FDIC: Deposit Insurance Regulations; Revocable Trust Accounts

The FDIC recently came out with an interim final regulation regarding deposit insurance for revocable trust accounts. The FDIC summarized the interim rule as follows:

SUMMARY: The FDIC is adopting an interim rule to simplify and modernize its deposit insurance rules for revocable trust accounts. The FDIC's main goal in implementing these revisions is to make the rules easier to understand and apply, without decreasing coverage currently available for revocable trust account owners. The FDIC believes that the interim rule will result in faster deposit insurance determinations after depository institution closings and will help improve public confidence in the banking system. The interim rule eliminates the concept of qualifying beneficiaries. Also, for account owners with revocable trust accounts totaling no more than $500,000, coverage will be determined without regard to the beneficial interest of each beneficiary in the trust.

Under the new rules, a trust account owner with up to five different beneficiaries named in all his or her revocable trust accounts at one FDIC-insured institution will be insured up to $100,000 per beneficiary. Revocable trust account owners with more than $500,000 and more than five different beneficiaries named in the trust(s) will be insured for the greater of either: $500,000 or the aggregate amount of all the beneficiaries' interests in the trust(s), limited to $100,000 per beneficiary.

Federal Register: September 30, 2008 (Volume 73, Number 190).

Attorney Neil Hendershot at the PA Elder, Estate & Fiduciary Law Blog provided a great post on the interim rule titled, FDIC's Interim Rule for Living Trust Deposits.  Instead of reinventing the wheel I'm happy to defer to Attorney Hendershot on this topic.  As you will see from Attorney Hendershot's post, this is not the first time that FDIC has attempted to clarify deposit insurance in regards to revocable trusts.

One item of note given the recent passage of the $700 billion dollar bailout plan is that the $100,000 per depositor limit was temporarily raised to $250,000 through December 31, 2009.  Since the interim rule came out a week prior to the temporary increase it does not expressly state whether it is applicable to revocable trust.  It is logical that the temporary $250,000 per depositor increase also applies to each beneficiary of a revocable trust.  I will continue to research that aspect and report back any findings.