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FDIC Protection And Account Title

nickgieschen
  |     |   4 posts since 2017

I have a few CDs and savings accounts at various banks to which I have added POD beneficiaries in order to get 250K FDIC protection per beneficiary. I had thought that simply adding the beneficiaries would suffice, but then read in the FDIC documentation that there is a particular requirement for the titling of the account:

"The account title at the bank must indicate that the account is held pursuant to a trust relationship. This rule can be met by using the terms payable on death (or POD), in trust for (or ITF), as trustee for (or ATF), living trust, family trust, or any similar language, including simply having the word "trust" in the account title. The account title includes information contained in the bank's electronic deposit account records."

I'm curious as to what this title is. Is this something I can ask the bank to retroactively apply to my current CDs for example? Does an account typically get automatically titled in this way if one adds beneficiaries?

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Answers
me1004
  |     |   1,379 posts since 2010
I first heard of this rule when Indymac went under. I have raised the issue several times since then when opening a new CD, and gotten all kinds of responses. My experience with this question and anything else is that the banks are completely inept, they will tell you the wrong information, they will do things wrong, and there is not much you can do — and these problems continue even you go well uptake managerial ranks.

I have a couple-few times made a fuss and gotten them to add something to the title. But most often, they just do what they do no matter what you say, they say they have no way to do that, say you are covered, don’t worry. And some of them do automatically do it in one way or another.

I also was told by XCEL FCU that the rules are not the same for credit unions, which are insured by the NCUA, not the FDIC. XCEL merely lists the names on their paperwork at the end, simply saying “beneficiaries.” They insist that is all needed under the NCUA rules (I haven’t looked up the NCUA rules).

I notice, XCEL’s approach would seem to satisfy even this FDIC rule, which the OP quotes as reading, “The account title includes information contained in the bank’s electronic deposit account records.” That quote seems to include all the account records the bank holds as being part of the title by definition, it simply would have to be mentioned in there — although that was NOT how things were explained when it became an issue when Indymac collapsed. If that line means what it seems to say — anywhere in the account records — then I don’t know why it became an issue when Indymac collapsed. That line seems to be saying that all the records of your account are part of the “title.”

ChasR is very right when he says the FDIC language is murky. After all, if “title” does not mean what everyone on the planet would think it means, then why use that word in the first place? Why not just say clearly what you mean, that the designation must be included somewhere in the account records held by the bank.

If they really are saying anywhere in the account records, then the point of that clause is simply to say that it must say somewhere in the account records held by the bank that the beneficiaries are POD, or ITF, or whatever, not that they must be in what everything thinks is the title. That is, it must say that they are legal beneficiaries covered by FDIC insurance, not simply your wishes outside of some legal document.

I do think the FDIC should revise its language. I know I have had plenty of irritation and trouble over the issue for years, thinking it must actually be designated in the title that pretty much anyone but the FDIC would consider to be the title.
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jib2424
  |     |   34 posts since 2014
What were you told when Indy Mac collapsed?
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paoli2
  |     |   2,641 posts since 2011
When I have inquired about them adding the word "POD" to the title they claim it is not necessary because that is the same as the person being beneficiary. Some have done it, others not. When I have time I want to call the FDIC and ask them how important it is to hve this done. Other than this, I make sure I keep all the CDs under the amount payable if the bank goes under. Besides, the beneficiary does not have ownership of the funds until the main owner or owners die so why are we all so concerned about this??
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me1004
  |     |   1,379 posts since 2010
Paoli, some people have more in a bank than is covered by FDIC insurance for a single account holder. When they add beneficiaries, that can increase how much is insured by the FDIC at that bank, for each extra beneficiaries, they get an extra $250,000 of FDIC coverage.

jib2424, I wasn't told anything, I never even got in touch, I seem to have been one of the few people who had any idea how FDIC insurance worked, was not worried and did not run out to Indymnac and stand in a blocks-long line to try to get my money. But the collapse, and the long lines and FDIC coverage was all over the news. It came out in that that there were problems with the accounts in that some or many accounts did not have anything indicated in the title that the account was a POD or ITF or whatever. Then I think it was the FDIC that made an announcement about how that is required or you can lose your insurance -- they said they would cover people that time but never again if the title was not as required. Still, I recall them saying something that without it being in the title, they could not tell quickly if that was a consideration, would have to go through all the account materials -- and that recollection seems to undermine what the definition of "title" in the original post here -- so I still an not sure, and the FDIC needs to be perfectly clear about it.

