These days, while the titans of Wall Street teeter on the edge of financial ruin and there's media chatter about the great depression, bank failures, and the domino effect, here's a comforting tip: the Federal Deposit Insurance Corporation (FDIC), which guarantees bank deposits up to $100,000, offers extra insurance for accounts owned by living trusts.
Here's how it works--the owner of a living trust account (which would be the person who set up the trust) can insure up to $100,000 per beneficiary, provided these requirements are met:
- A beneficiary must be the owner's spouse, child, grandparent, parent or sibling.
- A beneficiary must get their money when the trust owner dies.
- The account title at the bank must indicate that the account is held by the trust.
Here's an example: A father has a living trust which leaves his assets equally to his three children. This trust can be insured up to $300,000.
Trusts with two owners can get $100,000 of insurance per beneficiary per owner, as long as the beneficiaries will inherit the money when the second owner dies. A mother and a father who establish a trust for the benefit of their three kids can insure up to $600,000 worth of trust deposits.
The $100,000 limit, though, applies to all trust accounts that an owner has at the same bank. So if a trust owner has a payable-on-death account and a living trust account, both naming the same three children as beneficiaries, the funds in both accounts would be added together and the total insured would be $300,000.