FDIC Insurance & Trust Beneficiaries

The news regarding FDIC insurance limits and trust beneficiaries has been making the rounds this morning, both here and here…  But I thought it needed a little more context.

First, a little background:

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that protects against the loss of insured deposits if an FDIC-insured bank or savings association fails. 1

The bailout legislation, passed October 3 of this year, has the following details with regards to FDIC coverage:

Basic FDIC Deposit Insurance Coverage Limits*

Single Accounts (owned by one person) $250,000 per owner**
   
Joint Accounts (two or more persons) $250,000 per co-owner**
   
IRAs and certain other retirement accounts $250,000 per owner
   
Trust Accounts $250,000 per owner per beneficiary subject to specific limitations and requirements**
   
Corporation, Partnership and Unincorporated Association Accounts $250,000 per corporation, partnership or unincorporated association
   
Employee Benefit Plan Accounts $250,000 for the non-contingent, ascertainable interest of each participant
   
Government Accounts $250,000 per official custodian

Now, the context:

Over the last few days I have been culling through the vague and (merely) advisory opinions of a few state bar associations researching the following problem:  If I am acting as a trustee (or other fidcuary) for a client’s trust (or gaurdianship or estate) account(s), what liability (either ethically or civilly) do I face if the bank where those funds are held collapses?  …  I’m working on a memo on this subject so this news caught my eye.  Oh by the way, when I get an answer to the above question, I’ll post it here.  Nonetheless, this is good and welcome news!

As I am attempting to develop a policy for the firm with regards to the amount of due diligence we fiduciaries should bring to bear on our cutodial depository institutions, there will in the near future, be more details to come.
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1 http://www.fdic.gov/news/news/financial/2008/fil08102a.html
** The legislation authorizing the increase in deposit insurance coverage limits makes the change effective October 3, 2008, through December 31, 2009.
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I know, I’ve been gone for a while now but lets not make a big deal about it. I feel bad about it too… I changed jobs, sold a house, moved, am trying to buy another house now while living in temporary shelter… Its been crazy.

Good to see you too 😉

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