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DepositAccounts’ $100 million December…and $2.5 million in Penfed CDs


In December, a DepositAccounts.com poll revealed some pretty shocking numbers. First, according to the poll results, DepositAccounts readers have invested an estimated $100 million or more in PenFed CDs since the major rate hike that went live in December. That’s one-tenth of a billion dollars! It is impossible to know for sure if every poll entry was accurate or the exact amounts deposited within each range (I used the midpoints for my calculations), but it’s also impossible to know how many others have invested in the PenFed CDs without submitting an answer on the poll. Maybe we have sent two-tenths of a billion dollars?

One of the other shocking parts of the poll was that 4% of the 375 participants noted that they had invested $2.4 million or more, and another 3% noted that they had contributed between $980,000 and $2.4 million. That’s a total of 26 people noting that they had invested over $980,000. Many questioned how this could be possible (or at minimum, how it could be wise) given the federal insurance limits, so I thought this would be a good time to revisit the possibilities for extending insurance coverage through the lens of this specific example.

How To Insure $1+ million in Deposits

Anyone who places a million or more into accounts at any one credit union or bank should make sure the deposits are fully federally insured. PenFed is a safe credit union with a health grade at DepositAccounts.com of an A. Nevertheless, it’s always a good idea to stay below the federal insurance limits (FDIC for banks and NCUA for credit unions).

The standard insurance amount is $250,000 per depositor and per bank or credit union. This amount used to be $100,000, but it was increased to $250,000 during the financial crisis. There are many ways to insure deposits over $250,000 at one bank. However, as I described in previous posts, you have to be careful. If you or your bank makes any mistakes, your money above $250,000 may not be covered. If the bank fails, that uninsured money could be lost.

For the case of PenFed, there’s an easy way to insure deposits over $1 million. It’s by using revocable trust accounts which have terms like payable on death (POD). You can review the NCUA coverage and requirements for revocable trust accounts on page 24 of this NCUA "Your Insured Funds" guide.

The important feature of revocable trust accounts that allow them to be used to insure over $250,000 is described on page 27 of the NCUA guide. Here’s an excerpt:

When there are five or fewer beneficiaries, the maximum share insurance coverage for each trust owner is determined by multiplying $250,000 times the number of different beneficiaries, regardless of the dollar amount or percentage allotted to each different beneficiary.

I checked with PenFed about its beneficiary policies. Below is the information I received from PenFed:

PenFed does not have a maximum number of beneficiaries that can be listed on a single account. Charities may be listed as a beneficiary on an account; however, it is recommended that a full address and tax ID number be included to ensure PenFed is able to successfully identify the organization if necessary.

Based on the NCUA and PenFed rules, it’s easy to insure deposits of over $1 million. Thanks to DA reader Lou who first mentioned how to do this in 2011.

I’ve tested out two cases using the NCUA Share Insurance Estimator. This estimator is very similar to the FDIC EDIE calculator. These are useful tools to verify your deposits are fully insured.

In the first scenario, a man has $1.25 million in deposits fully insured. He wants his wife to be a POD for the vast majority of the funds. To insure $1.25 million, he has five CDs with a different beneficiary for each CD. The big CD that holds the vast majority of his funds has his wife as the beneficiary. The other four CDs only hold PenFed’s minimum CD deposit of $1,000. Each has a different charity as the beneficiary. Each charity must be recognized by the IRS. Below is a snapshot of the estimator showing that no deposits are uninsured.

insuring $1.25 million at PenFed

In the second scenario, a man is able to insure deposits of up to $3 million using joint accounts with beneficiaries. He and his wife are the co-owners of the joint accounts. They have one son, and they want him to be the primary beneficiary. He opens six joint accounts with his wife as the co-owner. One account is a joint account with no beneficiaries. The second joint account has his son as the beneficiary. The other four accounts are also joint accounts, each with a different charity (IRS recognized) as the beneficiary. The vast majority of the money is in the joint account with no beneficiaries and in the joint account with their son as the beneficiary. The other four joint accounts just have the CD minimum deposit of $1,000. Each has a different charity as the beneficiary. Below is a snapshot of the estimator showing that no deposits are uninsured.

insuring $3 million at PenFed

Please note that there is one problem with the above examples. These examples don’t allow any interest that accrues to be insured. You want to make sure the account balances remain insured until CD maturity.

