Listen to Lawrence…FDIC Part 6 – REVOCABLE TRUSTS

July 7, 2020


Dear clients and friends,


In a prior email, called FDIC PART TWO, I introduced the concept that you are entitled to $250,000 of FDIC insurance protection per depositor, per bank and per ACCOUNT OWNERSHIP CATEGORY…..and that there are eight categories. This email will discuss the THIRD category…..REVOCABLE TRUSTS. This also applies to NCUA insured credit union accounts.

The official definition of a REVOCABLE TRUST account from the FDIC website is “a deposit account owned by one or more people that designates one or more beneficiaries who will receive the deposits upon the death of the owner(s).”

I think this category is simple and confusing all at the same time. On the one hand, the term “revocable trust” conjures up images of a fancy formal trust agreement that you need a lawyer to create (and I have created many). These are typically called “living trusts” because they are created when the creator is, well….living. The main reasons people create these formal revocable trusts are to avoid probate and efficiently manage assets during and after their lives.

However, the term “revocable trust” is considered much broader by the FDIC and includes bank accounts that name a beneficiary. This includes simple checking and savings accounts, CDs and money money markets that name a beneficiary. These accounts are sometimes called “in-trust-for” accounts (ITF) or “payable-on-death” accounts (POD).

Whether your REVOCABLE TRUST account is a formal trust or an informal bank account naming beneficiaries, you are entitled to $250,000 of insurance protection per beneficiary up to five beneficiaries. That is, you can get an additional $1,250,000 of insurance at one insured bank or credit union. This is in addition to the $250,000 of protection from each of the other categories, such as from SINGLE ACCOUNTS or JOINT ACCOUNTS. (In another LISTEN TO LAWRENCE email I will describe the insurance limits if you have more than five beneficiaries.)

For example, if you have a formal revocable trust with $1,250,000 in it, naming your five children as beneficiaries, you will receive $250,000 of insurance times five for $1,250,000 of protection. Likewise, if you have an informal CD with $1,250,000 in it, naming your five children as beneficiaries, you will receive $250,000 of insurance times five for $1,250,000 of protection. YOU do not count as one of the beneficiaries, only those who receive the funds after your death, but it can include your spouse.

If the formal revocable trust has two creators/owners (aka, trustors, settlers, grantors, donors) or the informal account is a joint account naming beneficiaries, then each creator/owner gets their own $250,000 of insurance protection times five. For example, if a husband and wife create a formal joint revocable trust with their five children as beneficiaries, then each would have up to $1,250,000 of insurance thereby protecting up to $2,500,000 at one bank from this category alone.

The rule is you get $250,000 of protection per beneficiary after adding up all the different beneficiaries in these accounts at the same insured bank. Therefore, if you have a formal revocable trust with $1,250,000 naming three kids as beneficiaries and a CD worth the same with the three children and two grandchildren as beneficiaries, you will have five separate beneficiaries between the two accounts and thus will still only get five times $250,000 of insurance protection, leaving $1,250,000 uninsured.


My question is, if a couple has a joint account and they have over $500,000 in a savings account or money market, can it exceed the $250,000 a person if there is a beneficiary on the account? Two banks told me that you can exceed $500,000 and each beneficiary is entitled to $250,000 and it is insured. I am so confused. Now that you are confused with this question please advise. Regards.


No confusion. This is a joint bank account with beneficiaries, therefore it falls under the REVOCABLE TRUST category, with each owner getting $250,000 of protection per beneficiary. You don’t tell me how many beneficiaries in your question. If one, you would each get $250,000 of protection (total of $500,000). If two beneficiaries, you would each get $500,000 of protection (total of $1,000,000).


Lawrence, why not mention that every beneficiary on accounts up to five is also covered for $250,000.00 as long as they are designated beneficiaries on the account card?


This topic will be continued in my next LISTEN TO LAWRENCE email.


An additional scenario. All our accounts are POD accounts – Checking account, Money Market Account and CDs — totaling around $700,000 . My husband and I are joint owners on everything with our two children as beneficiaries. How much is protected?


All the POD accounts fall under the REVOCABLE TRUST category and equal $700,000. You each will have $500,000 of protection ($250,00 x 2 beneficiaries). Therefore all your accounts are protected up to $1,000,000.

This is PART A of this discussion. To be continued…..

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.


Stay safe!