Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

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gotlucky
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Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by gotlucky » Mon May 14, 2018 1:54 pm

Ally allows unequal beneficiaries for POD accounts. This seems like a nice feature because I want to maximize the FDIC coverage while not allowing my 2 minor children to directly receive (or have rights) to the money except as by directed by our living trust.

Ally allows me to specify one beneficiary (my wife) to receive 99.9% of the POD account and others (my 2 minor children) to each receive 0.05%.

As far as I can tell, this POD account is still FDIC-insured up to $750k. Is that correct?

If so, it seems like a good way to use any living person as a "micro" beneficiary if you need the added FDIC coverage.

Gill
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by Gill » Mon May 14, 2018 2:18 pm

Any information I've seen on FDIC insurance doesn't extend the insurance beyond $250K because of a POD designation, only in the case of a joint account.
Gill

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HueyLD
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by HueyLD » Mon May 14, 2018 3:03 pm

Q: Can I have more than $250,000 of deposit insurance coverage at one FDIC-insured bank?

A: Yes. The FDIC insures deposits according to the ownership category in which the funds are insured and how the accounts are titled. The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category. Deposits held in different ownership categories are separately insured, up to at least $250,000, even if held at the same bank. For example, a revocable trust account (including living trusts and informal revocable trusts commonly referred to as payable on death (POD) accounts) with one owner naming three unique beneficiaries can be insured up to $750,000.
https://www.fdic.gov/deposit/deposits/faq.html

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dm200
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by dm200 » Mon May 14, 2018 3:05 pm

Gill wrote:
Mon May 14, 2018 2:18 pm
Any information I've seen on FDIC insurance doesn't extend the insurance beyond $250K because of a POD designation, only in the case of a joint account.
Gill
Sorry, but POD designation can multiply the FDIC (or NCUA) federal insurance limits above $250k

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Steelersfan
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by Steelersfan » Mon May 14, 2018 5:22 pm

In general, the owner of a revocable trust account is insured up to $250,000 for each unique beneficiary, if all of the following requirements are met:

The account title at the bank must indicate that the account is held pursuant to a trust relationship. This rule can be met by using the terms payable on death (or POD), in trust for (or ITF), as trustee for (or ATF), living trust, family trust, or any similar language, including simply having the word "trust" in the account title. The account title includes information contained in the bank's electronic deposit account records.

The beneficiaries must be named in either the deposit account records of the bank (for informal revocable trusts) or identified in the formal revocable trust document. For a formal trust agreement, it is acceptable for the trust to use language such as "my issue" or other commonly used legal terms to describe the designated beneficiaries, provided the specific names and number of eligible beneficiaries can be determined.

To qualify as an eligible beneficiary, the beneficiary must be a living person, a charity or a non-profit organization. If a charity or non-profit organization is named as beneficiary, it must qualify as such under Internal Revenue Service (IRS) regulations.

An account must meet all of the above requirements to be insured under the revocable trust ownership category. Typically, if any of the above requirements are not met, the entire amount in the account, or the portion of the account that does not qualify, is added to the owner's other single accounts, if any, at the same bank and insured up to $250,000. If the trust has multiple co-owners, each owner's share of the non-qualifying amount would be treated as his or her single ownership account.

Insurance coverage for revocable trust accounts is calculated differently depending on the number of beneficiaries named by the owner, the beneficiaries' interests and the amount of the deposit.

Two calculation methods are used to determine insurance coverage of revocable trust accounts: one method is used only when a revocable trust owner has five or fewer unique beneficiaries; the other method is used only when an owner has six or more unique beneficiaries.

If a trust has more than one owner, each owner's insurance coverage is calculated separately.




The text above is about half way down this FDIC.GOV page:

https://www.fdic.gov/regulations/resour ... glish.html

Gill
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by Gill » Mon May 14, 2018 5:38 pm

As I read all of this, the coverage applies to the long-established common law Totten Trust accounts, eg. A in trust for B, not the simple designation of a beneficiary on an account titled in the name of A.