Another important note is that there is no grace period when a beneficiaries dies. You lose coverage immediately. That is one benefit of naming non-profit organizations or charities as beneficiaries. I guess it’s possible that the organization could go out-of-business, but for large organizations, I would think the chance is small.

Finally, you cannot extend coverage with beneficiaries for IRAs or other retirement accounts. This is a separate category from revocable trust accounts.

Bottom Line

Those 26 DepositAccounts readers who reported to have invested over $980,000 in PenFed CDs can keep all of their deposits federally insured if they set up accounts and specify beneficiaries as described above.

Before opening accounts and specifying beneficiaries, be sure to check the NCUA Share Insurance Estimator for credit union accounts and the FDIC EDIE calculator for bank accounts. Also, make sure you verify documentation from the institutions that properly identifies the beneficiaries. According to page 24 of the NCUA "Your Insured Funds" guide, "The account title or other account records of the credit union must indicate the account is held pursuant to a trust relationship." It’s up to you to ensure the credit union properly sets up the account.

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Anonymous   |     |   Comment #1
Thank you, Ken, for an excellent article.  These kinds of beneficiary considerations always have driven me crazy.  But the worst I've found is in NY State.  My accounts there allow only one beneficiary per account, which is nuts in my view.  I prefer to have just one account, with multiple beneficiaries.  In other states that's not been a problem.  But in New York I have to have multiple accounts, a separate account for each beneficiary.  This make management of the money more complex, especially on the internet.  Annoying?  Yes, it is.
me1004   |     |   Comment #9
Actually, I have a couple accounts in New York State, and they all have multiple beneficiaries on them. If you are finiding this at a single bank, that is the bank policy, not the state's. Well, perhaps it has something to do with being a state-chartered bank rather than a federally chartered bank?
Anonymous   |     |   Comment #18
Thanks.  I appreciate the reply and the interesting information.  It's a CU, not a bank.  I do not live in NY.  The CU has told me it's state law, but I agree that's an excuse often used by banks and CUs too lazy to change annoying policy.
me1004   |     |   Comment #51
I don't live in NY either. So, its not state law, not even simply applying to people out of state. And it doesn't surprise me to hear they said that, as too often I find companies blame government law when there is no such law, it is their policy, but they want to blame someone else.
Anonymous   |     |   Comment #2







51hh   |     |   Comment #3
Great contribution as usual, Ken.

1. I seriously doubt the accuracy of such a poll.  Maybe being a bit jealous:D

2. Luckily I do not have such a problem (on insurance coverage). 

3. With that type of money (2.4M), I would have a low-fee financial planner to explore other (safe) options.  But I have to admit 3% on 2.4M is a fairly good return in today's interest climate. 
scottj   |     |   Comment #4
One thing to add to this is something I recently learned after corresponding with the NCUA. I was concerned after reading that  it is important that Penfed has each beneficiary listed correctly to get the extra coverage. Some of my certificates are under my trust name, It is a formal revocable trust. I was concerned that Penfed shows no beneficiaries under this type of account so I contacted the NCUA. They told me in the case of a Formal trust the Credit Union does not need to show beneficiaries, In the event of failure the NCUA would review my trust documents to determine my coverage. This is why it seems to be a good Idea for people to take the time to set up a formal trust especially if you have multiple beneficiaries. Will be able to avoid having to open multiple accounts to get the extra coverage and your money goes to who you want and when. The when part was a big issue to me, before I set up my trust I just had my daughter as POD on all my accounts. She is still a minor but having accounts set up like that would allow her to take all the money when she turns 18 if something were to happen to me. Now with my trust I have it set that she receives spread out over a period of time at different ages   
Anonymous   |     |   Comment #5
Can you give me a idea what a simple Formal Trust cost via a lawyer?
Anonymous   |     |   Comment #12
I just set up a revocable trust and it cost me $2800
Anonymous   |     |   Comment #17
It's easy to set one up without a lawyer, though I'm sure I'll get 20 replies from folks without a JD expressing a fear/warning about doing it without a lawyer. A web search can find trust docs that people posted on the web. 90+% of the content is basically the same. The main difference in the beneficiaries. SuE Orman has a kit, and a web search can often find discount codes that make it free.
mh83   |     |   Comment #6
Ken, your scenarios imply that all the accounts an individual has in one institution are lumped together for insurance coverage calculations. That's not my understanding of the regulations. I believe each account is calculated separately. The insurance from one account doesn't usually pour over to another account. I think CD 1 of your scenarios are not fully insured.

