FDIC Insurance above $250K

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bt365
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FDIC Insurance above $250K

Post by bt365 »

Can one allocate CDs across several banks with total value of 250K at each bank and maintain FDIC insurance for all, or is $250K the maximum FDIC protection for all CDs (checking/savings/MMDA/CDs) at all banks? Am referring to accounts for a single person not living in Mass. I have read about CDARS network which spreads holder's CD's across many banks within their network, though the participating banks are paying rock-bottom yields, sometimes even lower than brokered CD or local bank CDs. Seems no place to get any appreciable cash yield and have protection of FDIC/NCUA insurance. Have fully allotted for bonds in my retirement account and seeking place for extra short term (1-2) years cash. Thank you.
Last edited by bt365 on Fri Jun 05, 2020 3:13 pm, edited 1 time in total.
RonSwanson
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Re: FDIC Insurance above $250K

Post by RonSwanson »

According to FDIC.gov:
"The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. "

So a single account and a joint account would be insured separately, for example. That is my understanding at least.
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cheese_breath
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Re: FDIC Insurance above $250K

Post by cheese_breath »

$250K for each bank, but not different branches of the same bank.
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bt365
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Re: FDIC Insurance above $250K

Post by bt365 »

So a single account and a joint account would be insured separately, for example. That is my understanding at least.

That I understand. My wife passed many years ago. I am single.
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bt365
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Re: FDIC Insurance above $250K

Post by bt365 »

Thinking cash in separate banks with short CD ladder of $250,000 in each bank, with FDIC protection. In these times CD yields are abysmal, even going out five years yields little. Not that I would go out five years, as better investment returns elsewhere for that length of time, albeit with no certainty principle will not fall, and no FDIC protection.
Last edited by bt365 on Fri Jun 05, 2020 3:25 pm, edited 4 times in total.
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cheese_breath
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Re: FDIC Insurance above $250K

Post by cheese_breath »

RonSwanson wrote: Fri Jun 05, 2020 3:11 pm According to FDIC.gov:
"The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. "

So a single account and a joint account would be insured separately, for example. That is my understanding at least.
Ownership categories...

Single accounts
Certain retirement accounts
Joint accounts
Revocable trust accounts
Irrevocable trust accounts
Employee benefit plan accounts
Corporation/partnerships/unincorporated association accounts
Government accounts

OP's CDs would all be single accounts
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tashnewbie
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Re: FDIC Insurance above $250K

Post by tashnewbie »

cheese_breath wrote: Fri Jun 05, 2020 3:21 pm
RonSwanson wrote: Fri Jun 05, 2020 3:11 pm According to FDIC.gov:
"The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. "

So a single account and a joint account would be insured separately, for example. That is my understanding at least.
Ownership categories...

Single accounts
Certain retirement accounts
Joint accounts
Revocable trust accounts
Irrevocable trust accounts
Employee benefit plan accounts
Corporation/partnerships/unincorporated association accounts
Government accounts

OP's CDs would all be single accounts
Like you said above though, it's per bank for each ownership category. $250K should be covered in a single ownership category at each bank.
Robert20
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Re: FDIC Insurance above $250K

Post by Robert20 »

bt365 wrote: Fri Jun 05, 2020 3:07 pm Can one allocate CDs across several banks with total value of 250K at each bank and maintain FDIC insurance for all, or is $250K the maximum FDIC protection for all CDs (checking/savings/MMDA/CDs) at all banks? Am referring to accounts for a single person not living in Mass. I have read about CDARS network which spreads holder's CD's across many banks within their network, though the participating banks are paying rock-bottom yields, sometimes even lower than brokered CD or local bank CDs. Seems no place to get any appreciable cash yield and have protection of FDIC/NCUA insurance. Have fully allotted for bonds in my retirement account and seeking place for extra short term (1-2) years cash. Thank you.
Fidelity covers upto 1.5M something.. Pl check..
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cheese_breath
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Re: FDIC Insurance above $250K

Post by cheese_breath »

tashnewbie wrote: Fri Jun 05, 2020 3:28 pm
cheese_breath wrote: Fri Jun 05, 2020 3:21 pm
RonSwanson wrote: Fri Jun 05, 2020 3:11 pm According to FDIC.gov:
"The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. "

So a single account and a joint account would be insured separately, for example. That is my understanding at least.
Ownership categories...

