter FIL-14-2004
February 4, 2004
FDIC Insurance Coverage of Living Trust Accounts Information Sheet
On January 13, 2004, the FDIC adopted new rules for insurance coverage of living trust
accounts. The new rules, which are effective on April 1, 2004, are summarized below.
What is a living trust?
A living trust (or family trust) is a formal revocable trust, usually set up by an attorney, in which
the owner (also known as a grantor or settlor) specifies who will receive the trust assets when
the owner dies. The owner keeps control of the trust assets during his or her lifetim
change the trust at any time.
How are living trust accounts insured under the new FDIC rule?
The owner of a living trust account would be insured up to $100,000 pe
following requirements are met:
? The beneficiary must be the owner's spouse, child, gran
sibling. Stepparents and stepchildren, adopted childr
qualify. In-laws, cousins, nieces and nephews, friends
not qualify.
? The beneficiary must become entitled to
owner dies -- coverage would be based o
at the time the bank fails. Example: A living
beneficiaries but states that each beneficia
if the beneficiary dies before the owner. As
the bank fails, only the children
insurance purposes. (That's be
while their parent is alive.) Cov
available on the trust's deposit
? The account title
trust. This rule ca
Coverage is based
otherwise, the FDI
account. Example
This trust's accoun
beneficiaries who
How does the ne
Previously, many l
contained conditio
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: A fath
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at the bank
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assume that
-- not the g
cause the g
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must indic
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cn the benef
trust nam
ry's share w
suming all
en and
, and
r inter
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s wh
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table organ
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ships also
izations do
n the trust when the
vo meet this requirement
r's three children as
ss to the beneficiary's children
ichildren are alive at the time
n -- would be beneficiaries for
n are not entitled to any trust assets
$300,000 ($100,000 per beneficiary) would be
ate that the account is held by a living
ausing the terms "living trust" or "family trust" in the account
rests of each qualifying beneficiary. Unless the trust states
the beneficiaries have an equal interest in the living trust
er has a living trust leaving all trust assets equally to his three children.
ld be insured up to $300,000 since there are three qualifying
become owners of the trust assets when the owner dies.
differ from the old rule?
iving trusts did not qualify for per-beneficiary coverage because they
ns that prevented a qualifying beneficiary from actually receiving his or her
share of the trust assets when the owner died. Under the new rule, the FDIC will ignore these
conditions for insurance purposes. In addition, the former rule required banks to keep the
names of the trust beneficiaries in the bank's account records. Under the new rule, a bank only
needs to indicate in the account title that the account is held by a living trust. Note: The rule for
payable on death - or POD -- accounts has not changed: the names of the beneficiaries of a
POD account still must be identified in the bank's records.
What if a living trust has more than one owner?
If a living trust has more than one owner, coverage would be up to $100,000 per qualifying
beneficiary for each owner, provided the beneficiary would be entitled to receive the trust assets
when the last owner dies. Example: A husband and wife are co-owners of a living trust. The
trust states that upon the death of one spouse the funds will pass to the surviving spouse, and
upon the death of the last owner the funds will pass to their three children equally. This trust's
deposit account would be insured up to $600,000.
What if a beneficiary is not the owner's spouse, child, grandchild, parent or
The trust interest of a non-qualifying beneficiary is insured as the owner's single o
funds and would be added to any other single ownership funds the owner may ha
bank, and the total would be insured up to $100,000. Example: A living trust state
assets will belong equally to the owner's husband and nephew upon he
account has a balance of $200,000, her husband's share -- $100,000 -
revocable trust funds and her nephew's share -- $100,000 -- woul
ownership funds. If, for example, the owner already had a single o
$20,000, the nephew's interest ($100,000) would be added to her
and the total would be insured for $100,000, leaving $20,00
How is a beneficiary's life estate interest insured?
Living trusts often give a beneficiary the right to receive inco
assets during the beneficiary's lifetime (known as
with the life estate interests dies, the remaining a
otherwise indicated in the trust, the FDIC will ass
owns an equal share of the trust with the other b
living trust giving his wife a life estate interest in t
to their two children equally upon his
$300,000 ($100,000 for each qualify
Are living trust accounts and "pay
The $100,000 per-benef
death (POD) and living t
has a POD account nam
account naming th
and the total insur
How can I get mo
? Call toll-free
? E-mail using
? Mail questio
e sam
Ied up
re inf
at 1-8
the F
ns to:
iciary insura
rust account
ing his son a
e beneficiar
to $200,000
normation ab
wife's death
aing beneficia
able on dea
nce limit app
s - that an o
a life esta
ssets pass
ume that a
he trust as
. Deposits
ry - the wif
0 unin
me fro
te inte
to oth
. Exam
tsets w
id be
m th
er be
r death. If
- would be
insured as
rship accou
r single ow
ve at the same
s that the trust
the trust's
insured as her
her single
nt for
enership funds
e trust or to use trust
v. When the beneficiary
neficiaries. Unless
with a life estate interest
ple: A husband creates a
ith the remaining assets going
for this trust could be insured up to
e and two children).
th" accounts separately insured?
lies to all revocable trust accounts - payable on
wner has at the same bank. Example: A father
nd daughter as beneficiaries and he has a living trust
ies. The funds in both accounts would be added together
($100,000 per qualifying beneficiary).
out insurance coverage of living trust accounts?
77-ASK-FDIC (1-877-275-3342) or 1-800-925-4618 (TTD)
DIC Customer Assistance Form at www2.fdic.gov/starsmail/index
FDIC-DSC, 550 17th Street, NW, Washington, DC 20429-9990

Are beneficiaries covered by FDIC?The FDIC recognizes life estate and remainder beneficiaries, but not contingent beneficiaries. The beneficiaries are living individuals and/or an IRS-qualifying charity or nonprofit organization. At the time a bank fails, the beneficiary must be entitled to his or her interest in the revocable trust assets upon the grantor’s death.