To fully insure $1.25MM, you would have one CD with 5 different beneficiaries. Assuming it's allowed by the institution, you can indicate varying percentages or dollar amounts to each beneficiary. So to have the bulk of the funds go to one beneficiary, you might designate 96% for that particular beneficiary and 1% to each of the other four beneficiaries.
Ken Tumin
Ken Tumin   |     |   Comment #22
Please note the above scenarios were verified using the NCUA Share Insurance Estimator. The images showing $0 of uninsured deposits were snapshots of the Estimator. The FDIC has the same rules. You can see a very similar example on page 44 of this FDIC document.
mh83   |     |   Comment #57
After re-reading the NCUA Guide, I see that you are correct. All revocable trust account balances are indeed combined to determine coverage. That would mean it's not possible to obtain additional coverage by having a formal trust along with POD accounts if all the beneficiaries are the same.
Anonymous   |     |   Comment #7
Be careful using the multiple $1000.00 beneficiaries accounts and expect to get an additional $250,000 for each one.  Insurance coverage for revocable trust accounts is
calculated differently depending on the number of beneficiaries named by the owner, the beneficiaries’ interests and the amount of the deposit.  Your scenario above will not be valid for FDIC coverage.  Each Charity only provides $1000.00 of additional insurance coverage, since that's the beneficaries interest.  I know "Eddie" shows otherwise, but it assumes equal interest for all beneficaries.  (see page 10 "FDIC: Your Insured Deposits") 
OAG   |     |   Comment #8
Regarding IRA Accounts: PenFed has a form that (Form 732 JF) can be used to designate a Primary Beneficiary(ies) and Contingent Beneficiary(ies). For example a Spouse as Primary and children as Contingent (in the case of joint deaths of a individual and spouse). The form also allows one to assign a percentage for each beneficiary. PenFed has this form and another (Form 771) that can be used for non-IRA CD's. The forms are downloadable at the PenFed site. 
Anonymous   |     |   Comment #11
OAG, I understand what you stated.  However, I would be hesitant about NCUA insurance coverage as to primary beneficiaries and contingent beneficiaries.
OAG   |     |   Comment #46
One of the objectives of naming beneficiaries is to avoid probate. If the balance is below $250K I do not see any problems. Your point may need further clarification if the balance in a IRA was above that amount.
Ken Tumin
Ken Tumin   |     |   Comment #23
As I mentioned above, the above scenarios were verified using the NCUA Share Insurance Estimator. The images showing $0 of uninsured deposits were snapshots of the Estimator. The FDIC has the same rules. You can see a very similar example on page 44 of this FDIC document.
Anonymous   |     |   Comment #28
You're using the calculator wrong. Garbage in, garbage out.
me1004   |     |   Comment #10
Gee, Ken, if you really got over $100 million moved to PenFed -- or any institution -- wow, the possibilities that presents. That's the kind of money that sets the price, if organized and moved in lock step.

That is, there is potential here for DepositAccounts to negotiate notably higher rates than are out there anywhere now, in trade for such an inflow of this kind of magnitude. (And of course, I mean higher rates for we, your faithful followers -- although some cut for you is certainly part of it.) 

