Q&A: Extra FDIC protection for trust accounts?

Q. Is it true that a bank CD that is in trust for children will be protected if the bank fails, even if the amount in the CD is over the FDIC limit?

A. Sometimes. Payable-on-death (POD)  accounts, such as bank CDs or other accounts in trust for a named beneficiary, can be insured over the $100,000 Federal Deposit Insurance Corp. limit, depending on the number of beneficiaries and the amount of the CDs.

"For PODs, each qualified beneficiary is insured up to $100,000," says David Barr,
a spokesman for the FDIC. "So if you have two children, you are covered for $200,000. If you have three children, the coverage is $300,000." Qualified beneficiaries include children, parents, spouses, grandchildren, and siblings.

For more information, call 877-ASK-FDIC or go to the FDIC's Web site.

Comments

[Ken]

Here's a link to the FDIC page with the requirements for POD:
http://www.fdic.gov/deposit/deposits/insured/ownership4.html#revocable

In addition to the beneficiariers being qualified, the FDIC requires:

1) The account title must include a commonly accepted term such as "payable-on-death," "in trust for," "as trustee for" or similar language to indicate the existence of a trust relationship. The term may be abbreviated (for example "POD," "ITF" or "ATF").

2) The beneficiaries must be identified by name in the deposit account records of the insured bank.

I've heard about cases where a bank may add a beneficiary on your account without it being added to the account title. So it's important to check on this.

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