In response, on September 26, 2008, the FDIC Board of Directors issued an interim new rule that applies to coverage offered to “Revocable Trust Accounts.” Along with this new rule came the long-awaited permanent increase in FDIC insurance coverage from $100,000 to $250,000 per depositor, per insured depository institution for each account ownership category that was included in the Wall Street Reform and Consumer Protection Act signed into law by former President Obama on July 21, 2010.
FDIC’s Definition of “Revocable Trust Account”
The FDIC’s definition of “Revocable Trust Account” includes informal trust accounts—including payable on death, or POD accounts; in-trust-for, or ITF accounts; and Totten Trust accounts—as well as formal accounts that are owned by the trustee of a traditional Revocable Living Trust.
Summary of the Old Rule Governing FDIC Insurance and Revocable Trust Accounts
The old rule governing Revocable Trust Accounts provided for the following:
Summary of the New Rule Governing FDIC Insurance and Revocable Trust Accounts
The FDIC had several goals with regard to the promulgation of the new interim rule: As a result, the new interim rule retains all of the features of the old rule listed above with three important exceptions:
How Much FDIC Insurance Coverage Do Estate Bank Accounts Receive?
If you are the personal representative of a probate estate, then it is your fiduciary duty to understand how the FDIC rules apply to estate assets that are held in FDIC-insured banks. While you would think that, just like a trust bank account, an estate bank account would be insured on a per-beneficiary basis, this is not the case. Instead, estate bank accounts are only insured up to the current maximum amount of $250,000. So, if the estate is not going to be closed anytime soon and the cash in the bank exceeds $250,000, then you should consider spreading the cash among several different banks or using the CDARS program to fully protect the estate’s money.
Using the FDIC’s “EDIE the Estimator” to Determine Your Coverage
Even though the interim new rule does simplify the calculation of coverage for revocable trust accounts in many regards, figuring it all out can still be confusing. To help consumers determine their coverage, the FDIC website has a tool named “Edie the Estimator” that will calculate the coverage you’ll receive on the individual, trust, and business accounts held in FDIC-insured institutions.