This is serious power. With a somewhat controlled movement of that kind of money, you have a strong union, a serious organization to negotiate serious benefits. You could take the chase for higher interest rates to a new level -- we depositors no longer the beggars instead now calling the shots. After all, when you boil it down, we are the ones with all the money, let them beg US and let them have to deal with the rates WE set! They should be the beggars, not us -- you can start something to change that. Of course, I might be talking of a mutual fund, we deposit into it, and you use that huge sum to get us much higher rates than we have been fleeced for all this time -- yet find some way to do it so FDIC insurance or NCUA insurance applies. I'm not sure there is a way to do it AND apply the insurance. BUt gee, that kind of money -- the possibilities.
Anonymous   |     |   Comment #13
Although it looks good on the surface and in theory, during these days with the Federal Reserve's policy of holding interest rates artificially low, it won't work.  Along with the banks and CUs taking in more than they loan out are already flush with cash deposits.

Some of the major financial institutions have had a similar plan for years.  Pooling depositors money and funneling huge amounts to a few chosen banks.  This had little or no effect to gain higher interest rates than an individual could get on their own. 
Anonymous   |     |   Comment #15
Banks have an unlimited supply of money.  Where have you been for the last several years.  Have you even heard of Bernanke?
Anonymous   |     |   Comment #47
Brokerages have been offering 10 yr. brokered CD's at 3.3% for some time now. PenFed's 5/7 year offerings at 3.04% offer more flexibility, but long term money can easily earn 3+% with FDIC insurance.
Note: PenFed will compound interest where brokered CD's generally pay fixed coupon dividends twice a year. You can reinvest dividends on your own or take the money and run.      
Anonymous   |     |   Comment #14
These claims of the amount insured are incorrect.  The NCUA estimator indicates they are wrong.  In the first example for the revocable trust accounts, the one with four $1,000 accounts and one $1,246,000 account, $254,000 is insured.  $250,000 of the $1,246,000 account is insured and each of the $1,000 accounts insured fully.
Anonymous   |     |   Comment #16
I hope nobody actually sets up their accounts like the examples in the article because they're completely wrong.
lou   |     |   Comment #19
Ken is absolutely correct in his example. Although Ken didn't credit me, I am the one who discovered this wrinkle with FDIC/NCUA insurance a few years ago. Anyone can check this  claim using the site search engine. At the time, I spoke to a FDIC attorney as well as someone from NCUA and they both confirmed this was correct.

In 2008 they increased FDIC/NCUA insurance to $250,000 but they also made a few other very important changes. Instead of having to use immediate family members as beneficiaries, they allowed any living person or charity to be a beneficiary for insurance purposes. They also allowed an account owner to have 5 beneficiaries where each beneficiary can qualify for the full amount of insurance even though they may have unequal interests in the insured deposits. In other words, Ken's example only works for 5 beneficiaries. It won't work if you have more than five. It also works if the bank or credit union allows beneficiaries with unequal interests. You could have one CD of $2,500,000 with 2 owners and 5 beneficiaries if one beneficiary has a 99% share and the other 4 have 1% each. This works just as well as Ken's example but Penfed doesn't allow beneficiaries with unequal interests. However, many other institutions do.
Anonymous   |     |   Comment #21
Re:  "if one beneficiary has a 99% share and the other 4 have 1% each"

1(.99) + 4(.01) =1.03  Is that a bonus?
Ken Tumin
Ken Tumin   |     |   Comment #26
Thanks Lou for providing more details about this method. Sorry that I forgot to credit you. I've updated the post with the credit.
lou   |     |   Comment #31
No problem, Ken. I find it amusing how some of your readers are so sure this is wrong.
lou   |     |   Comment #20
Here is the link to the article Ken wrote back in 2011 about this way of insuring deposits. This is nothing new. Like I said in the previous post, I discovered this methodology many years ago and vetted it with both FDIC/NCUA. It is not a gimmick or a loophole.

