FDIC Simplifies Insurance Coverage Rules for Trust Accounts: Revocable and Irrevocable Trusts Now Insured Equally

The FDIC has adopted new deposit insurance rules for Trust Accounts that took effect as of April 1, 2024.

FDIC and Bank Accounts

FDIC deposit insurance protects the money you hold at FDIC-insured banks in traditional deposit accounts such as checking accounts, savings accounts, money market deposit accounts, and CDs. The standard maximum insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.

FDIC and Trust Accounts

Regarding trust accounts, the FDIC’s new rule greatly simplifies the deposit insurance rules for Trust Accounts (deposit accounts held by revocable and irrevocable trusts), eliminating the complex differences between the revocable and irrevocable trust rules in favor of a straightforward insurance calculation that applies to both revocable trusts and irrevocable trusts.

Under the new rule, a deposit owner’s trust deposits will be insured up to $250,000 for each trust beneficiary, not to exceed five beneficiaries, per insured bank, regardless of whether a trust is revocable or irrevocable.

For example, a Trust Account with three beneficiaries will be insured up to $750,000 ($250,000 × 3) whereas a Trust Account with five or more beneficiaries will be insured up to a maximum of $1,250,000 ($250,000 × 5). If a trust has more than one owner (such as a trust created by husband and wife as grantors), the insurance limit is multiplied by the number of owners, meaning a trust with two owners and three beneficiaries will be insured up to $1,500,000 (2 x $250,000 x 3) and a trust with two owners and five beneficiaries would have an insurance limit of $2,500,000 (2 × $250,000 × 5).

Trusts are complex legal agreements that require careful analysis to determine the right vehicle to best suit your needs and goals. One size does not fit all! Consult with the knowledgeable and experienced Trusts and Estates attorneys at Cona Elder Law to discover which is right for you. Our attorneys can be reached at 631.390.5000 and are always available to meet your needs.