FDIC and NCUA insurance limits for trust accounts


P

Pico Rico

A living trust document specifies 15 beneficiaries, with a first group of
three beneficiaries getting a specific distribution of $xx each (relatively
small in the grand scheme) and a second group of 12 beneficiaries being the
primary beneficiaries receiving equal shares after expenses and the first
group receives their distribution.

Nothing is said in the trust regarding specific bank or credit union or
broker accounts.

Would the FDIC and NCUA consider the beneficiaries as "unequal
beneficiaries"? Or would they rely on the trustee to make that
determination.

The investor just wants to figure out with some degree of certainty what the
FDIC and NCUA insurance limits are on her living trust accounts.

What if $xx mentioned above exceeds $250,000?

Thus far, she has been going under what seems to have been the old rule (or
a previous understanding) that the insurance was limited to 5 x $250,000, as
there were more than 5 beneficiaries, but it seems there is a higher level
of insurance actually available.
 
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D

David S. Meyers, CFP(R)

A living trust document specifies 15 beneficiaries, with a first group of
three beneficiaries getting a specific distribution of $xx each (relatively
small in the grand scheme) and a second group of 12 beneficiaries being the
primary beneficiaries receiving equal shares after expenses and the first
group receives their distribution.
Per the FDIC, it looks like you run into the $1,250,000 limitation (subject to $250k/beneficiary as well - in case there are unequal shares).

See <https://www.fdic.gov/edie/fdic_info.html>

They recommend calling the FDIC if it's still unclear and provide a number:

Note: Determining coverage for revocable trust accounts that have six or more
beneficiaries and provide different interests for the trust beneficiaries can be
complicated. Contact the FDIC at 1-877-275-3342 if you need assistance in
determining the insurance coverage of your revocable trust.
Thus far, she has been going under what seems to have been the old rule (or
a previous understanding) that the insurance was limited to 5 x $250,000, as
there were more than 5 beneficiaries, but it seems there is a higher level
of insurance actually available.
Looks, from that FDIC page, that the 5x rule still applies, though it's more of a
$1.25million rule with individual beneficiary shares capped at $250k each.
Bottom line, though - call the FDIC.

If you don't mind, I'm sure others here would love to hear what they tell you!

Thanks

--David
 
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P

Pico Rico

David S. Meyers said:
Per the FDIC, it looks like you run into the $1,250,000 limitation
(subject to $250k/beneficiary as well - in case there are unequal shares).

See <https://www.fdic.gov/edie/fdic_info.html>

They recommend calling the FDIC if it's still unclear and provide a
number:

Note: Determining coverage for revocable trust accounts that have six
or more
beneficiaries and provide different interests for the trust
beneficiaries can be
complicated. Contact the FDIC at 1-877-275-3342 if you need assistance
in
determining the insurance coverage of your revocable trust.


Looks, from that FDIC page, that the 5x rule still applies, though it's
more of a
$1.25million rule with individual beneficiary shares capped at $250k each.
Bottom line, though - call the FDIC.

If you don't mind, I'm sure others here would love to hear what they tell
you!

Thanks

--David
I think this topic will be too complex for an FDIC phone call, and there
would be no assurances of what they tell me is true or they will abide by
it.

It would be much simpler if the trust specifically said how to divvy up THIS
account, but it does not. So, I did a spreadsheet showing total estate,
less estate taxes, and then calculated a pro rata for all the beneficiaries.
Then, applying this to the FDIC rules leads to - - - a result that I think
is correct, but not likely to be known with certainty IS correct unless and
until there is a failure requiring FDIC insurance. Too much hassle at the
moment. Perhaps a future revision of the trust will say the FDIC account
will be only for the second group, so they all get their $250k insurance,
and the first group can rely on other assets for their cut.

Too bad Treasuries are such a bad deal these days.
 

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