The law changed in 2008 because they needed to find a way to make it easier to determine who was eligible for insurance if a bank failed. In 2008 Indymac failed and the FDIC had a very difficult time attempting to verify beneficiary accounts. So they purposely changed the law to avoid the problem of verifying beneficiaries and determining insurance based on the beneficiary's percentage share of the insured deposits.

lou   |     |   Comment #24
Ooops! I meant one beneficiary has a 96% share and the other 4 each have a 1% share. Or you could have one beneficiary with a 99% and the other 4 with a .25% share.
Anonymous   |     |   Comment #25
Did you look at Ken's example? He has one account with one beneficiary and 1.246 million and claims it's all insured. 
lou   |     |   Comment #30
Yes, this works as long as there are 4 other accounts with the same owners and different beneficiaries.

Look at the 2011 article. All of this has been discussed many times in the past. As Ken said, you can use the FDIC/NCUA calculator and you will see it works just as he said. When I discovered this in 2009, I discussed this with FDIC/NCUA attorneys and both entities verified its accuracy.

Again it will also work with one account of $1,250,000 if the bank or credit union allows beneficiaries with unequal interests.
Anonymous   |     |   Comment #32
Are you an retired or active Attorney?
lou   |     |   Comment #33
No, but I do have a finance background, which may have helped.

Prior to 2008, it use to be very difficult to figure out how much insurance you had if you had more than one beneficiary with dissimilar percentage shares. The FDIC had a h*ll of a time trying to sort through this when Indymac failed, so when they changed the FDIC/NCUA insurance amount in 2008, they also changed this aspect of the law to make it easier to calculate your insurance in revocable beneficiary accounts. 
Anonymous   |     |   Comment #27
Ok, now that the insurance question is resolved, how do all of us FUND the accounts?
psjf   |     |   Comment #29
Haha.  Exactly!  I'm willing to serve as a beneficiary if anyone needs one or two extra to get up to the max.  
James   |     |   Comment #44
Great! Just post your SSN and we're in business.
Kidding aside. That is the very reason why your need to use charitable organizations with official Tax ID numbers. I'm afraid to even ask my siblings for their numbers because it would be just a bit awkward.

bbug   |     |   Comment #34
And then there's those of us with IRAs. We can't avail ourselves of these beneficiary accounts and there is no way to reduce the risk on deposits over $250,000.

It's the government that is forcing us to take these risks because it is the government that is keeping rates low. I've added to Navy Federal certificates to get a reasonable return and am now exposed.  It's time for legislation to correct this oversight.
lou   |     |   Comment #35
Anonymous   |     |   Comment #36
Ken, great article!  I thought there is a grace period of a specified time after someone dies So you do not lose FDIC coverage immediately.
Can someone clarify?
Anonymous   |     |   Comment #38
There is a grace period.  Six months.
andybuji   |     |   Comment #37
Be aware that PenFed has some serious drawbacks with how they address the beneficiary subject.  Not enough to have me not do business with them (on the contrary, I've moved over quite a chunk), but at the end of the day less business than it could have been.

 - You can select either joint ownership or naming a beneficiary, but not both.  Hard to believe, but it's so.  This is the first time I've ever run into this.
 - Their form mandates equal shares for all named beneficiaries.  This is for non-qualified accounts, I haven't seen their IRA form, which I would hope is different in that respect.
 - Along those same lines, they don't allow for a primary beneficiary and a contingent beneficiary (again, not talking IRA here). 

I call this Pre-Industrial Age account titling.  Maybe even Stone Age.  I've been beyond happy with every other aspect of their business.  Maybe I'll try and talk my way up the food chain and see if I can speak to a decision "input provider" about this.
Anonymous   |     |   Comment #39
To find the real numbers from PenFed, just wait for the quarterly report and compare the numbers.
Anonymous   |     |   Comment #40
It is a nightmare trying to do business with PenFed.  The application process via their web site is awful and wouldn't let me open an account without calling them.  Then they sent reams of paperwork, little bits at a time, to open the account.  The process was neverending.  Then they required that get a notary to certify a copy of my driver's license.  The byzantine document they send you to open an IRA is over 20 pages long.  I just gave up with these folks.  
Anonymous   |     |   Comment #41
 20 pages, all but 1 or 2 are informational. You're a hysteric.
Anonymous   |     |   Comment #50
Your choice.  Do what you want.  It's your lose.
James   |     |   Comment #43
Ken is correct with his method. I called the NCUA and they confirmed this back in December.