Single accounts
Certain retirement accounts
Joint accounts
Revocable trust accounts
Irrevocable trust accounts
Employee benefit plan accounts
Corporation/partnerships/unincorporated association accounts
Government accounts

OP's CDs would all be single accounts
Like you said above though, it's per bank for each ownership category. $250K should be covered in a single ownership category at each bank.
That is correct.
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erictiger12
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Re: FDIC Insurance above $250K

Post by erictiger12 »

Will adding two beneficiaries increase the coverage to 500K?
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retired@50
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Re: FDIC Insurance above $250K

Post by retired@50 »

erictiger12 wrote: Fri Jun 05, 2020 4:16 pm Will adding two beneficiaries increase the coverage to 500K?
No. The FDIC insurance is for the depositor.

Regards,

EDIT: see expanded post below with additional information.
Last edited by retired@50 on Fri Jun 05, 2020 6:30 pm, edited 1 time in total.
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Re: FDIC Insurance above $250K

Post by nisiprius »

The FDIC has a useful online tool, EDIE, the Electronic Deposit Insurance Estimator, which is quite worth using--especially if you actually are ready to act and the situation is slightly complicated.

Also, some Massachusetts banks advertise all deposits fully insured--but not entirely by FDIC. The first $250,000 by FDIC, anything above that by one of two slightly mysterious bank-consortium-thingies named SIF and DIF.
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Affable at 50
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Re: FDIC Insurance above $250K

Post by Affable at 50 »

Robert20 wrote: Fri Jun 05, 2020 3:29 pm
bt365 wrote: Fri Jun 05, 2020 3:07 pm Can one allocate CDs across several banks with total value of 250K at each bank and maintain FDIC insurance for all, or is $250K the maximum FDIC protection for all CDs (checking/savings/MMDA/CDs) at all banks? Am referring to accounts for a single person not living in Mass. I have read about CDARS network which spreads holder's CD's across many banks within their network, though the participating banks are paying rock-bottom yields, sometimes even lower than brokered CD or local bank CDs. Seems no place to get any appreciable cash yield and have protection of FDIC/NCUA insurance. Have fully allotted for bonds in my retirement account and seeking place for extra short term (1-2) years cash. Thank you.
Fidelity covers upto 1.5M something.. Pl check..
Through Fidelity’s Cash Management Account you can hold up to $1.25 million and maintain FDIC insurance.

https://www.fidelity.com/cash-managemen ... t/overview
straws46
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Re: FDIC Insurance above $250K

Post by straws46 »

retired@50 wrote: Fri Jun 05, 2020 5:35 pm
erictiger12 wrote: Fri Jun 05, 2020 4:16 pm Will adding two beneficiaries increase the coverage to 500K?
No. The FDIC insurance is for the depositor.

Regards,
Adding pay on death beneficiaries will change both the nature of the account (from individual to revocable trust) and the amount of insurance (up to $250,000 per pod beneficiary up to a limit of 5). Go to the FDIC website and study up yourself. If you have enough money that FDIC insurance limits are an issue, I am betting you will be able to understand the FDIC's rules.
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retired@50
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Re: FDIC Insurance above $250K

Post by retired@50 »

straws46 wrote: Fri Jun 05, 2020 6:00 pm
retired@50 wrote: Fri Jun 05, 2020 5:35 pm
erictiger12 wrote: Fri Jun 05, 2020 4:16 pm Will adding two beneficiaries increase the coverage to 500K?
No. The FDIC insurance is for the depositor.

Regards,
Adding pay on death beneficiaries will change both the nature of the account (from individual to revocable trust) and the amount of insurance (up to $250,000 per pod beneficiary up to a limit of 5). Go to the FDIC website and study up yourself. If you have enough money that FDIC insurance limits are an issue, I am betting you will be able to understand the FDIC's rules.
Doesn't this additional protection presume the original account was opened / owned by a trust?
EDIT:
I've managed to dig up the answer to my own question, posting here in case others are interested. See quotes below from the FDIC website.
The general notion is that you can create an "informal" trust which will cover each beneficiary (up to 5), IF a couple of requirements are met.

