Against the backdrop of difficult economic times, investors have become increasingly concerned about the security of their investments. The FDIC is an agency that insures funds on deposit with certain banks and savings associations. The FDIC recently created the Electronic Deposit Insurance Estimator (EDIE), which is an online application that enables you to calculate the insurance coverage of your accounts at each FDIC-insured institution.
The Federal Deposit Insurance Corporation (FDIC) is an agency of the United States that protects your deposits if an FDIC insured bank or savings association fails. If your insured bank fails, FDIC insurance will cover your deposits up to the insurance limit. The types of accounts that the FDIC insures are checking, NOW and savings accounts, money market accounts, CDs, and certain retirement accounts.
The basic insurance amount is $100,000 per depositor per insured bank. Certain retirement accounts are insured up to $250,000 per depositor per insured bank. Thus, if you and your family have no more than $100,000 in all your deposit accounts combined at the same insured bank, your deposits are fully insured. If you have more than $100,000 on deposit with one insured bank, you may still be fully FDIC insured. Whether you are or are not in this situation will depend upon the way or ways in which the accounts are titled.
The most common ways in which accounts can be owned are: (1) single accounts; (2) certain retirement accounts; (3) joint accounts; and (4) revocable trust accounts. Following is a summary of the rules that govern the FDIC insurance coverage for each of these account types.
Single Accounts: These are deposit accounts owned by one person, titled in that individual’s name alone. All such accounts held at the same FDIC insured bank are aggregated and the total is insured up to $100,000.
Joint Accounts: These are deposit accounts owned by two or more people. As long as both owners have equal rights to withdraw funds from such an account, each owner’s share of all joint accounts at the same FDIC insured bank are aggregated and the total is insured up to $100,000. For example, if a married couple has joint checking and savings accounts at the same FDIC insured bank, each co-owner’s shares of the two accounts is aggregated and insured up to $100,000, providing up to $200,000 in coverage.
Certain Retirement Accounts: These are deposit accounts owned by one person, titled in the name of that individual’s retirement plan. These accounts include, and are limited to, IRAs, Section 457 deferred compensation plans, self-directed defined contribution plans, and self-directed Keogh plans. All such deposits in any of these qualifying accounts held at the same FDIC insured bank are aggregated and the total is insured up to $250,000.
Revocable Trust Accounts: These are deposits held in either payable-on-death (POD) or living trust accounts. POD accounts are informal revocable trusts that are created when an individual signs an agreement providing that the funds will be paid to one or more beneficiaries upon the account owner’s death. Living trusts are formal revocable trusts created for estate planning purposes.
The amount of FDIC insurance coverage provided for revocable trust accounts depends upon the account owner’s relationship with each beneficiary. Specifically, the FDIC insures the interest of each beneficiary up to $100,000 if all of the following requirements are met: (1) the beneficiary is the account owner’s spouse, child, grandchild, or sibling; (2) the account title must reference that a trust relationship exits; and (3) each beneficiary must be identified in the bank’s records.
FDIC’s Electronic Deposit Insurance Estimator (EDIE): EDIE is an interactive application that can help you learn about deposit insurance. It allows you to calculate the insurance coverage of your accounts at each FDIC-insured institution.
Before you begin, be sure that you have assembled the following current information about all of your deposit accounts at an FDIC-Insured Institution: Account Balance, Name of Owner(s), and Name of Beneficiary(ies) for Personal Accounts and Account Balance.
To begin using the EDIE, visit http://www.fdic.gov/edie/. For more general information on FDIC insurance, you can call the agency at (877) ASK-FDIC, or write them at FDIC, Attn: Deposit Insurance Outreach, 550 17th Street, NW, Washington, DC 888-663-7407.