Gill
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by Gill » Mon May 14, 2018 5:39 pm

dm200 wrote:
Mon May 14, 2018 3:05 pm
Gill wrote:
Mon May 14, 2018 2:18 pm
Any information I've seen on FDIC insurance doesn't extend the insurance beyond $250K because of a POD designation, only in the case of a joint account.
Gill
Sorry, but POD designation can multiply the FDIC (or NCUA) federal insurance limits above $250k
See my post above. I’m not sure you’re correct.
Gill

DWNY
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by DWNY » Mon May 14, 2018 6:03 pm

My favorite way to check for FDIC coverage is the FDIC's own coverage calculator. If one fills in 3 POD beneficiaries in the calculator for one account. The result is that up to $750,000 is insured. An account balance of $750,001 shows $1 uisninsured.

https://www5.fdic.gov/edie/

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dm200
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by dm200 » Mon May 14, 2018 6:16 pm

DWNY wrote:
Mon May 14, 2018 6:03 pm
My favorite way to check for FDIC coverage is the FDIC's own coverage calculator. If one fills in 3 POD beneficiaries in the calculator for one account. The result is that up to $750,000 is insured. An account balance of $750,001 shows $1 uisninsured.

https://www5.fdic.gov/edie/
There is a similar calculator for federally insured credit unions at ncua.gov

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OAG
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by OAG » Mon May 14, 2018 6:38 pm

DWNY wrote:
Mon May 14, 2018 6:03 pm
My favorite way to check for FDIC coverage is the FDIC's own coverage calculator. If one fills in 3 POD beneficiaries in the calculator for one account. The result is that up to $750,000 is insured. An account balance of $750,001 shows $1 uisninsured.

https://www5.fdic.gov/edie/
+1 (I use this at three different CU to get to $2.5 Million. (BTW the calculater at NCUA gives the same result (no mystery they are both basically the same calculator)}.
OAG=Old Army Guy. Retired CW4 USA (US Army) in 1979.

Gill
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by Gill » Mon May 14, 2018 6:46 pm

We’re saying the same thing. The beneficiaries must be designated in the account name as in a Totten Trust. My checking account is in my name alone but my wife is designated as a POD beneficiary. That account would only be insured for $250K.
Gill

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Kevin M
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by Kevin M » Mon May 14, 2018 6:58 pm

Gill wrote:
Mon May 14, 2018 6:46 pm
We’re saying the same thing. The beneficiaries must be designated in the account name as in a Totten Trust. My checking account is in my name alone but my wife is designated as a POD beneficiary. That account would only be insured for $250K.
Gill
Yes, because you only have one beneficiary, so no difference than if you had no beneficiaries. If you named two beneficiaries then your coverage would be $500K.

I don't see how the language quoted in a reply above is not perfectly clear. If it's a trust or POD account, then the coverage is determined by the number of beneficiaries

Kevin
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need403bhelp
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by need403bhelp » Mon May 14, 2018 7:05 pm

Kevin M wrote:
Mon May 14, 2018 6:58 pm
Gill wrote:
Mon May 14, 2018 6:46 pm
We’re saying the same thing. The beneficiaries must be designated in the account name as in a Totten Trust. My checking account is in my name alone but my wife is designated as a POD beneficiary. That account would only be insured for $250K.
Gill
Yes, because you only have one beneficiary, so no difference than if you had no beneficiaries. If you named two beneficiaries then your coverage would be $500K.

I don't see how the language quoted in a reply above is not perfectly clear. If it's a trust or POD account, then the coverage is determined by the number of beneficiaries

Kevin
I agree with Kevin M’s interpretation. They have a detailed PDF brochure with examples that spells everything out:

https://www.fdic.gov/deposit/deposits/b ... nglish.pdf

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Kevin M
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by Kevin M » Mon May 14, 2018 7:06 pm

gotlucky wrote:
Mon May 14, 2018 1:54 pm
Ally allows unequal beneficiaries for POD accounts. This seems like a nice feature because I want to maximize the FDIC coverage while not allowing my 2 minor children to directly receive (or have rights) to the money except as by directed by our living trust.

