FDIC Insurance Coverage
FDIC deposit insurance has permanently increased from $100,000 to $250,000 per depositor.
The FDIC short for the Federal Deposit Insurance Corporation - is an independent agency of the United States government. The FDIC protects depositors against the loss of their insured deposits if an FDIC-insured bank or savings association fails. FDIC insurance is backed by the full faith and credit of the United States government. If a depositor's accounts is at one FDIC-insured bank or savings association total $250,000 or less, the deposits are fully insured. A depositor can have more than $250,000 at one insured bank or savings association and still be fully insured provided the accounts meet certain requirements. This guide describes the FDIC's rules for insurance coverage of bank and savings association deposits and answers frequently asked questions about the FDIC's insurance rules. The guide is intended primarily for depositors who need a comprehensive explanation of the FDIC's rules, including the requirements to qualify for more than $250,000 in insurance coverage.
A single account is a deposit owned by one person. The following deposit account types are included in this ownership category.
- Accounts held in one person's name alone Accounts established for one person by an agent, nominee, guardian, custodian, or conservator, including Uniform Transfers to Minors Act accounts, escrow accounts, and brokered deposit accounts
- Accounts held in the name of a business that is a sole proprietorship (for example, a "DBA –Accounts established for a decedent's estate, and
- Any account that fails to qualify for coverage under another ownership category.
- All single accounts owned by the same person at the same insured bank are added together and the total is insured up to $250,000.
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:
- All co-owners must be people. Legal entities such as corporations, trusts, estates, or partnerships are not eligible for joint account coverage.
- All co-owners must have equal rights to withdraw deposits from the account. For example, if one co-owner can withdraw deposits on his or her signature alone but the other co-owner can withdraw deposits only with the signature of both co-owners, the co-owners do not have equal withdrawal rights.
- All co-owners must sign the deposit account signature card unless the account is a CD or is established by an agent, nominee, guardian, custodian, executor or conservator.
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, Traditional IRAs, Roth IRAs, Simplified Employee Pension (SEP) IRAs, Savings Incentive Match Plans for Employees (SIMPLE) IRAs
- All Section 457 deferred compensation plan accounts, such as eligible deferred compensation plans provided by state and local governments regardless of whether they are self-directed
- Self-directed defined contribution plan accounts, such as self-directed 401(k) plans, self-directed SIMPLE held in the form of 401(k) plans, self-directed defined contribution money purchase plans, and self-directed defined contribution profit-sharing plans
- Self-directed Keogh plan accounts (or H.R. 10 plan accounts) designed for self-employed individuals
- All retirement accounts listed above owned by the same person in the same FDIC-insured bank are added together and the total is insured up to $250,000.
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.