The information in the news at the time of the Indymac collapse id not define "account title," as if you don't know the FDIC defines it differently than anyone else would, there is no reason to think you need to define what "account title" is. From the quote in the original post here, it seems "account title" is not simply the "headline" on the account, it is all the account materials -- and if so, then POD (or whatever) does not need to be in the "headline," it would only need to be somewhere in the account materials. But I suggest, that is not what the news was suggesting at the time of the Indymac collapse, the news was reporting that the lack of it in the titles was forcing the regulators to expend far too much time going through all the account materials to determine if it was properly a POD.

From the definition in the original post here, I suspect the point is that merely listing people to get the money as beneficiaries does not make it a formal trust account, as a POD is, and the trust status is needed for the FDIC coverage. They are saying to make sure it actually says somewhere in the account materials that it is actually a POD, don't merely list people to get your money.

But what was being reported at the time of the Indymac collapse seemed to suggest the FDIC wanted that designation in the "headline" of the account -- but that reporting could have been a misunderstanding by the reporters -- see my comment above about no reason to ask the definition of what everyone would think is obvious.
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jib2424
  |     |   34 posts since 2014
me1004, I agree totally with your comment "the Federal Deposit Insurance Commission needs to be perfectly clear about it". How can we get such a clarification, one we can rely on?
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CTM
  |     |   179 posts since 2010
While the rules have changed over the years, especially since the early 1990's, and the state where you resided also had an impact, the latest published document seems to be perfectly clear.

From the FDIC document, created April 18, 2016, page 66, section IX, paragraph 1
(notice "expressly defined"):

https://www.fdic.gov/deposit/diguidebankers/documents/financial_institution_employees_guide_to_deposit_insurance.pdf

The “title” of a revocable trust account is expressly defined to include the electronic deposit
account records of the IDI. For this purpose, the designation can be as simple as a code in
the IDI’s electronic deposit account records. Accordingly, if an IDI’s electronic records
identify a deposit as a revocable trust account, the account will be insured as such.

Also, from the 2017 version of 12 CFR 331.10 (start reading at "for example, the FDIC"):

https://www.gpo.gov/fdsys/pkg/CFR-2017-title12-vol5/pdf/CFR-2017-title12-vol5.pdf

(b)Required intention and naming of beneficiaries.

(1) The required intention in paragraph (a) of this section that upon the owner's death the funds shall belong to one or more beneficiaries must be manifested in the “title” of the account using commonly accepted terms such as, but not limited to, “in trust for,” “as trustee for,” “payable-on-death to,” or any acronym therefor. For purposes of this requirement, “title” includes the electronic deposit account records of the institution. (For example, the FDIC would recognize an account as a revocable trust account even if the title of the account signature card does not designate the account as a revocable trust account as long as the institution's electronic deposit account records identify (through a code or otherwise) the account as a revocable trust account.) The settlor of a revocable trust shall be presumed to own the funds deposited into the account.
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me1004
  |     |   1,379 posts since 2010
I tend to agree with your definition of "title". But I'm not so sure it is as clear as you say. The way they wrote that, I can't tell if they are emphasizing "electronic" or emphasizing "deposit account records." Seems to me that might mean they are saying they don't need an original signature on an original document, an electronic version will suffice.

Still, I think they are defining "title" similarly to "deed" or to a real estate "title" document; that is, I think, they meant all the account setup documentation is the "title," not only the headline on the account.

(BTW, legally speaking, the word "expressly" means nothing, adds nothing, its just wordiness.)
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nickgieschen
  |     |   4 posts since 2017
In case anyone is dealing with Synchrony Bank on this issue, after talking to a supervisor there, I was told they will *not* change my account titling to conform to the FDIC's requirements. Thus, as far as I can tell, anyone who has added beneficiaries in order to get FDIC insurance at Synchrony bank is not in fact covered.