Ally allows me to specify one beneficiary (my wife) to receive 99.9% of the POD account and others (my 2 minor children) to each receive 0.05%.

As far as I can tell, this POD account is still FDIC-insured up to $750k. Is that correct?

If so, it seems like a good way to use any living person as a "micro" beneficiary if you need the added FDIC coverage.
Yes, this is true for up to five beneficiaries. After that it gets more complicated.

The thing to be careful about is for your POD designations not to conflict with the provisions of your trust, since the trust should be written to handle all contingencies.

So this is your individual money, not your and your wife's money?

Assuming so, let's say your trust is set up so that the money would be held in trust for your children, perhaps with your wife as trustee, but with restrictions on how she could spend the trust funds. In this case, your POD setup would negate your trust intentions, since on your death, your wife would have complete control over the money inherited directly as beneficiary of the POD account. She could then remarry, make her new husband her beneficiary, then die and her new husband makes his children the beneficiaries, cutting your children out entirely.

Kevin
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Gill
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by Gill » Mon May 14, 2018 7:07 pm

Kevin M wrote:
Mon May 14, 2018 6:58 pm
Gill wrote:
Mon May 14, 2018 6:46 pm
We’re saying the same thing. The beneficiaries must be designated in the account name as in a Totten Trust. My checking account is in my name alone but my wife is designated as a POD beneficiary. That account would only be insured for $250K.
Gill
Yes, because you only have one beneficiary, so no difference than if you had no beneficiaries. If you named two beneficiaries then your coverage would be $500K.

I don't see how the language quoted in a reply above is not perfectly clear. If it's a trust or POD account, then the coverage is determined by the number of beneficiaries

Kevin
Mine has nothing to do with number of beneficiaries. It’s because the account is in my name alone. I could designate ten beneficiaries with this account title and the coverage would still be $250K. My point is, the beneficiaries must be in the name of the account. If not, there is only $250K coverage regardless of the number designated as POD.
Gill

gotlucky
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by gotlucky » Mon May 14, 2018 8:05 pm

Kevin M wrote:
Mon May 14, 2018 7:06 pm

Yes, this is true for up to five beneficiaries. After that it gets more complicated.

The thing to be careful about is for your POD designations not to conflict with the provisions of your trust, since the trust should be written to handle all contingencies.

So this is your individual money, not your and your wife's money?

Assuming so, let's say your trust is set up so that the money would be held in trust for your children, perhaps with your wife as trustee, but with restrictions on how she could spend the trust funds. In this case, your POD setup would negate your trust intentions, since on your death, your wife would have complete control over the money inherited directly as beneficiary of the POD account. She could then remarry, make her new husband her beneficiary, then die and her new husband makes his children the beneficiaries, cutting your children out entirely.
Thanks Kevin. I did note that "up to 5" beneficiaries was straightforward.

I am aware that POD instructions supersede the trust instructions because the money 1) isn't titled in my living trust to begin and 2) never makes into my estate upon my death via pour-over will or other instructions.

I'm more concerned about Ally becoming insolvent than my untimely death (of course, now that I've said that... :| ). It's not that far-fetched that Ally could fail. I've had accounts at S&Ls and banks that have failed in the past but was always below the insured limits and receiving my funds (from RTC I think) promptly and painlessly.