Also, it is important to note that BOTH joint owners MUST be members for the insurance coverage to be effective for joint owners. To do this, the joint owner (as opposed to the member owner) must joint separately. It does not matter how much. My wife joined with her own $5 Regular Share Account. This is also confirmed with detailed email discussion with an NCUA representative.


lou   |     |   Comment #45
The joint owner (wife) does not have to be a member at Penfed to get the $500,000 of coverage for joint accounts.
James   |     |   Comment #53
I went back an forth with PenFed and NCUA with this for awhile. Finally someone at NCUA who really seemed to understand the issue in detail said she absolutely must be a member on her own even if it is a small account. It even asks on the NCUA calculator that Ken is using next to the joint owner: Is this owner a member of the credit union? Yes or No. Click no and the insurance coverage is not there for the joint owner. Being a joint owner does NOT make her a member until she joins as well separately with her own log in. Pen Fed is clear on that.
lou   |     |   Comment #56
The NCUA calculator asks if the joint owner is living and a member of the credit union. Obviously, no would be the wrong answer. There is absolutely no need for the joint owner to be a member of the union.
James   |     |   Comment #58
Why would it ask if they are a member and living if they did not need to be both? If I have some time later I'll find the email she sent me and cut and paste it in the comments.
lou   |     |   Comment #59
Technically, I see your point but if you read the NCUA disclosures there is no mention of any requirement for a joint owner to also be a member of the credit union. Not sure why they wrote it that way on the website but the NCUA disclosures take precedence over a poorly worded statement on their website.
James   |     |   Comment #60
I think I solved this controversy. BOTH joint owners must be members for joint POD accounts but not for joint accounts with no beneficiaries. Here is a quite from the NCUA Customer Access Analyst from the Office of Consumer Protection: 

"The NCUSIF insures member accounts based on the type of account and ownership.  While all owners of a joint ownership account with no named beneficiaries are insured as long as one owner is a member of the credit union, this is not the case for any other accounts with multiple owners.  A federal credit union is not eligible to offer formal or informal revocable trust accounts where all owners are not members of the credit union.  For your example of a joint POD, both owners must be members of the credit union in their own right for the account to have coverage as a revocable trust.   Since you state your wife is not a member of the credit union, the maximum insurance coverage you (as owner) would have on all share deposits with the same two beneficiaries named is $500,000.  In order to increase the coverage to $1,000,000 your wife must join the credit union in her own right by purchasing at least one share in the credit union in accordance with your credit union’s bylaws."

Hope this clears it up.


lou   |     |   Comment #61
This analyst is WRONG. Show me anywhere in the NCUA insurance disclosures where it states this. He made this up out of thin air. Disregard him as he doesn't know what he is talking about. Call him back or some other analyst and make him show you a source for this assertion.
James   |     |   Comment #63

You seem pretty confident in your position as did the analyst in her email. You may very well be right, but to me it really is trivial and I always err on the side of caution with this kind of money. My wife already joined with a $5 regular share account so what's done is done. I guess the real question is should others in similar circumstances do the same especially if it is so easily done within 5 minutes and a credit card for $5 in an account. I say yes they should even if it is possible or even probable that you are right. A representative of the NCUA stating an opinion and the NCUA calculator asking if they the joint owner is "living AND and member of the credit union" (and yes they use all caps for "AND") is pretty convincing.

It may be like the IRS. Some matters are not clearly explained in the tax code and there may not be a ruling from the IRS on the matter for years until an actual case comes up and is decided on.

