FDIC Insurance

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
Artisan
Posts: 333
Joined: Sat Oct 01, 2016 8:30 am

FDIC Insurance

Post by Artisan »

I apologize in advance if this is a basic question. I was having a debate with a family member about FDIC and NCUA insurance limits.

My understanding was that each account holder was insured for 250K per type of account at one institution.

Also that each beneficiary on an account adds an additional 250K of insurance.

So in this scenario let's assume all account are maintained at the same institution.

Mrs. Artisan has an individual account of $1 million. Her primary beneficiery is Mr. Artisan and contingent beneficiaries are John and Mary Artisan.

Mrs. and Mr. Artisan have a joint account of $1 million. Their beneficiaries are John and Mary Artisan.

How much is each of these accounts insured for under FDIC/NCUA?

Thank you.
mary1492
Posts: 599
Joined: Thu Oct 17, 2019 3:02 am

Re: FDIC Insurance

Post by mary1492 »

Each gets $250k of coverage on accounts registered in his/her own name at the institution.

You get an additional $250k each on joint registered accounts at the institution.

In the scenario you describe, you have $250k FDIC coverage on the $1 million individual account in your name. The joint account has $500k of FDIC coverage.

It is not by beneficiary, but account owner.

https://www.ally.com/bank/fdic/
Pool your money into joint accounts.

Joint accounts are insured separately from accounts in other ownership categories, up to a total of $250,000 per owner. This means you and your spouse can get another $500,000 of FDIC insurance coverage by opening a joint account in addition to your single accounts. And adding another joint account owner—like a parent—adds another $250,000 in coverage, and so on.
robertfromtx
Posts: 12
Joined: Wed Jan 01, 2020 5:19 pm

Re: FDIC Insurance

Post by robertfromtx »

Your best bet is to plug in your scenario at FDIC's EDIE tool:

https://edie.fdic.gov/calculator.html

Coverage is determined by a combination of type, ownership, and beneficiary of accounts.

In your scenario, OP, I came up with $1.25million total coverage assuming I did it correctly. (I'm a former banker, but its been a while!)
Last edited by robertfromtx on Tue Jun 21, 2022 4:06 pm, edited 1 time in total.
User avatar
celia
Posts: 14672
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: FDIC Insurance

Post by celia »

The number of beneficiaries is only relevant for accounts owned by a trust. And the number of trust beneficiaries are assumed to be inheriting equally.
UpperNwGuy
Posts: 8071
Joined: Sun Oct 08, 2017 7:16 pm

Re: FDIC Insurance

Post by UpperNwGuy »

Artisan wrote: Tue Jun 21, 2022 3:31 pm My understanding was that each account holder was insured for 250K per type of account at one institution.

Also that each beneficiary on an account adds an additional 250K of insurance.
The part I have highlighted in blue is not correct.
mary1492
Posts: 599
Joined: Thu Oct 17, 2019 3:02 am

Re: FDIC Insurance

Post by mary1492 »

robertfromtx wrote: Tue Jun 21, 2022 3:59 pm Your best bet is to plug in your scenario at FDIC's EDIE tool:

https://edie.fdic.gov/calculator.html

Coverage is determined by a combination of type, ownership, and beneficiary of accounts.

In your scenario, OP, I came up with $1.25million total coverage assuming I did it correctly. (I'm a former banker, but its been a while!)
EDIE says $750k
robertfromtx
Posts: 12
Joined: Wed Jan 01, 2020 5:19 pm

Re: FDIC Insurance

Post by robertfromtx »

celia wrote: Tue Jun 21, 2022 4:06 pm The number of beneficiaries is only relevant for accounts owned by a trust. And the number of trust beneficiaries are assumed to be inheriting equally.
Having beneficiaries makes it a POD account which is a type of trust account.
robertfromtx
Posts: 12
Joined: Wed Jan 01, 2020 5:19 pm

Re: FDIC Insurance

Post by robertfromtx »

mary1492 wrote: Tue Jun 21, 2022 4:13 pm
robertfromtx wrote: Tue Jun 21, 2022 3:59 pm Your best bet is to plug in your scenario at FDIC's EDIE tool:

https://edie.fdic.gov/calculator.html

Coverage is determined by a combination of type, ownership, and beneficiary of accounts.

