The FDIC Consumer News provides practical guidance on how to become a safer, smarter user of financial services. Issues and selected articles offer quick tips, helpful hints and common -sense strategies to protect and stretch your hard-earned dollars. See the Winter 2016 Special Edition “A Bank Customer’s Guide to Cybersecurity“.
What kind of accounts are eligible for FDIC insurance?
FDIC insurance covers all types of deposits at an insured bank, including a checking account, negotiable order of withdrawal (NOW) account, savings account, money market deposit account (MMDA) or time deposit such as a certificates of deposit (CD). The FDIC does not insure safe deposit boxes or their contents. U.S. Treasury bills, bonds or notes are also not covered by FDIC insurance, but these investments are backed by the full faith and credit of the United States government.
What are the basic FDIC coverage limits?
The standard deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. The FDIC provides separate insurance coverage for a depositor’s funds at the same insured bank if the deposits are held in different ownership categories. To qualify for this expanded coverage, the requirements for insurance coverage in each ownership category must be met. The ownership categories are as follows:
|Single Accounts (owned by one person)||$250,000 per owner|
|Joint Accounts (two or more persons)||$250,000 per co-owner|
|IRAs & Other Certain Retirement Accounts||$250,000 per owner|
|Revocable Trust Accounts||Each owner is insured up to $250,000 for the interests of each beneficiary, subject to specific limitations and requirements|
What happens if I have a deposit account in an insured bank that fails?
The troubled bank may be purchased by a healthy one, in which case you would become a depositor in the healthy bank. If, however, that does not occur, the FDIC pays off depositors as quickly as possible. The payoff of insured accounts usually occurs within a few days after the failure.
What happens to insurance coverage after an account owner dies?
The FDIC insures a deceased person’s accounts as if the person were still alive for six months after the death of the account holder. During this grace period, the insurance coverage of the owner’s accounts will not change unless the accounts are restructured by those authorized to do so. Also, the FDIC will not apply this grace period if it would result in less coverage. There is no grace period if the beneficiary of a POD account dies. In most cases, insurance coverage for the deposits would be reduced immediately. Like informal revocable trusts, the six month grace period does not apply to the death of a beneficiary named in a formal revocable trust account. However, the terms of the former revocable trust may provide for a successor beneficiary or some other redistribution of the trust deposits. Depending on these terms, the insurance coverage may or may not change.
What are fiduciary accounts?
Fiduciary accounts are deposit accounts owned by one party but held in a fiduciary capacity by another party. Fiduciary relationships may include, but are not limited to, an agent, nominee, guardian, executor or custodian. Common fiduciary accounts include Uniform Transfers to Minors Act accounts, escrow accounts, Interest on Lawyer Trust accounts and deposit accounts obtained through a broker. The fiduciary nature of the account must be disclosed in the bank’s deposit account records. The name and ownership interest of each owner must be ascertainable from the deposit account records of the insured bank or from records maintained by the agent. Funds deposited by a fiduciary of a person or entity are insured as the deposits of the owner if the disclosure requirements for fiduciary accounts are met.