Back then, I wasn't aware that I could do POD accounts and get more insurance with each named beneficiary, so I used to have $98k CDs at many different banks. It was really a big hassle. Now that I can adjust the percentage claim of the beneficiaries, everything is so much simpler. My "micro" beneficiaries understand why they are listed and that, should I die prematurely, they'd receive de minimis amounts from this POD account (Ally allows a beneficiary's stake to be as low as 1bp or $100 per $1M insured). If fact, they will probably now start using me as their "micro" beneficiary and maybe their banks won't allow such small shares. :wink:

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Kevin M
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by Kevin M » Mon May 14, 2018 8:09 pm

Gill wrote:
Mon May 14, 2018 7:07 pm
Kevin M wrote:
Mon May 14, 2018 6:58 pm
Gill wrote:
Mon May 14, 2018 6:46 pm
We’re saying the same thing. The beneficiaries must be designated in the account name as in a Totten Trust. My checking account is in my name alone but my wife is designated as a POD beneficiary. That account would only be insured for $250K.
Gill
Yes, because you only have one beneficiary, so no difference than if you had no beneficiaries. If you named two beneficiaries then your coverage would be $500K.

I don't see how the language quoted in a reply above is not perfectly clear. If it's a trust or POD account, then the coverage is determined by the number of beneficiaries

Kevin
Mine has nothing to do with number of beneficiaries. It’s because the account is in my name alone. I could designate ten beneficiaries with this account title and the coverage would still be $250K. My point is, the beneficiaries must be in the name of the account. If not, there is only $250K coverage regardless of the number designated as POD.
Gill
I think you are wrong. Did you read this part of the reply above?
The account title at the bank must indicate that the account is held pursuant to a trust relationship. This rule can be met by using the terms payable on death (or POD), in trust for (or ITF), as trustee for (or ATF), living trust, family trust, or any similar language, including simply having the word "trust" in the account title. The account title includes information contained in the bank's electronic deposit account records.

The beneficiaries must be named in either the deposit account records of the bank (for informal revocable trusts) <snip>
I underlined the important parts.

At Ally Bank, you can see your named beneficiaries for a POD account online, therefore the POD information is in the bank's electronic deposit account records.

What is it about this that you think we are not understanding?

Kevin
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DIFAR31
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by DIFAR31 » Mon May 14, 2018 8:14 pm

Gill wrote:
Mon May 14, 2018 7:07 pm
My point is, the beneficiaries must be in the name of the account. If not, there is only $250K coverage regardless of the number designated as POD.
Not according to the FDIC brochure that was linked to.

The account title at the bank must indicate that the account is held pursuant to a trust relationship. This rule can be met by using the terms payable on death (or POD), in trust for (or ITF), as trustee for (or ATF), living trust, family trust, or any similar language, including simply having the word “trust” in the account title.


The names of the beneficiaries don't need to be incorporated in the name of the account; the names do need to be listed in the bank's deposit account records or "identified in the formal revocable trust document."

My wife and I are joint account holders of a POD savings account. The monthly statements are addressed thusly:

John Smith or
Mary Smith
POD
100 Main St.
Anytown, USA

Works for me.
Last edited by DIFAR31 on Mon May 14, 2018 9:50 pm, edited 1 time in total.

Gill
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by Gill » Mon May 14, 2018 8:35 pm

I don’t agree with your interpretation of the “bank’s deposit account records”. Realizing I won’t change your mind, would you be willing to risk your own funds on your interpretation of this provision? I wouldn’t.
Gill

DIFAR31
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by DIFAR31 » Mon May 14, 2018 9:34 pm

How much interpretation is required to figure out what's meant by "bank's deposit account records"?

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Kevin M
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by Kevin M » Mon May 14, 2018 9:50 pm

Gill wrote:
Mon May 14, 2018 8:35 pm
I don’t agree with your interpretation of the “bank’s deposit account records”. Realizing I won’t change your mind, would you be willing to risk your own funds on your interpretation of this provision? I wouldn’t.
Gill
Yes, I have done so at Ally Bank in the past, but no longer have enough there to worry about it (CD rates no longer competitive).

