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