Now I have to consider whether I should withdraw and incur in the early termination fee.
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Anon456
  |     |   249 posts since 2011
i just looked into this as well.

Here is my understanding. The TITLE of the account needs to say, at least, POD. Does not have to list them.

The Beneficiaries need to be listed in the bank records. MOST use the signature card as that documentation.

SO - - per my understanding, if the CD shows POD in the ownership name, and you have a copy of the signature card with each listed, you SHOULD be OK.

Please let me know if you have any direct conflicting information.
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Worthman
  |     |   8 posts since 2010
https://www5.fdic.gov/edie/fdic_info.html
https://www.fdic.gov/deposit/covered/categories.html
https://www.fdic.gov/deposit/covered/trust.html

You can also plug all of your individual accts, 1 bank at a time into an online calculator called EDIE the estimator, which you can print out the results of...or call and ask to speak to an FDIC deposit insurance specialist.as listed in the top link above and also as described in the following description written below.

Q: Can I check to see if my accounts are fully covered?

A: Yes, you can get detailed information about your specific deposit insurance coverage by accessing the FDIC's Electronic Deposit Insurance Estimator (EDIE) and entering information about your accounts. You can also call the FDIC at 1-877-ASK-FDIC (1-877-275-3342) and ask to speak to an FDIC deposit insurance specialist.

To determine your deposit insurance coverage or ask any other specific deposit insurance questions, call 1-877-ASK-FDIC (1-877-275-3342).
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Kaight
  |     |   1,192 posts since 2011
Yes, you can ask the bank to attend to this for you. A good bank or CU will take care of this without any need for you to ask. An uncaring financial institution, OTOH, might dawdle or even tell you to go pound sand. But in any event, if you don't ask you don't get. So ask.
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Bozo
  |     |   1,375 posts since 2011
Kaight, I was equally befuddled several months back, so I called Alliant. I was advised that having a beneficiary who would receive the proceeds on death does not equate to a "POD" in the title of the account. "Kaight POD wife" in the title = 2 X $250,000. Kaight with wife as beneficiary = $250,000.

At least that's the way I think it was explained to me.
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Bozo
  |     |   1,375 posts since 2011
Kaight, your second question ("how do I get the bank to apply the re-titling to an existing account") might be a bit more complicated. Alliant explained it was a two-step process. First, you have to delete present beneficiaries. That's one form. Second, you need to re-title the account. That's another form. Whether you might need to liquidate the CD in order to do this was not the subject of my inquiry, as I was dealing only with a garden-variety savings account. Your instincts, however, to contact the bank, are spot-on.
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Bozo
  |     |   1,375 posts since 2011
Oops, I just realized the queries were from Poster "nickgieschen", not Kaight.
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ChasR
  |     |   287 posts since 2013
Bozo: It strikes me that the explanation was erroneous, at least insofar as Alliant is concerned.
First, simply naming someone as a beneficiary of an Alliant account means it is "payable-on-death" to that beneficiary. The account agreement says "Any account established with beneficiaries at Alliant is considered a revocable trust account and is an instruction to Alliant that such single or jointly owned account funds so designated are payable to the owner(s) during his, her, or their lifetimes and, when the last account owner dies, payable to any named and surviving beneficiary(ies)."
Second, NCUA rules do not require the POD to be mentioned in the "title" of the account--just listing a beneficiary is sufficient: "The required intention in paragraph (a) of this section that upon the owner's death the funds shall belong to one or more beneficiaries must be manifested in the title of the account or elsewhere in the account records of the credit union using commonly accepted terms such as, but not limited to, in trust for, as trustee for, payable-on-death to, or any acronym therefore, or by listing one or more beneficiaries in the account records of the credit union."
The FDIC rule language is a bit murkier on the "title" matter.
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Bozo
  |     |   1,375 posts since 2011
Charles, which gets me back to "call the bank or credit union." Did I get the straight skinny from Alliant? No harm, no foul. I plopped the money in a J/T account elsewhere.
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jib2424
  |     |   34 posts since 2014
So, in the case of a bank (FDIC) ,is simply listing POD beneficiaries sufficient? This is a question that must be answered.
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ChasR
  |     |   287 posts since 2013
As I said, the FDIC language is murky. And many banks, while listing beneficiaries, simply do not include "payable on death" in the account "title." You have to look at the deposit account agreement to see what a beneficiary listing means.
In my case, I think the way Ally now handles POD accounts on its online banking pages is sufficient. It doesn't show a "title" but it shows an "owner" "and "beneficiaries." If you click on :beneficiaries," you bring up a page that shows the account is "payable on death." I think this satisfies the FDIC language that " account title includes information contained in the bank's electronic deposit account records."
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paoli2
  |     |   2,641 posts since 2011
Some of these posts confuse me. POD means "payable on death" and so does a beneficiary. You can't have a different POD from the person who is the beneficiary because who would get the funds at death? I must have misunderstood what one poster wrote but at least he has his wife (the same person) as the POD and the beneficiary.

