With the recent financial turmoil, we have received numerous inquiries with respect to the relationship of Revocable Living Trusts and Federal Deposit Insurance Corporation (“FDIC”).

 

The FDIC is an independent agency of the United States government that protects against the loss of insured deposits if an FDIC insured bank or saving association fails. FDIC is backed by the U.S. Treasury department and charges the insured banks for the coverage. Coverage to the consumer is automatic, however, the type of account and the institution holding the account dictates whether the funds are insured and, if so, the amount of coverage. 

 

FDIC insurance covers funds in deposit accounts, including checking and savings, money market accounts and certificates of deposit. FDIC insurance does not, however, cover other financial products and services such as stocks, bonds, mutual fund shares, life insurance policies, annuities or municipal securities.

 

As many of you know,the government temporarily increased the amount of account coverage from $100,000 to $250,000. This increase went into effect on October 3, 2008. The amount of coverage will return to $100,000 as of December 31, 2009. 

 

One of the many benefits of a Revocable Living Trust is that it provides insurance coverage for each beneficiary. Another significant recent change, effective September 26, 2008, is that no longer must a beneficiary be “qualified” (formerly only spouses, children, grandchildren, parents and siblings qualified for coverage) now any named individual, charity, or non-profit organization can be a beneficiary receiving the protection. 

 

Thus, as long as you have established a checking account in the name of your Revocable Living Trust and your trust has five or fewer specific beneficiaries then the account is insured up to $250,000 for each beneficiary. In the case that you have more than five beneficiaries the rules become a bit more complicated but you still will receive the most beneficial treatment.

 

You have taken a smart, important step by setting up a Revocable Living Trust. We are here to assist you in receiving the most benefit from your planning. A key component to receiving the most value is to make sure that as your life changes your planning changes. Please give us a call if you have any questions regarding FDIC insurance or with any portion of your estate planning.