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FDIC Insurance of Complex Trust Agreements

Extending FDIC insurance past $100K can be complicated for the plain old informal revocable trust accounts (aka, payable on death or similar). It can even be more complicated for formal revocable trust accounts. According to this MarketWatch article, there were some trust accounts such as AB Trusts that were part of the $39.2 million uninsured deposits of ANB Financial Bank that failed in May (see post for more on this bank failure).

One complication described in the article is when a revocable trust converts into an irrevocable trust which can happen due to a death. Revocable trusts can qualify for up to $100,000 in coverage per qualified beneficiary. For irrevocable trusts, all contingent interests are added together and insured up to only $100,000.

For the official details of FDIC insurance of trust accounts, please refer to this FDIC guide.

In addition to the issue of trusts, the article describes FDIC rules related to loans. If you have uninsured bank deposits at a failed bank, loans that you have at the bank may be used to offset the loss of the uninsured deposits. See question # 22 at this FDIC Deposit Insurance Coverage FAQ for the official details.

For more details about extending FDIC insurance past $100K and the risks involved, please refer to my August 2007 post.

Thanks to the reader who emailed me the link to this MarketWatch article.

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Text of FDIC press release on trusts:


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