James   |     |   Comment #64
And this from the NCUA FAQ on their website:


"Do I have to be a credit union member to be insured at that NCUA-insured credit union?   All primary owners (natural person(s) and non-natural person(s)) on any share account at an NCUA-insured credit union must fall within that credit union's field of membership and be on record as a member of that credit union. Co-owners on joint accounts with no beneficiaries are provided insurance coverage regardless of whether they are a member. However, co-owners on revocable trust accounts must be members of the credit union for their portion of the funds to be NCUA insured. Also, all owners on an irrevocable trust account must be members of the credit union OR all the beneficaries must be members of the credit union for the account to be NCUA insured. If membership status of a co-owner is unknown, one should inquire with their credit union."

A POD account is treated as an irrevocable trust account.

lou   |     |   Comment #65
No, a POD account is a revocable trust account.
James   |     |   Comment #66
You are correct. It is a revocable trust. I placed the wrong sentence in bold. It should be the preceding sentence.  But both require membership of the joint owner as above.
lou   |     |   Comment #67
James, I have sent an email to Ken and have asked him to look into this. I am confused by this language. Not sure what to make of it but I think we need to find out. If this language is correct (wonder why it is not in the legal disclosure?), then I need to make some changes to a bunch of credit unions I belong to.
James   |     |   Comment #68
Glad to be of help. If you find out any new information from Ken, just post a reply to this thread and I will check back in the future.

lou   |     |   Comment #74
James, it appears you may be right. I wonder how many people think they are insured with their joint revocable accounts and in fact may not be.

 I am going to call NCUA and try to get to the bottom of this, as I don't quite understand why a joint revocable account is treated differently than a joint account.
Anonymous   |     |   Comment #48
Here are the NCUA ownership/insurance specifics:

It's tricky, especially for trusts.
Anonymous   |     |   Comment #49
Again, not really tricky.  It's written in black and white, straight forward language.  People must be able to comprehend what they read to understand it all.
me1004   |     |   Comment #52
Good explanation of the insurance setups. Still, this is how I always understood it. I don't see a loophole here -- are people considering naming a charity as a beneficiary to be a loophole? The FDIC (and NCUA) changed the rules a few years back about beneficiaries, no longer requiring they be relatives in direct descending order. Thus, any beneficiary will get you extra insurance, whether a charity, a friend, even a name you pick out of the phone book (please pick mine!), any beneficiary.

But note, this bit of naming a charity is not free. If you should die, the payout will go to the designated beneficiaries (the trust overrides any will you might have), and in these examples, that means $1,000 per charity, so in the one case it would cost you $6,000. So you better be sure that is what you want to happen with your money.
James   |     |   Comment #54
It is much easier to just have one $1000 account with 3 charities named rather than 3 different accounts. It works on NCUA calculator as well.
me1004   |     |   Comment #79
Yes, but that wasn't my point. My point was that you should consider whether you want your money going to some charity when you die instead of someone else. When you list a beneficiary, you are giving away that money, so you better not list that beneficiary unless they are the ones you want to have that money. If you want the charity to have that money, fine, list them -- just understand what you are doing.

Also, my point was that as I read the article, it seems to think there is some loophole to adding a charity as a beneficiary. It has always been my understanding -- and practice -- since the FDIC and NCUA changed the rules several years back about descending order of relatives that you can name any beneficiary and get the extra insurance for that. I don't see that as some new loophole -- it was an deliberate change in the law, the intentional result. Its not new knowledge to me -- although it is always good to remind people and explain details, so the article is still worthwhile.

Even before that change, it was always my understanding that you can name a list of beneficiaries on an account and get the extra insurance for each -- that's not new or a loophole.