All of my institutions state they are one and the same so our beneficiary is basically the same as the POD.
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Bozo
  |     |   1,375 posts since 2011
Paoli2, as noted above, the advice on NCUA/FDIC insurance limits can be confusing. Alliant CU advised me that a "beneficiary" on my after-tax CD was not the same as a POD in the title, and would offer no additional insurance. Some posters here contend otherwise. Am I confused? Sure. Do I lose sleep over it? No. As I suggested, the one thing everybody seems to agree with is that "Joe POD Jane" in the title of the CD offers 2 X $250,000 insurance.
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alan1
  |     |   877 posts since 2015
Bozo -- please do not be concerned whether "everyone seems to agree" that Joe POD Jane in the title offers 2 x $250,000 insurance. Does the FDIC agree? Does the NCUA agree?

For FDIC Electronic Deposit Insurance Estimator, go to https://www5.fdic.gov/edie/

For NCUA Share Insurance Estimator, go to https://www.mycreditunion.gov/estimator/Pages/default.aspx

Please.
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CTM
  |     |   179 posts since 2010
Bozo -

Once again, it is not possible to agree that an account titled Joe POD Jane provides 2 x $250,000 insurance coverage, because it does not.

This is not a discussion on the titling of the account, rather that FDIC or NCUA insurance coverage (on a POD/ITF/RLT/Totten Trust) is on a per owner / per beneficiary basis.

I provided links to the FDIC and NCUA insurance coverage tools the last time you posted this opinion. Alan1 has provided them again, in his post (above).

Here is another one from the FDIC: https://www.fdic.gov/deposit/covered/categories.html

Look at the 4th banner (light blue), titled "Revocable Trust Account".
The text seems unequivocal: "Coverage Limit: Owner insured $250,000 for each unique beneficiary designated"

And one more from the NCUA: http://webapps.ncua.gov/ins/rulechange.html

(Third line under "New Basic NCUA Share Insurance Limits for Common Ownership Types*")

Revocable Trust (ITF/POD) Accounts
$250,000 per member per beneficiary subject to specific limitations and requirements

Joe is the sole member/owner and Jane is the sole beneficiary.
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Ricochet
  |     |   522 posts since 2010
Revocable Trust Accounts
Account Nickname Balance Owner Beneficiaries
what you know $800,000.00 XX 88 77

Insurance Summary Balance Insured Uninsured
Xx POD/ITF $800,000.00 $500,000.00 $300,000.00
77, 88
Total for all accounts at A (Totals will be rounded)
Balance Insured Uninsured
$800,000.00 $500,000.00 $300,000.00

If you’d like to learn more about what you can do to protect your deposits please visit www.FDIC.gov/deposit/deposits or contact the FDIC at 1-877-275-3342.
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Bozo
  |     |   1,375 posts since 2011
OK, as I am now thoroughly confused, I will remind myself to keep all after-tax accounts in joint tenancy.
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me1004
  |     |   1,379 posts since 2010
We can answer that the best we can, but in the end, as several here have noted, I and they think the FDIC needs to make it more clear. Without the FDIC doing so, whatever we tell you might not be the final word, there is some wiggle room in the FDIC language that needs to be cleared up. I have found the banks to have the same differing opinions are we here have -- and that is a formula for disaster, and asking them for the final word will be no better than asking here.

