FDIC FAQs-How will the FDIC determine the amount of deposit insurance coverage available for revocable trust accounts, where some of the revocable trust accounts are noninterest-bearing transaction accounts and others are not?

Compliance > Deposit Operations > FDIC FAQs on Insurance and Payment of Interest on Demand Deposit Accounts

Q:  While the Dodd-Frank Deposit Insurance Provision is in effect, how will the FDIC

determine the amount of deposit insurance coverage available for revocable trust

accounts, where some of the revocable trust accounts are noninterest-bearing

transaction accounts and others are not?

A:  Coverage for revocable trust accounts, in general, is based on the number of “eligible”

beneficiaries named in the account. The specific question is how the FDIC will “count up”

the number of eligible beneficiaries to determine revocable trust account coverage for an

account owner who has multiple revocable trust accounts, including one or more such

accounts that qualify as noninterest-bearing transaction accounts under the Dodd-Frank

Deposit Insurance Provision.

For example, if a depositor has an interest-bearing account with a balance of $400,000

payable on death to a niece, and a qualifying noninterest-bearing transaction account with a

balance of $200,000 payable on death to a friend, how much coverage would be available

for the accounts?

To make this deposit insurance calculation, the FDIC would first determine the total number

of different beneficiaries the account owner has named in all revocable trust accounts (both

interest-bearing and noninterest-bearing) at the same IDI. In this example, there is one

owner and two beneficiaries (the niece and the friend). The FDIC would multiply the

number of owners times the number of beneficiaries times the SMDIA of $250,000 to

determine the maximum coverage available on the account owner’s revocable trust

accounts. In this example, the amount is $500,000. We then would apply that amount to

the total balance of the account owner’s interest-bearing revocable trust accounts. Because

that amount is $400,000, the interest-bearing payable on death account would be fully

covered. The balance in the noninterest-bearing transaction account (in this case, $200,000)

would be separately and fully covered under the Dodd-Frank Deposit Insurance Provision.

This can be found in - FAQ#16 of FDIC’s FAQs.  FDIC’s FAQs can be found at: http://www.fdic.gov/deposit/deposits/unlimited/faq.pdf

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