Is Your Money Safe?

Fall, 2008

Updated Fall, 2009

With our present economic climate, you might want to review how your bank accounts are titled and how much money is deposited because it will affect your FDIC protection.

The FDIC (Federal Deposit Insurance Corporation) is an independent agency of the United States government that insures depositors of FDIC-insured banks or savings associations against loss if the bank should fail.  However, there are strict limitations.  What and how much is covered?

FDIC insurance covers checking, “NOW”, savings, money markets, and certificate of deposits at insured banks.  It does not cover investments in stocks, bonds, mutual funds, life insurance, or annuities, even if purchased through an insured bank.  It also does not cover Treasury bills or Notes; these are backed by the “full faith and credit” of the U.S. government.

Prior to October 3, 2008, basic FDIC coverage was $100,000 per depositor per insured bank and $250,000 for certain retirement accounts per depositor per insured institution.  Currently, all non-interest bearing transaction deposit accounts at an FDIC-insured institution, this includes all personal and business accounts that do not earn interest, are fully insured for the ENTIRE amount in the deposit account until December 31, 2009 as long as the bank does not “opt out” of this coverage.  The FDIC will maintain this information and make it available on its website.  All other deposit accounts at an FDIC-insured institution are insured up to at least $250,000 per depositor.  After, December 31, 2009, the temporary standard insurance amount will be $250,000 per depositor until December 31, 2013.  On January 1, 2014, FDIC insurance reverts back to $100,000 per depositor and the following will apply.  However, it could be possible to have deposits in excess of these amounts at one insured bank and be covered, depending on the ownership of the accounts.

Coverage Pre 10/03/08 and Post 12/31/13:

SINGLE ACCOUNTS - Single accounts are those owned by one person, including sole proprietorship business accounts, and titled by only that person.  All single accounts are added together and the total insured is up to $100,000 per insured bank.    If an individual has an account in his/her name alone, but gives another person the right to withdraw deposits, the account will be considered a joint account unless the bank’s deposit account records indicate that this individual is authorized to make withdrawals pursuant to a Power of Attorney, or is authorized to withdraw funds for the convenience of the owner.

JOINT ACCOUNTS - When deposit accounts are owned by two or more people, each co-owner’s share of every account is added together with his/her other accounts, and each owner is insured up to $100,000.  Shares are deemed equally owned unless account records state otherwise.  Coverage is not increased by rearranging the owners’ names, changing the styling of their names, using different Social Security numbers, or alternating the use of “or” “and” or “and/or”.

REVOCABLE TRUST ACCOUNTS - Revocable trust accounts (informal and formal) are those accounts owned by one or more individuals with the intention that they will be owned by the named beneficiaries upon the death of the owner(s).

Informal revocable trusts are often referred to as payable-on-death (POD) accounts, and as such, must include in the account name some commonly accepted term signifying so and indicate the relationship.  The beneficiaries must be identified by name.  If the beneficiaries are qualifying (owner’s spouse, child, grandchild, parent, sibling), each owner is entitled to coverage up to $100,000 per beneficiary.  All funds designated to non-qualifying beneficiaries are considered a single account and as such are totaled and insured up to $100,000.

Formal revocable trusts are referred to as living or family trust accounts.  The basic requirements and coverage are the same as POD accounts, however, there are additional coverage calculations depending on how the trust document is written.

The $100,000 per beneficiary limit applies to all formal and informal revocable accounts held at the same insured bank.

IRREVOCABLE TRUST ACCOUNTS - Irrevocable trust accounts are those in which the grantor gives up all power to cancel or change the trust.  Since these trusts often contain conditions that affect the beneficiaries’ interests or provide the trustee or beneficiary the authority to invade the principal, insurance protection is usually limited to a total of $100,000.

RETIREMENT ACCOUNTS - Certain retirement accounts, owned by the same individual at the same insured bank, can be added together for coverage up to $250,000.  The accounts included are all types of IRA’s, Section 457 plans, self-directed defined contribution plans, and self-directed Keogh plans.  Naming beneficiaries does not increase insurance protection.

CORPORATION/PARTNERSHIP ACCOUNTS - Deposits owned by a corporation or partnership are insured up to $100,000 at a single bank.

When two insured banks merge, the deposits are separately insured for at least six months, after which, the insurance coverage will be combined.

To make sure your deposits are safe, please review your coverage.  If you have questions, please contact your financial institution, check the link to the FDIC on our website at www.grstarbuck.com, or as always, feel free to call.  We at G.R. Starbuck & Co., P.A. are here to help.