FDIC Insurance

Andrew Goldberg
September 19, 2008 — 1,426 views  
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As the federal government has taken over more than ten failed banks this year, panicked consumers are wondering how to ensure their bank deposits are adequately protected by Federal Deposit Insurance Corporation ("FDIC") insurance.  This article briefly outlines the level of insurance protection provided to various types of deposit accounts.

Accounts held in a single person's name, as a custodian under a UTMA account, as an agent, guardian or custodian of another, are all aggregated and insured only up to $100,000.  Joint owners of an account are each entitled to $100,000 of insurance (for a total of $200,000 on the account), but such insurance coverage is aggregated with all other accounts for a maximum of $100,000.  For instance, if Fred and Wilma were joint owners of an account with a balance of $180,000 and Wilma also had an account in her sole name with a balance of $30,000, she would still only have $100,000 of coverage and $20,000 would be uninsured [($180,000÷2)+$30,000-$100,000=$20,000 uninsured].

Coverage greater than $100,000 is eligible for "pay-on-death" accounts (also known as "transfer-on-death" accounts) and more formal revocable living trust accounts.  The total insurance coverage will be based on a number of factors, most importantly, the number of beneficiaries of the trust and whether the beneficiary is "qualifying."  The exact owner of the trust, as well as each beneficiary's interest, will also determine the total insurance coverage applicable to the account. 

Traditional IRAs, Roth IRAs, SEP-IRAs, Simple IRAs, and Keoghs are insured up to an aggregate of $250,000.  The coverage of these accounts is not aggregated with any other coverage. 

Employee benefit plan accounts are subject to complicated rules based on each participant's share of the plan assets.  Also, deposits owned by a corporation, partnership, limited liability company, or a sole proprietorship are insured only up to $100,000, but are insured independently from the separate accounts of the stockholders, partners or members.

If you have large deposits at one or more banks, we urge you to fully understand the exact insurance protection so you do not suffer any unanticipated consequences if your bank fails and is taken over by the federal government.  Please feel free to contact our office to help you evaluate your insurance coverage, or on any other related estate or business planning matter.  We look forward to an opportunity to assist you.

For further information regarding these matters, please contact Mr. Goldberg at 248.740.5664 or [email protected]

Andrew Goldberg