FDIC Insurance Coverage
The FDIC, which stands for the Federal Deposit Insurance Corporation, is an autonomous entity within the United States government. Its primary mission is safeguarding depositors in the event of a bank or savings association insured by the FDIC encountering financial difficulties. FDIC insurance enjoys the unequivocal backing of the U.S. government. If a depositor maintains accounts at an FDIC-insured bank or savings association, and the total deposits do not exceed $250,000, these deposits are fully insured. Moreover, a depositor can have sums exceeding $250,000 in one insured institution while still enjoying full coverage, provided certain stipulations are met. This guide offers a comprehensive overview of the FDIC's regulations governing deposit insurance, addressing common questions about these rules. It is primarily intended for depositors seeking a thorough explanation of the FDIC's guidelines, particularly those related to eligibility for insurance coverage exceeding $250,000.
A single account is a deposit owned by one person. The following deposit account types are included in this ownership category.
If an individual has a deposit account titled in his or her name alone but gives another person the right to withdraw deposits from the account, the account will be insured as a single account only if the insured bank's deposit account records indicate that:
A joint account is a deposit owned by two or more people. To qualify for insurance under this ownership category, all of the following requirements must be met:
If all of these requirements are met, each co-owner's share of every account that is jointly held at the same insured bank is added together with the co-owner's other shares, and the total is insured up to $250,000. The FDIC assumes that all co-owners' shares are equal unless the deposit account records state otherwise.
Certain Retirement Accounts
These are deposits owned by one person and titled in the name of that person's retirement account. The following types of retirement plan deposits qualify for coverage as "certain retirement accounts":
Traditional IRAs, Roth IRAs, Simplified Employee Pension (SEP) IRAs, Savings Incentive Match Plans for Employees (SIMPLE) IRAs.
Irrevocable Trust Accounts
Irrevocable trust accounts are deposits held by a trust established by statute or a written trust agreement in which the grantor (the creator of the trust – also referred to as a trust or settlor) contributes deposits or other property and gives up all power to cancel or change the trust. An irrevocable trust also may come into existence upon the death of an owner of a revocable trust. The reason is that the owner no longer can revoke or change the terms of the trust. If a trust has multiple owners and one owner passes away, the trust agreement may call for the trust to split into an irrevocable trust and a revocable trust owned by the survivor. The interests of a beneficiary in all deposit accounts established by the same grantor and held at the same insured bank under an irrevocable trust are added together and insured up to $250,000, only if ALL of the following requirements are met: The insured bank's deposit account records must disclose the existence of the trust relationship. The beneficiaries and their interests in the trust must be identifiable from the bank's deposit account records or from the trustee's records.
Since irrevocable trusts often contain conditions that affect the interests of the beneficiaries or provide a trustee or a beneficiary with the authority to invade the principal, deposit insurance for an irrevocable trust account usually is limited to a total of $250,000.A grantor or trustee of an irrevocable trust account who is unsure of the provisions of the trust should consult with a legal or financial advisor.