Creation of an informal trust:
1. Informal Revocable Trusts –
often called payable-on death (“POD”), in-trust-for (“ITF”), as trustee for (“ATF”), or Totten trust accounts – are created when an account owner signs an agreement, which is usually part of the IDI’s signature card, directing the IDI to transfer the funds in the account to one or more named beneficiaries upon the owner’s death.
Account title is important:
1. Trust Relationship Must be Reflected in the Account Title

Deposit insurance regulations mandate that the testamentary intent of a revocable trust account be manifested in the “title” of the account. In other words, the “title” must reflect that upon the revocable trust owner’s death the account funds shall belong to one or more beneficiaries. For informal revocable trusts, this titling requirement can be satisfied by using commonly accepted terms such as, but not limited to, “in trust for,” “as trustee for,” “payable-on-death to,” or any acronym therefor (e.g., “ITF,” “ATF” or “POD”). For formal revocable trusts, the accounts can be titled in the name of the trust or by simply having the word “trust” in the title.

For purposes of meeting this requirement, the term “title” includes the electronic deposit account records of the IDI. For informal revocable trusts, the FDIC will recognize an account as a revocable trust account if the IDI’s electronic deposit account records identify (through a code or otherwise) the account as a revocable trust account. In other words, IDIs can meet the titling requirement by using an electronic code signifying the deposit as a POD account.

2. Beneficiaries Must be Identified in the IDI Records

FDIC regulations require that the specific names of the beneficiaries must be reflected in the IDI’s account records. This does not mean that the beneficiary names must be reflected in the account name or caption; provided that the name is in the IDI’s records, i.e., on the signature card or account agreement, this requirement is deemed satisfied. This requirement applies solely to informal revocable trust accounts. It does not apply to formal living trust accounts, where the beneficiaries are identified in the trust agreement.
Full page at fdic.gov: https://www.fdic.gov/deposit/diguideban ... l#informal

Regards,
Last edited by retired@50 on Sat Jun 06, 2020 12:21 am, edited 4 times in total.
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hirlaw
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Re: FDIC Insurance above $250K

Post by hirlaw »

This is a helpful guide from the FDIC. For instance, a joint account is insured up to $250,000 per co-owner.

www.fdic.gov/deposit/covered/categories.html
nesdog
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Re: FDIC Insurance above $250K

Post by nesdog »

I've been trying to reason this out as well.

We have a CapOne account in our Living Trust, my wife and I as trustees and daughter as beneficiary. We also have a joint CD not in the trust. What's the total coverage? When I use EDIE, it seems like we have a max of 500k. But different categories make it seem like it should be 500 for each one?
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Re: FDIC Insurance above $250K

Post by Kevin M »

nesdog wrote: Fri Jun 05, 2020 6:28 pm I've been trying to reason this out as well.

We have a CapOne account in our Living Trust, my wife and I as trustees and daughter as beneficiary. We also have a joint CD not in the trust. What's the total coverage? When I use EDIE, it seems like we have a max of 500k. But different categories make it seem like it should be 500 for each one?
You are correct, as long as the joint CD does not name your daughter as a beneficiary, which would put it into the revocable trust category, and it would be lumped in with your formal revocable trust accounts for coverage.

For the revocable trust category, each owner is insured up to $250K per beneficiary, so $250K for you and same for your wife, for a total of $500K.

For the joint account ownership category, you and your wife are separately insured up to $250K each, for a total of $500K in this ownership category.

But you also need to think about why you have a trust, which usually is to avoid probate. The joint account is potentially exposed to probate if you and your wife die simultaneously, or the surviving spouse were to die before moving the account into the living trust.

Of course the death of one of the joint owners would also reduce coverage by half for both ownership categories, but there is a six-month grace period to restructure your accounts before the coverage is reduced.

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Kevin M
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Re: FDIC Insurance above $250K

Post by Kevin M »

bt365 wrote: Fri Jun 05, 2020 3:07 pm Can one allocate CDs across several banks with total value of 250K at each bank and maintain FDIC insurance for all, or is $250K the maximum FDIC protection for all CDs (checking/savings/MMDA/CDs) at all banks?
It is the former, but per various replies, you can get more than $250K coverage at a single bank (or credit union) with certain ownership categories, or by using multiple ownership categories.

