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FDIC Insurance Changes for Trust Accounts
Understanding FDIC Insurance
FDIC insurance safeguards eligible deposits up to $250,000 per depositor, per insured bank, for each account category in the event of a bank failure. This protection extends to bank accounts held by both revocable and irrevocable trusts.
Current Rules for FDIC Insurance on Trust Accounts
Previously, the FDIC had separate rules for revocable and irrevocable trusts, each with its own coverage criteria and calculation methods. This often led to confusion among account holders.
For revocable trusts, the coverage limit was straightforward, depending on the number of primary beneficiaries. For irrevocable trusts, the calculation was more complex, involving contingent interests and their collective insurance limit.
New Rules for FDIC Insurance on Trust Accounts
Starting April 1, 2024, the FDIC has simplified the insurance rules for trust accounts. Both revocable and irrevocable trusts now fall under a single category, which also includes “payable on death” (POD) and “in trust for” (ITF) accounts.
Each trust owner is insured up to $250,000 for each eligible primary beneficiary, with a maximum of five beneficiaries, resulting in a total coverage of $1.25 million.
New FDIC Insurance Coverage for Trust Accounts, Single Owner
| Number of Beneficiaries | FDIC Insurance Limit |
|---|---|
| 1 | $250,000 |
| 2 | $500,000 |
| 3 | $750,000 |
| 4 | $1,000,000 |
| 5 | $1,250,000 |
| 5+ | $1,250,000 |
New FDIC Insurance Coverage for Trust Accounts, Two Owners
| Number of Beneficiaries | FDIC Insurance Limit |
|---|---|
| 1 | $500,000 |
| 2 | $1,000,000 |
| 3 | $1,500,000 |
| 4 | $2,000,000 |
| 5+ | $2,500,000 |
Implications for Trust Account Holders
If two people, such as a married couple, hold revocable and irrevocable trusts at the same bank, their FDIC coverage limit is doubled. For example, a combined balance for two trust account owners with four beneficiaries would be insured up to $2 million.
The Bottom Line
The FDIC has simplified the insurance coverage rules for trust accounts, making it easier for account holders to understand their coverage limits. This change, effective April 1, 2024, ensures that trust account owners can more easily determine how much of their money is insured.
Contact O1ne Mortgage for Your Mortgage Needs
At O1ne Mortgage, we are committed to providing you with the best mortgage services. If you have any questions or need assistance with your mortgage, please call us at 213-732-3074. Our team of experts is here to help you every step of the way.
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