In your scenario, OP, I came up with $1.25million total coverage assuming I did it correctly. (I'm a former banker, but its been a while!)
EDIE says $750k
Image
User avatar
celia
Posts: 14672
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: FDIC Insurance

Post by celia »

robertfromtx wrote: Tue Jun 21, 2022 4:13 pm
celia wrote: Tue Jun 21, 2022 4:06 pm The number of beneficiaries is only relevant for accounts owned by a trust. And the number of trust beneficiaries are assumed to be inheriting equally.
Having beneficiaries makes it a POD account which is a type of trust account.
If so, what type of “trust” would you be referring to. (I disagree with you, which is why I’m asking.)
robertfromtx
Posts: 12
Joined: Wed Jan 01, 2020 5:19 pm

Re: FDIC Insurance

Post by robertfromtx »

celia wrote: Tue Jun 21, 2022 4:24 pm
robertfromtx wrote: Tue Jun 21, 2022 4:13 pm
celia wrote: Tue Jun 21, 2022 4:06 pm The number of beneficiaries is only relevant for accounts owned by a trust. And the number of trust beneficiaries are assumed to be inheriting equally.
Having beneficiaries makes it a POD account which is a type of trust account.
If so, what type of “trust” would you be referring to. (I disagree with you, which is why I’m asking.)
Let's use Mary's link from Ally above.
Add beneficiaries to your accounts.
You can increase your FDIC insurance coverage by creating a payable-on-death account (also known as an informal trust, in-trust-for, or Totten Trust account) or titling an account in the name of a formal revocable trust . For these account types, each unique beneficiary adds $250,000 of coverage up to FDIC limits. For example, a payable-on-death account with 1 owner and 5 beneficiaries could be insured up to $1,250,000.
mary1492
Posts: 599
Joined: Thu Oct 17, 2019 3:02 am

Re: FDIC Insurance

Post by mary1492 »

robertfromtx wrote: Tue Jun 21, 2022 4:22 pm
mary1492 wrote: Tue Jun 21, 2022 4:13 pm
robertfromtx wrote: Tue Jun 21, 2022 3:59 pm Your best bet is to plug in your scenario at FDIC's EDIE tool:

https://edie.fdic.gov/calculator.html

Coverage is determined by a combination of type, ownership, and beneficiary of accounts.

In your scenario, OP, I came up with $1.25million total coverage assuming I did it correctly. (I'm a former banker, but its been a while!)
EDIE says $750k
Image
I see, thanks.
User avatar
celia
Posts: 14672
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: FDIC Insurance

Post by celia »

mary1492 wrote: Tue Jun 21, 2022 4:31 pm
robertfromtx wrote: Tue Jun 21, 2022 4:22 pm
mary1492 wrote: Tue Jun 21, 2022 4:13 pm EDIE says $750k
Image
I see, thanks.
EDIE says $750k is UNINSURED.

But I’m not sure you can list both primary and contingent beneficiaries in EDIE since not all 3 people would be inheriting.
Last edited by celia on Wed Jun 22, 2022 4:08 pm, edited 2 times in total.
User avatar
celia
Posts: 14672
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: FDIC Insurance for TRUSTS

Post by celia »

In the threads that talk about trusts, I often see references to “Testamentary Trusts”, which are created upon death of the grantor by his/her will. If you have a Testamentary trust described in your will, since it has not yet been created (because you haven’t yet died), by definition it doesn’t yet exist and would not need FDIC insurance.

But if you have a Revocable Living Trust, it makes sense to fund it while you are living rather than leaving your bank accounts in your name, so that you get more FDIC insurance coverage.
Topic Author
Artisan
Posts: 333
Joined: Sat Oct 01, 2016 8:30 am

Re: FDIC Insurance

Post by Artisan »

My understanding was that a bank account that permitted you to list beneficiaries was a POD account. I had thought this was known as a Totten trust and its main function was to avoid the account having to go through probate.
So a POD is a type of trust.

What I am unsure of if this type of trust with named beneficiearies qualify for additional FDIC insurance.

Maybe one of the trust attorneys here can weigh in.
Post Reply