Considering the revocable trust ownership category, most banks and credit unions allow payable on death (POD) accounts, which are insured up to $250K per beneficiary (per owner), and for up to five beneficiaries it does not matter how much each beneficiary gets. So you could designate your primary beneficiary to get 99%, and a relative, friend, or qualified charity to get 1%, as long as the bank or CU allows unequal designations (some do, some don't), and you would be insured up to $500K. For more than five beneficiaries, it gets more complicated.

I assume that you at least have a will, and that you have one or more heirs. If you don't already have a revocable trust, then you could name your heir as your primary beneficiary, designating them to receive the bulk of your account upon your death, and name one or more others as a beneficiaries that each receive a small percentage of the account (if the bank or CU allows unequal shares). This is an easy way to increase your deposit insurance coverage up to $1.25M.

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Re: FDIC Insurance above $250K

Post by AlohaJoe »

Affable at 50 wrote: Fri Jun 05, 2020 5:54 pm
Robert20 wrote: Fri Jun 05, 2020 3:29 pm
bt365 wrote: Fri Jun 05, 2020 3:07 pm Can one allocate CDs across several banks with total value of 250K at each bank and maintain FDIC insurance for all, or is $250K the maximum FDIC protection for all CDs (checking/savings/MMDA/CDs) at all banks? Am referring to accounts for a single person not living in Mass. I have read about CDARS network which spreads holder's CD's across many banks within their network, though the participating banks are paying rock-bottom yields, sometimes even lower than brokered CD or local bank CDs. Seems no place to get any appreciable cash yield and have protection of FDIC/NCUA insurance. Have fully allotted for bonds in my retirement account and seeking place for extra short term (1-2) years cash. Thank you.
Fidelity covers upto 1.5M something.. Pl check..
Through Fidelity’s Cash Management Account you can hold up to $1.25 million and maintain FDIC insurance.

https://www.fidelity.com/cash-managemen ... t/overview
And Interactive Brokers offers $5 million in FDIC insurance for couples. ETrade offers $2.5 million for couples. I assume that private banking clients (i.e. the people with >$10 million) get similar services but I'm surprised it isn't more widespread at "normal" brokerages; Schwab and Vanguard don't offer anything like it, as far as I know.
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Re: FDIC Insurance above $250K

Post by jason2459 »

E-Trade uses multiple partner banks to spread the money across. Each bank with 250k fdic. I would assume anywhere that says they insure more then $250k by FDIC does the same.

They change partner banks periodically. From my most recent email from them on this.
.Please note the following updates to your Program Banks:

Added: Barrington Bank, Beal Bank SSB, Beal Bank USA, Beverly Bank & Trust, Cathay Bank, Customers Bank, Crystal Lake Bank & Trust, Hinsdale Bank, JPMorgan Chase Bank, NA, Lakeforest Bank, Mizuho Bank (USA), Northbrook Bank & Trust, Old Plank Trail Comm Bank, PNC Bank, National Association, Schaumburg Bank & Trust, State Bank of the Lakes, TriState Capital Bank, Village Bank & Trust, Wheaton Bank & Trust

For a complete list of Program Banks, click here.

What this means for your account:

No action is required on your part; the way you access cash in your account for spending is unchanged.
FDIC insurance coverage for the Premium Savings Account Bank Deposit Program is still $250,000 per Program Bank and up to $1.25MM in total ($2.5MM for joint accounts).
Coverage limits for each Program Bank per customer are $250,000 across all accounts where cash is held at the Program Bank. You are responsible for monitoring your deposits with a Program Bank.
You may opt out of having funds swept to any Program Bank at any time. To do so, please call us at the number below.
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J295
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Re: FDIC Insurance above $250K

Post by J295 »

If you want to deposit all of the funds through a single bank and have the full amount (let’s say $2 million just for an example) be covered by FDIC insurance you can do so at a bank that participates in the CDARS program. Google it and discuss it with your banker if interested.

Edited to add: presently, and typically, the CDARS rates are not as competitive as those offered by online banks. Our present experience is the brick and mortar cd rates are nowhere near as competitive as the online rates. Rate wise I believe that rather than use the program one can simply use different FDIC insured banks to purchase multiple fully insured CDs at multiple banks.
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