FDIC Implements New Rules on Trust Account Insurance

Affluent Americans are advised to review the extent of their bank deposit insurance coverage following recent changes implemented by the Federal Deposit Insurance Corporation (FDIC).

Previously, there was no limit on the amount insured in trust accounts, which are legal arrangements ensuring asset distribution to specific beneficiaries. However, the new rules cap FDIC insurance for trust accounts at $1.25 million.

Purpose and Implications of the Rule: 

The FDIC implemented this change to simplify deposit insurance rules and facilitate quicker determinations of insured accounts in the possibility of a bank failure. However, it may result in reduced insurance coverage for some bank customers with large deposits in trust accounts.

Affected depositors may need to restructure their deposits or open new accounts at other banks to protect their funds. The change underscores the importance of understanding and managing deposit insurance coverage.

Insured Amounts and Ownership Categories:

While the FDIC still insures up to $250,000 per depositor and per account category at each bank, the new rule limits insurance for trust accounts to $1.25 million. This change affects the coverage of both irrevocable and revocable trusts.

Previously, trust accounts provided a loophole to insure more than $250,000 by allowing each trust beneficiary to receive $250,000 in insurance protection. However, under the new rules, the number of beneficiaries eligible for insurance is limited to five, with a maximum coverage of $1.25 million.

Actions for Depositors: 

Depositors can use the FDIC’s Electronic Deposit Insurance Estimator tool to assess their coverage per-bank basis. If some funds are uninsured, depositors should communicate with their bank to explore alternative solutions, such as opening different account types or transferring uninsured sums to other banks.