With the recent problems at Countrywide and at other banks that have large ties with the mortgage industry, it's a good idea to make sure your deposits are fully covered. If you have less than $100K of bank deposits, it's straighforward. If you have over $100K, there are many ways you can still be covered, but as the above example shows, you have to be careful.
According to the FDIC an owner of a POD account is insured up to $100,000 for each beneficiary if all of the following requirements are met:
- 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").
- The beneficiaries must be identified by name in the deposit account records of the insured bank.
- The beneficiaries must be "qualifying," meaning that the beneficiaries must be the owner's spouse, child, grandchild, parent, or sibling. Adopted and step children, grandchildren, parents, and siblings also qualify. Others including in-laws, cousins, nieces and nephews, friends, organizations (including charities) and trusts do not qualify.
I wasn't sure how one could confirm that beneficiaries are identified by name in the deposit account records of the insured bank. According to the FDIC's glossary of terms:
Deposit account records include signature cards, certificates of deposit (CDs), passbooks, account ledgers, and computer records that relate to the bank's deposit-taking function. Also called Account Records and Bank Account Records.However, for the purposes of determining coverage, account statements, deposit slips and cancelled checks are not considered deposit account records. So, having the POD's listed on a statement is probably not enough evidence. If you want to be sure your POD's meet the first two requirements above, I recommend contacting your bank.
In the next few days, I'm planning another post with more details about using POD's to extend FDIC and NCUA insurance coverage. Update: Here's the new post link with the additional details.
For more info and links to the government websites, please refer to my Facts about FDIC and NCUA post.