Dear clients and friends,
FDIC PART 6 B
This is a continuation of the last one where I discussed FDIC (and NCUA) insurance protection under the REVOCABLE TRUST category.
There are a couple of formal requirements you have to follow to get the insurance protection under the REVOCABLE TRUST category, but nothing difficult:
First, the title to the account (or the bank’s internal digital records) must show that it was intended to be an account with a beneficiary. For example, the title to a CD may be Mike Brady, ITF. The beneficiaries must also be formally named, either in the formal trust agreement or if an informal account, in the records of the bank; and
Second, the beneficiary must be a natural person, charity or other IRS recognized non-profit. If the beneficiary does not fall within this rule (like your pet dog), it will not fall within the REVOCABLE TRUST category but rather the SINGLE ACCOUNT category.
FIVE OR FEWER UNIQUE BENEFICIARIES
My last email focused on the amount of insurance protection you get when you have five or fewer unique beneficiaries on all combined formal and informal trust accounts; each owner of the trust gets $250,000 of protection per beneficiary. In such cases, it doesn’t matter how much a beneficiary may receive.
For example, Carol has one CD for $990,000 naming Marcia, Jan and Cindy as beneficiaries, and another CD FOR $10,000 naming Alice as beneficiary, for a total of $1,000,000. How much is insured? The answer is one owner times 4 unique beneficiaries ($250,000 x 4) for a total of $1,000,000 of insurance.
BUT WHAT IF THERE ARE MORE THAN FIVE UNIQUE BENEFICIARIES?
If there are more than five unique beneficiaries, the analysis changes. The amount of protection will then depend on how much total money is in the accounts and whether the beneficiaries are receiving EQUAL or UNEQUAL amounts.
WITH ACCOUNTS UP TO $1,250,000: COVERAGE NO MATTER WHAT!
If a depositor’s total REVOCABLE TRUST accounts equal $1,250,000 OR LESS, then the fact that the account has more than five beneficiaries is ignored. For example, Mike has a Revocable Trust with $1,000,000 of accounts and he names his wife, Carol; his six kids; and housekeeper, Alice as beneficiaries. Here, he has eight beneficiaries, but the over five beneficiary rules do not apply because the account does not exceed $1,250,000. The entire amount is insured!
A discussion of REVOCABLE TRUST accounts over $1,250,000 with more than five beneficiaries will be continue in my next LISTEN TO LAWRENCE email.
I hope this helps.
Please forward this information to your friends and relatives.
As always, please send me your questions. If you are thinking about it, others are probably too, so my answers will no doubt help you and many others.
Let’s stay connected.
LISTEN TO LAWRENCE