Apr 07, 2008

Who Knew? Banks Offer More Insurance for Trust Accounts

fdicThese 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:


  1. A beneficiary must be the owner's spouse, child, grandparent, parent or sibling.

  2. A beneficiary must get their money when the trust owner dies.

  3. 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.