The Federal Deposit Insurance Corporation (FDIC) protects depositors against the loss of their insured deposits if an FDIC-insured bank or savings association fails. If a depositor’s accounts at one FDIC-insured bank or savings association total $100,000 or less, the deposits are fully insured.

FDIC insurance covers all types of deposits received at an insured bank, including deposits in checking, NOW, and savings accounts, money market deposit

accounts, and time deposits such as certificates of deposit (CDs). FDIC deposit insurance covers the balance of each depositor’s account, dollar-for-dollar, up to the insurance limit, including principal and any accrued interest through the date of the insured bank’s closing. The FDIC does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, even if these investments were bought from an insured bank.

The basic insurance amount is $100,000 per depositor, per insured bank. The $100,000 amount applies to all depositors of an insured bank except for owners of certain retirement accounts, which are insured up to $250,000 per owner, per insured bank.

Deposits in separate branches of an insured bank are not separately insured. Deposits in one insured bank are insured separately from deposits in another insured bank.

Deposits maintained in different categories of legal ownership at the same bank can be separately insured. Therefore, it is possible to have deposits of more than $100,000 at one insured bank and still be fully insured.

The FDIC provides several different categories of ownership and the amount insured varies based on the 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 account")
• Accounts established for a decedent’s estate, and
• Any account that fails to qualify for coverage under another ownership category.

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:

• the other signer is authorized to make withdrawals pursuant to a Power of Attorney, or
• the account is owned by one person and the other person is authorized to withdraw deposits on the owner’s behalf (for example, a convenience account)

If the insured bank’s account records do not indicate that such a relationship exists, the deposit would be insured as a joint account.

Kevin Personal checking $5,000

Kevin Savings $25,000

Kevin Certified Deposit (CD) $100,000

Kevin’s Gear (a sole proprietorship) Checking $50,000

Deposits owned by a sole proprietorship are insured as the single ownership deposits of the person who owns the business. Thus, the deposits in all of these accounts are added together and the total balance, $180,000, is insured for $100,000, leaving $80,000 uninsured.

• All types of IRAs, including:
• 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 IRAs 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

John’s Roth IRA $115,000

John’s IRA $90,000

Naming beneficiaries on a retirement account does not increase deposit insurance coverage. Coverdell Education Savings Accounts (formerly known as an Education IRAs), Health Savings Accounts, and Medical Savings Accounts are not included and are not eligible for the increased coverage of $250,000. Defined-benefit plans (benefits predetermined by an employee’s compensation, years of service, and age) are not eligible for the $250,000 coverage limit either.

1. All co-owners must be people. Legal entities such as corporations, trusts, estates, or partnerships are not eligible for joint account coverage.

2. All co-owners must have equal rights to withdraw funds from the account. For example, if one co-owner can withdraw funds 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.

3. 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.

The FDIC assumes that all co-owners’ shares are equal.

For example, a husband and wife could have up to $200,000 in one or more joint accounts at the same insured bank and the deposits would be fully insured. The husband’s ownership share is insured up to $100,000 and the wife’s ownership share is insured up to $100,000.

Joe and Gavin Checking $30,000/2 = $15,000 each

Joe and Gavin Savings $100,000/2 = $50,000 each

Joe and George and Phil CDs $225,000/3 = $75,000 each.

Gavin and Phil Checking $70,000/2 = $35,000 each

Joe’s total equal value share for FDIC computations is $140,000, in which only $100,000 is insured, leaving $40,000 uninsured.

Gavin has $100,000 and is fully insured.

George has $75,000 and is fully insured.

Phil has $110,000, of which $100,000 is insured, leaving $10,000 uninsured.

There are both informal and formal revocable trusts.

Informal revocable trusts, often called "payable-on death" (POD) accounts, are created when the account owner signs an agreement–usually part of the bank’s signature card – stating that the deposits are payable to one or more beneficiaries upon the owner’s death.

Formal revocable trusts – known as "living" or "family" trusts – are written trusts created for estate planning purposes. The owner controls the deposits and other assets in the trust during his or her lifetime. Upon the owner’s death, the trust generally becomes irrevocable. All deposits that an owner has in both informal and formal revocable trusts are added together for insurance purposes, and the insurance limit is applied to the combined total.

1. The account title must include a commonly accepted term such as "payable-on-death,""in trust for," "as trustee for" or similar language to indicate the existence of a trust relationship. The term may be abbreviated (for example, "POD," "ITF" or "ATF").

2. The beneficiaries must be identified by name in the deposit account records of the insured bank.

3. The beneficiaries must be "qualifying," meaning that the beneficiaries must be the owner’s spouse, child, grandchild, parent, or sibling. Adopted and step children, grandchildren, parents, and siblings also qualify.

Others including in-laws, cousins, nieces and nephews, friends, organizations (including charities) and trusts do not qualify.

Father has account that is POD to son and daughter in the amount of $200,000

As there are two qualified beneficiaries, the son and daughter, the account is insured up to $200,000 rather than the father’s individual amount of $100,000.

Deposit insurance coverage is based on each owner’s trust relationship with each qualifying beneficiary. The owner of this POD account, the father, is insured up to a maximum of $200,000 since he has two qualifying beneficiaries on the revocable trust account. This example assumes that the beneficiaries have equal beneficiary interests in the revocable trust account and the owner has no other revocable trust accounts naming the same beneficiaries.

