About Ken Tumin

Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Mayweather's $123 Million Bank Account and Insuring Large Accounts

Earlier this month boxing champion Floyd Mayweather Jr. made news for more than just winning another fight. In an ESPN interview, it was revealed that Mayweather had a single bank account with $123 million. That balance may have increased after Mayweather defeated Canelo Alvarez for a record $41.5 million payday.

I’m sure very few people have this much money that they want to keep in a liquid bank account. However, many people may have to keep over $250,000 in a bank account. It may be after a house sale or after inheriting money. In today’s interest rate environment, it may also be common for savers as they move matured CDs into liquid accounts. If you have over $250,000 in any one bank, it’s important to make sure you don’t have any money that’s uninsured. Most depositors of failed banks have been lucky in recent years since the FDIC has typically been able to find a buyer to assume all deposits of the failed bank. However, occasionally no buyer is found. That was recently the case with a Connecticut bank that failed on September 13th. In these cases, depositors will lose some or all of their uninsured deposits.

There are several ways to insure deposits over $250,000 at one bank or credit union. You do have to be careful. If the bank doesn’t follow the FDIC’s rules, the depositor will be the one who will pay the price. So it’s important for those with over $250,000 in a bank to fully understand the FDIC rules. One of the best resources that I’ve found is this FDIC Comprehensive Seminar on Deposit Insurance Coverage For Bankers. Also, it’s a good idea to use the FDIC EDIE calculator to see if you have any uninsured deposits.

An easy way to insure more than $250,000 deposits in one bank account is with revocable trust accounts. These can be established just by designating beneficiaries using terms like payable-on-death (POD) in the account title. One can easily insure over a million by naming multiple beneficiaries. Below is a snapshot of an example that I did using the FDIC EDIE calculator. In the example, John Doe is the owner of a bank account with 10 beneficiaries. The beneficiaries are charities. The FDIC now allows IRS-approved charities and non-profit organizations to be qualified beneficiaries for deposit insurance purpose. This has an advantage over individuals since you lose the additional coverage immediately if the beneficiary dies. As you can see in the below snapshot, the 10 beneficiaries allow all $2.5 million of deposits in the one bank account to be fully FDIC insured. Additional coverage can be added with additional beneficiaries. You’ll probably be limited by the bank in how many beneficiaries you can designate. For example, Ally Bank limits the number of beneficiaries that can be listed on an account to 10. Also, they allow charities to be beneficiaries.

FDIC Coverage with multiple beneficiaries

Another easy way to increase FDIC coverage is with joint accounts. If a joint account was used in the above example, the total coverage with 10 beneficiaries can be increased to $5 million.

The problem with using beneficiaries as shown in the above example is that it may conflict with your estate plan. When you die, you may want to leave most of your money to one or just a few people. If that’s the case, you can still use beneficiaries to easily insure over $1 million. I described how you can do this in my post Maximizing Your FDIC Coverage with Beneficiaries.

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  |     |   Comment #1
In addition to making sure that we understand the FDIC rules, we must make sure the bank follows the rules.  Especially with POD accounts.  The FDIC rules are very vague on POD accounts.  One FDIC rule states the word "POD or ITF" must be in the account title, and another FDIC rule states it may be in the bank's computer records or in the account title.  Which FDIC rule is correct?  The banks don't know.
  |     |   Comment #2
Does get tough to insure over when you open in a trust. I just went over $1 mil and only $250k of it insured, not worried though since it is in a very healthy bank with MA DIF insurance. Not a single depositor has ever lost a penny in a DIF bank, and DIF has been around longer than FDIC
  |     |   Comment #3
It should be noted that you do not have to include POD or ITF in the title of the account for credit unions. As long as the account has beneficiaries, you should be okay. The NCUA's rules are not so strict.
  |     |   Comment #4
FDIC rules are quite explicit.  It's just that some people reading them do not understand them.
  |     |   Comment #6
FDIC EDIE calculator is a smooth sail to see through uninsured deposits. However, I have tried my hands at understanding the FDIC rules, but found it quite complicated.
  |     |   Comment #7
#6 Why don't you call the FDIC at 1-877-275-3342 and ask them to mail you a copy of their brochure"Insuring Your Deposits".  This way you can have it handy to see exactly all the ways you can use to be fully insured.  The banks are supposed to keep copies for customers but I had to order some for my local Chase.  The manager did not know they were available and even she was confused as to how the rules really worked.  I always keep the brochure handy and updated since they can make changes.
  |     |   Comment #8
#7  Why do you need to need to keep the brochure "updated" if they were correct in the first place?  Possibly to correct errors they published in their interpretion of the laws.  The laws don't change very often and when they do it is made very public.

If I were you, I would move to another bank since your bank has very little knowledge of the FDIC laws.  As I have experienced, the banks claim to have detailed FDIC knowledge but not in reality.  Remember the banks don't keep "your" signed paper copy of anything.  If you think they do, ask them to physically see the signature paper work "you" signed when you opened your accounts. 

  |     |   Comment #9
#8  It is not often the rules change with the FDIC insurance but they can.  It would not be an error but probably a change in the law.  If I have a true concern, I will call the FDIC and ask if they have made any changes from the date of the brochure I have so I can make my decisions correctly.  As for my bank, what can I say?  It's Chase!  I am at this time waiting for my CDs to mature so I can hopefully wean my accounts away from them.  I think it is very sad that banks don't give a training seminar to managers on FDIC and especially IRA knowledge.

BTW, who does keep the signed copies of our paperwork if not the bank or their corporate office?
  |     |   Comment #10
A fool and his money may soon part. :)
  |     |   Comment #11
Asked my bank a few years ago and later found out directly from FDIC that the information the bank rep told me was wrong. Got back to the rep and there was really no response from him at that point. Some time later I asked him a question and he quickly answered that he cannot speak on FDICs behalf so I should contact FDIC. When I said that previously he had been confident in providing FDIC information he now repeated that I have to contact FDIC. So I suspect some issues have surfaced about bank reps interpreting FDIC rules to customers.
  |     |   Comment #14
I have IRA CD's (with good interest rates), and having to keep them in numerous banks is getting to be a pain.
  |     |   Comment #15
#14, what interest rates are you getting for your iRA CD's and where? I can feel you - it is not easy moving IRA money around.

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