The simple answer is that deposits of up to $100,000 per depositor and up to $250,000 of certain retirement accounts per depositor in an FDIC-insured bank are covered by FDIC insurance.

However, individual situations must be assessed separately to determine just what coverage you indeed have on your deposits. The following examples are not intended to be comprehensive explanations of all FDIC insurance coverage, but are summaries for two common account situations:

Multiple Accounts. If you have multiple accounts (e.g., a checking and a money market account) at the same bank under the same name, the amounts in those accounts are aggregated to a maximum insured amount of $100,000. For joint accounts in which both account holders have equal rights to withdraw money, each person's share of all joint accounts at the same insured bank is added together and the total is insured up to $100,000 per person.

Example: John and Mary have a $220,000 CD at an insured bank. Under FDIC rules, each person's share of each joint account is considered equal unless otherwise stated in the bank's records. John and Mary each own $110,000 in the joint account category, putting a total of $20,000 ($10,000 for each) over the insurance limit.

Living Trust Accounts.  Another common account type is the Living Trust account, in which the owner of the account controls the deposits during his or her lifetime "in trust for" specified beneficiaries. Deposit insurance for these kinds of accounts is based on the relationship between the account holder and the beneficiaries. The FDIC insures each beneficiary's amount in the account if they qualify. While the trust owner is the insured party, coverage is provided for the interests of each beneficiary in the account. The FDIC insures the interests of each beneficiary up to $100,000 for each owner if all of the following requirements are met:

• The beneficiary is the owner's spouse, child, grandchild, parent, or sibling. Adopted and stepchildren, grandchildren, parents, and siblings also qualify. In-laws, grandparents, great-grandchildren, cousins, nieces and nephews, friends, organizations (including charities), and trusts do not qualify.
• The account title must indicate the existence of the trust relationship by including a term such as payable on death, in trust for, trust, living trust, family trust, or an acronym such as POD or ITF.
• For POD accounts, each beneficiary must be identified by name in the bank's account records. 

If any of these requirements are not met, the entire amount in the account, or any portion of the account that does not qualify, would be added to the owner's other single accounts, if any, at the same bank and insured up to $100,000. If the revocable trust account has more than one owner, the FDIC would insure each owner's share as his or her single account.

What should you do if your deposits exceed the insured limit?

It is possible to maximize insurance coverage within one insured bank by having different owners (i.e., separate account names) on multiple accounts. Your bank representative should be able to assist you in achieving this.

In the case where only one account name is possible, and the deposits will exceed the insurance limits (e.g., an escrow account), utilizing multiple insured financial institutions is the most likely alternative. There is at least one service we are aware of, provided by certain banks, that utilize a formal, systematic system of spreading account balances to up to 500 banks, if necessary, to ensure that your entire balance is covered by deposit insurance. Your "portfolio" of deposits is managed by one bank and you receive a single statement summarizing the status of your deposits. This service places all funds in certificates of deposit having a minimum maturity of four weeks.

A former bank founder and president, Stephen Barnett fully understands the banking industry and has been highly successful in helping individuals and business owners protect their assets, refinance or restructure their loans, and obtain the financing they need to build and grow their businesses. Let his expertise help you. Call him today.

For more information about the FDIC and the insurance coverage rules and limits, please visit the following informative web pages:

• http://www.fdic.gov/deposit/deposits/insuringdeposits/index.html  
• http://www.fdic.gov/index.html 
• http://www.fdic.gov/edie/