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FDIC Insurance

www.FDIC.gov is a must see website

To prevent a recurrence of the banking failures that followed the 1929 crash, where depositors lost everything if their local banks failed, the government created a safety net to pay depositors their balances, dollar for dollar, in the event of a bank failure. Since the establishment of the FDIC in 1933, not one penny has been lost to depositors, on insured funds, as a result of a banking failure.

The FDIC (Federal Deposit Insurance Corporation) was established by congress as a safety net for depositors, and as a way to promote stability and regain public confidence in the nation’s financial system. Currently, the FDIC insures bank deposits up to $250,000 per depositor, per bank (not per branch). Only bank deposits are insured and include: checking, savings, now, money markets, CD and retirement accounts. All other banking products, such as US treasury bills, bonds, securities, insurance, mutual funds, annuities and safety deposit boxes are not FDIC insured. The insurance covers principal plus accrued interest though a bank’s closing date. US treasury bills, bonds and notes are guaranteed by the federal government, and therefore not insured by the FDIC

FDIC insurance can exceed $250,000 per depositor if various ownership categories are in use. Each category gets the additional coverage!  However, multiple accounts per depositor under the same category are aggregated. If, for instance, a depositor has checking, savings & CD accounts all under the same name, they all count as a single account for insurance purposes.

 The four critical ownership categories are:

  • Single Accounts – $250,000 per depositor.
  • Joint Accounts - Deposits owned by two or more people; each co-owner must have equal rights to withdrawal money and documented on the signatory cards. – $250,000 per depositor.
  • Self Directed Retirement Accounts (IRA, Roth IRA, Keogh) $250,000 per depositor – numbers of beneficiaries do not affect the insurance limits.
  • Revocable Trust Accounts –$250,000 per depositor, per qualifying beneficiary. Qualifying beneficiaries include spouse, children, grandchildren, parents, siblings, as well as adopted and stepchildren. Additionally, the beneficiaries must be named in the account records, and the title on the account must indicate that the account is an informal revocable trust account. Common terms used are: Payable on Death (POD); In Trust For (ITF); or As Trustee For (ATF). 

 For example, given a husband, wife and two children with one grandparent:  

  • If both parents have single accounts with $275,000, owned individually, under each name, they will be insured for $500,000 or $250,000 each; $50,000 will be left uninsured.
  • If the same parents have a joint account with $525,000, they will be insured for $500,000 or $250,000 each; $25,000 will be left uninsured. Including the above items, $1,000,000 is insured by the FDIC.
  • If the husband has an additional $50,000 joint account with his mother, the husband has already reached the insurance limit, so his half is uninsured. His mother is insured for her half, or $25,000. In total, $1,025,000 is insured by the FDIC.
  • If the same parents have separate self directed retirement accounts (IRAs) totaling $250,000 each, they will be insured for another $500,000. The FDIC coverage now amounts to $1,500,000 plus the $25,000 for the grandmother.
  • If the parents have an informal joint revocable trust (POD) totaling $500,000, each naming two children as beneficiaries, they are insured for an additional $500,000 or $250,000 for each “qualifying beneficiary.” The total FDIC insurance coverage amounts to $2,000,000 plus the grandmother’s $25,000. All in one bank.

Maximizing the FDIC insurance is no different then estate planning. The titling of the accounts on the signature cards is paramount. (Note to readers: Never relay on websites like The Chestnut &Cedar Stock Report for FDIC insurance coverage information. Always call 1-877- ASK-FDIC or ask a representative at your local bank)

Click here to check your insurance coverage directly with the FDIC.  EDIC The Estimator is a fantastic, free, tool offered by the FDIC. Try it!

 Savers, young and old alike, need to thoroughly understand the FDIC insurance rules. If all else fails, FDIC insured accounts can act as a “nuclear bomb shelter” for your money.


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