As for SSN, that's up to you, do as you please. However, you do  not need a beneficiary's SSN in order to name him or her as your beneficiary for this -- they don't even have to have an SSN (perhaps you want to name your 1-year-old child, but they don't have an SSN). In fact, I do not have the SSN of my beneficiaries. (But on rare occasion, I have come across a bank that requires you to give an SSN for the beneficiary -- they don't seem to understand it isn't needed, and I don't do business with that bank. But that has been a very rare occurrance.)
James   |     |   Comment #55
Also, I would not name anyone a beneficiary unless I had there SSN number or Tax ID number for charities. So the telephone book does not work and I really don't want to ask friends their SSN.
paoli2   |     |   Comment #69
I received some info from a Penfed CSR recently that I wondered if anyone on here is aware of.  Usually when you are Joint Owner of a CD it seems to be taken for granted that when one of the owners passes, the other just takes over the CD.  I was informed by the CSR that this is not true for credit unions and especially for Penfed.  My DP can be Joint on the CDs with me as the Member Owner but if I go first, he cannot close the CD, get interest payments etc. unless he is also a Member Owner.  I let them have the $5.00 for his Savings Account and made him a Member Owner that night.  I have dealt with other credit unions who have not had these same rules so it must be unique for Penfed.  We really have to make sure we know what their precise rules are for their accounts when doing business with them. 
Anonymous   |     |   Comment #70
"We really have to make sure we know what their precise rules are for their accounts when doing business with them."

Ya think?
Anonymous   |     |   Comment #71
Is this in any written documentation provided by PenFed? 
paoli2   |     |   Comment #72
i  could not get her to tell me where to find this in their disclosures.  She just said it has to do with their referring to "Members" only being allowed to do these things and if one passes, Penfed would then let the Joint know they have to become a Member if they really want to do anything with the CD.  I felt it was just easier to make him a Member now.  I was hoping someone in this group knew more about this.
Anonymous   |     |   Comment #73
After following readers comments and experiences with Penfed, I don't believe I want to do business with them.  Penfed needs to get their act together.  It's very easy for someone "in the know" to put together a checklist covering different situations to be used by the CSRs.
Anonymous   |     |   Comment #75
That's your choice. 

But some depositors have to get their own act together and understand NCUA regulations.  They apply to all credit unions that are insured by them. Go to the NCUA's web-site to get all the insurance information.  Do not rely entirely on the comments on this blog site for accurate information.
Anonymous   |     |   Comment #76
There is a big plus of course for the rest of us when people choose not to do business with Penfed or any other bank or credit union we use.  Those institutions still will need to attract deposits and with a smaller number of depositors, they will need to offer even higher rates!  Ka-ching!
Anonymous   |     |   Comment #77
I'm sure the "higher ups" in the CU are aware of this requirement that all joint owners in a beneficiary account must also be members of the CU.  However they will not make it known to members since it most likely affects the amount they must pay for the NCUA insurance.  I would think there would be some type of resonsibility of the CU to properly set-up the accounts for full insurance coverage.  This is BS that the CSRs don't know the correct method.  Since depositors are members of the CU and therefore partial owners, heads should roll starting from the TOP.
Anonymous   |     |   Comment #78
Go back to doing something the old fashioned way:


A real rarity these days.
Anonymous   |     |   Comment #80
An earlier posting suggested not having a charity as a beneficiary.  One tool to "ensure" a trust is enforced after the death(s) of the settlor(s) is to have a beneficiary be a charity b/c the charity has a financial incentive to enforce, i.e. "fight" to validate the trust, b/c otherwise the charity will get nothing if the trust is challenged and no one else is around to defend the intent of the settlor(s).  Therefore if the % allocations are important (read again the extremes in this list), ask the question, who is going to defend them if the trust document is challenged later by one of the "low" percenters!
Ratesaver   |     |   Comment #81
It may be a little late to add to this post but I successfully opened a few cds at PenFed.. Thanks for the info on Ken"s site.  Everything went just great.. The csr that opened my acc.. was very helpful.. I put on my kids as beneficiary without a problem... She said it is most likely the 3% cd will end at the end of this month... Thanks again Ken
Anonymous   |     |   Comment #82
Something I never realized till I watched the NCUA video about ways to raise your amount of insurance coverage. Beneficiaries on a POD are only eligible for insurance coverage if they are also members of the credit union.
Anonymous   |     |   Comment #83
Correction: POD beneficaries are not required to be members. As you were.