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A revocable trust account is owned by one or more people that indicates an intention that the deposits will belong to one or more named beneficiaries upon the death of the owner(s). A revocable trust account can be revoked (or terminated) at the discretion of the owner. In this section, the term “owner” means the grantor, settlor, or trustor of the trust.

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.

The owner of a POD or Living Trust account is insured up to $100,000 for each beneficiary if all of the following requirements are met:

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.

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.

If any of the requirements for coverage in the revocable trust account category are not met:

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.

Living/Family Trust Accounts Living or family trust accounts are insured up to $100,000 per owner for each named beneficiary if all of the following requirements are met:

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.

Living trust coverage is based on the interests of qualifying beneficiaries who would become entitled to receive trust assets when the trust owner dies (or if the trust is jointly owned, when the last owner dies). This means that, when determining coverage, the FDIC will ignore any trust beneficiary who would have an interest in the trust assets only after another living beneficiary dies.

Some living trusts give a beneficiary the right to receive income from the trust or use the assets during the beneficiary’s lifetime (known as a life estate interest), with other beneficiaries receiving the remaining trust assets after the first beneficiary dies. In such a case, the FDIC will recognize all beneficiaries in determining insurance coverage. Unless otherwise indicated in the trust, the FDIC will assume that a beneficiary with a life estate interest has an equal share of the trust with the other beneficiaries.

...(Information on Irrevocable Trusts and Corporate Accounts continued to next page)....