What particular expertise do you have that makes you think we don't understand what "bank's deposit account records" means? Do you know of any cases where this has been a problem at failed banks?

I wonder if anyone here is motivated enough to actually try and get a ruling on this from the FDIC, perhaps working through Ally Bank. Maybe Ally Bank already has something in writing that would make it clear.

As an aside, some years ago, before I had come across the part about the bank's deposit account records being sufficient, or maybe because I was extra paranoid, I called Ally Bank and had them put the names of my beneficiaries into the titles of my POD accounts--I could see this online. Some time ago, for a reason that I don't recall, they sent a message indicating that they would no longer include beneficiaries in the displayed title (maybe because the bank's records were sufficient), and sure enough, they don't appear that way anymore.

Kevin
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libralibra
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by libralibra » Tue May 15, 2018 1:30 pm

Gill wrote:
Mon May 14, 2018 8:35 pm
I don’t agree with your interpretation of the “bank’s deposit account records”. Realizing I won’t change your mind, would you be willing to risk your own funds on your interpretation of this provision? I wouldn’t.
Gill
I'm wondering if the confusion between what Gill and everyone else is saying could be because Gill is talking about a bank IRA and everyone else is talking regular accounts? To be clear, adding beneficiaries to an IRA does not increase FDIC coverage, whereas it does for a revocable trust account (i.e. something with POD or Trust or similar in the title).

For OP's question, the percent assignment doesn't matter if 5 or fewer beneficiaries. If over 5 there is some complicated rationing formula. Also, it's really important to realize that the owner-beneficiary cap is across all accounts in the same bank. The coverage may not be what you expect if you have a complicated setup, eg.

A in trust for X,Y with 500k
A,B jtwrs in trust for Y,Z with 1000k

Since the combo A-Y has only 250k coverage, you are leaving 250k exposed even though on first glance it looks like both accounts should be covered.

Gill
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by Gill » Tue May 15, 2018 2:32 pm

libralibra wrote:
Tue May 15, 2018 1:30 pm
I'm wondering if the confusion between what Gill and everyone else is saying could be because Gill is talking about a bank IRA and everyone else is talking regular accounts?
No, I wasn't talking about a bank IRA.
Gill

gotlucky
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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by gotlucky » Tue May 15, 2018 2:59 pm

libralibra wrote:
Tue May 15, 2018 1:30 pm

For OP's question, the percent assignment doesn't matter if 5 or fewer beneficiaries. If over 5 there is some complicated rationing formula. Also, it's really important to realize that the owner-beneficiary cap is across all accounts in the same bank. The coverage may not be what you expect if you have a complicated setup, eg.
Thanks.

As to trusting the interpretation of the FDIC and trusting Ally's electronic records, I'm willing to go with it since it seems fairly clear to me when you use the FDIC's EDIE estimator. I keep hard copies of my beneficiary statements for my POD, IRA and other qualified accounts and keep them all together. The last time I had a funds at a bank that failed, they bent over backwards to make sure I was made whole. In fact, I received a much higher statutory interest rate for days that my funds were inaccessible.

If I'm going to trust that they'll maintain the correct balances electronically, I have to trust that they'll keep the benny info electronically too. If I don't trust that they can keep data right, then I should just put my money in my mattress because even the $250k wouldn't be safe.

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Re: Unequal beneficiaries for POD accounts to maximize FDIC at Ally.

Post by Steelersfan » Tue May 15, 2018 9:26 pm

gotlucky wrote:
Tue May 15, 2018 2:59 pm

If I'm going to trust that they'll maintain the correct balances electronically, I have to trust that they'll keep the benny info electronically too. If I don't trust that they can keep data right, then I should just put my money in my mattress because even the $250k wouldn't be safe.
I think it's a good idea to keep a paper printouts of the bank's records of beneficiaries, either from a screen shots or emails they might send out from time to time. There are posts here that tell of banks losing that information when mergers happen and/or long time passage.

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