FDIC Insurance for Living Trusts

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Stephen Charles Gruber

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Trusts Attorney

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Posted about 6 years ago. 6 helpful votes

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FDIC Coverage

The Federal Deposit Insurance Corporation (FDIC) insures bank accounts in the event of a bank failure. The amount of insurance has been increased to $250,000 by legislation enacted on Oct. 3, 2008. If you have more than the FDIC limit at a bank that fails, you could lose all or part of the amount that is not covered by the FDIC insurance.

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FDIC Insurance for Living Trusts

For each trust owner, living trust accounts are insured up to $250,000 per beneficiary, including individuals, charities and non-profit organizations. The maximum coverage per bank for each trust owner is $1,250,000. If there are two trust owners, such as husband and wife, the coverage can be up to $2,500,000 per bank.

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Examples of how FDIC Insurance Is Calculated

If the trust has more than one owner (also called a trustor), FDIC coverage is $250,000 per qualifying beneficiary for each owner. For example, if a husband and wife are the trustors, and the trust will be distributed to their three children after both of them have died, the trust accounts at a single bank will be insured up to $750,000 per trustor, or a total of $1,500,000 for that bank. If there is only one trustor and two beneficiaries, the coverage will be $500,000. If there is only one trustor and the beneficiaries are the trustor's child, and two charities, the coverage will be $750,000. If there are two trustors and only one beneficiary, the coverage is $500,000.

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What About Qualifying Beneficiaries?

The concept of qualifying beneficiaries, who were defined as descendants of the trustors, is no longer used by FDIC.

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Warning about Multiple Accounts

The FDIC limits are per bank, not per account. If a single trust owner has several accounts at the same bank totaling $500,000, and the trust has no qualifying beneficiaries, only $250,000 of assets will be FDIC insured. However, in addition to having FDIC insurance for a trust account, a depositor also could be covered for joint tenancy accounts and IRA accounts.

Additional Resources

Please visit the FDIC website at www.fdic.gov

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