A common mistake that depositors make in calculating coverage for revocable trust accounts is assuming that every person named on a revocable trust account — both the owner(s) and the beneficiaries — receives up to $100,000 in insurance coverage. This is not correct. Each owner of a revocable trust may be entitled to insurance coverage up to $100,000 for each qualifying beneficiary that the account owner designates in the revocable trust account. If all of the beneficiaries are qualifying and have equal interests, the insurance coverage for each owner is calculated by multiplying $100,000 times the number of qualifying beneficiaries, not $100,000 times the number of owners plus the number of beneficiaries.

If the beneficiaries are not all qualifying, or have unequal interests, the above calculation should not be used. All funds attributable to non-qualifying beneficiaries are aggregated and insured up to $100,000 as the single account funds of the trust owner. In addition, if the trust specifies different interests for the beneficiaries, the owner is insured only up to each beneficiary’s actual interest in the trust.

Husband and Wife POD 3 Children $300,000

Husband POD Wife $100,000

Wife POD Husband $100,000

Husband POD Brother and Father $200,000

These four accounts totaling $700,000 are fully insured because each owner is entitled to $100,000 insurance coverage for each qualifying beneficiary. The husband has $600,000 of insurance coverage ($100,000 for each qualifying beneficiary – his three children in the first account, his wife in the second account and his brother and father in the fourth

account). The wife has $400,000 of insurance coverage ($100,000 for each qualifying beneficiary – her three children in the first account and her husband in the third account).

The $100,000 per beneficiary insurance limit applies to all formal and informal revocable trust accounts that an owner has at the same bank.

• The entire amount in the account, or any portion of the account that does not qualify, would be added to the owner’s other single accounts, if any, at the same insured bank and insured up to $100,000.
• If the account has more than one owner, the FDIC would insure each owner’s share as his or her single account.

Husband POD to Nephew, Cousin, Friend $150,000 /3 =$50,000 each.

Wife POD to Nephew, Cousin, Friend $150,000 /3 = $50,000 each.

Of the $300,000 only $200,000 is insured, leaving $100,000 uninsured because the beneficiaries are not qualified. Thus the amount insured is only up to the $100,000 that the individual owners are eligible for.

1. The account title at the bank must indicate that the account is held pursuant to a trust relationship. This rule can be met by using the term "living trust," "family trust," or similar language in the account title.

2. The beneficiaries must be "qualifying" as defined for POD accounts earlier. While the owners of a trust may benefit from the trust during their lifetimes, they are not considered

beneficiaries for the purpose of calculating deposit insurance coverage. Beneficiaries are those identified by the owner to receive an interest in the trust assets when the last owner dies. In general, determining insurance coverage for living/family trust accounts is more difficult than for POD accounts because these formal trusts often identify multiple beneficiaries who may have unequal or dissimilar interests in the trust.

Deposit insurance coverage for a revocable living trust account depends upon the answers to the following specific questions:

A father has a living trust that leaves all of the trust assets to his son. If the son predeceases the father, the trust assets are distributed equally to the son's five children (father's grandchildren). If the bank should fail while the son is still alive, the father’s living trust account is insured up to $100,000, because there is one qualifying beneficiary who is entitled to receive the trust assets when the father dies. However, if the son predeceases his father, the five grandchildren are then the beneficiaries and the father's living trust account would be insured up to $500,000 ($100,000 for each of the living five beneficiaries).

A husband has a living trust giving his wife a life estate interest in the trust deposits, with the remainder going to their two children equally upon his wife’s death. The husband’s living trust would be insured up to $300,000. The FDIC’s insurance rules recognize the wife and two children as equal beneficiaries.

Brad has a living trust naming his daughter and nephew as equal beneficiaries of all trust assets. In this case, the trust has one qualifying beneficiary (the daughter) and one non-qualifying beneficiary (the nephew). Since one of the requirements for insurance coverage under the revocable trust account category is not met for one beneficiary – that is, one beneficiary is not qualifying – only the portion of Brad’s trust deposits attributable to his daughter qualifies for insurance coverage as a revocable trust account. The portion of the trust deposits attributable to Brad’s nephew may be insured as Brad’s single ownership account.

A father has a POD account naming his son and daughter as equal beneficiaries and he also has a living trust account naming the same beneficiaries. In this case, the funds in both the POD account and living trust account would be added together and the total insured up to $200,000 ($100,000 per owner per qualifying beneficiary).

A beneficiary does not have to be related to the grantor to obtain insurance coverage under the irrevocable trust account category.

To qualify for coverage under this category, a corporation, partnership, or unincorporated association must be engaged in an "independent activity," meaning that the entity is operated primarily for some purpose other than to increase insurance coverage.

Deposits owned by a corporation, partnership, or unincorporated association are insured up to $100,000 at a single bank, but are insured separately from the personal accounts of the entity’s stockholders, partners, or members. Accounts owned by the same corporation, partnership, or unincorporated association but designated for different purposes are not separately insured. Instead, such accounts are added together and insured up to $100,000.

For a more detailed analysis on all of the topics discussed in this article, please see: FDIC Insured Deposit Guide