I BELIEVE all the account set-up documents, and maybe even more of the account documents than that, constitute the "title," not merely the "headline" on the account. The "title" is a document(s), not merely a headline.
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ChasR
  |     |   287 posts since 2013
I believe that all account documents, including the description of POD and ITF accounts in a bank's deposit account agreement, are part of the "title." But I also agree with me1004 that the FDIC's language needs clarification from the agency itself. We can keep discussing this on DepositAccounts.com until the cows come home, but I don't think we're making any progress in resolving things.
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CTM
  |     |   179 posts since 2010
While I don't think any clarification is needed, that is not the question.

Bozo presented a specific question and was told (believes) that an account, properly titled, Joe POD Jane has $ 500K of FDIC or NCUA insurance coverage.

It does not!

Anyone can simply enter the specifics into the FDIC or NCUA insurance calculators and both yield the same result ... $250K not $ 500K.
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Bozo
  |     |   1,375 posts since 2011
CTM, I've happily resolved this issue by reminding myself to have all after-tax accounts remotely approaching $250,000 in joint tenancy. I've yet to hear anyone suggest joint tenants have anything less than 2 X $250,000, but who knows?
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alan1
  |     |   877 posts since 2015
Bozo -- I would suggest that the situation for joint accounts may be more complicated when it comes to NCUA deposit insurance. (I believe you are correct re FDIC insurance.) The complication re NCUA arises if one of the co-owners is not a "member" of the credit union, as defined by the NCUA.

1. Read the NCUA's "Your Insured Funds Booklet" at https://www.mycreditunion.gov/Documents/insured-funds-brochure.pdf
Pay particular attention to "Section B. Joint Accounts" beginning at p. 28 of the PDF (p. 26 of the print edition).

2. After completing Step 1, above, then go to the NCUA Share Insurance Estimator https://www.mycreditunion.gov/estimator/Pages/calculator.aspx
For "Ownership Type" select "Joint - No Beneficiaries
For each owner, there will be the following question:
"Is the owner living AND a member of the credit union?"
See what happens if you enter "No".
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me1004
  |     |   1,379 posts since 2010
Alan1, that is an interesting complication, about the joint owner not being a member of the credit union. But I am not so sure that situation is possible, I don't think someone can be a joint owner without being member of the CU.

I haven't looked into any special membership exemption for a joint owner, but I doubt there is one. Do you know of any CUs that would allow that?
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ChasR
  |     |   287 posts since 2013
I wasn't addressing Bozo's point. I agree that it's perfectly clear that Joe POD Jane only qualifies for only $250k of insurance.
What I and (I think) me1004 were addressing was this "title" issue under FDIC rules.
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paoli2
  |     |   2,641 posts since 2011
ChasR: You must be correct because that is why I was recently told by a certain credit union that I will be going over my insurance limit if I buy any more CDs in that particular POD category. Once one reaches the 250M max, one will be going over the insurance limit even if the person puts it in a joint account since they add up all accounts with a particular name on it. I was told the same by the FDIC since I was looking for a way around this so I could put more with this cu. Now hubby can buy CDs with them in his name only without adding mine and he would get his up to 250M coverage. However this is not what we want to do at this time. It can be a confusing issue.
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me1004
  |     |   1,379 posts since 2010
CTM, you definitely are right for FDIC coverage, one beneficiary does not get you any more coverage than you had without that beneficiary, it takes two beneficiaries with that institution to get you anything extra. I believe the NCUA handles it the same, but haven't actually checked.

Bozo, yes, you can do it as joint tenants -- but there are other legal ramifications of that to consider, such as that the joint tenant can withdraw and take that money any time they want, unlike a beneficiary, who has no access until after you die. And, depending on how the account is used, you might even need to give the joint tenant a 1099, and also file it with the IRS each year, if a portion of the income on the account is solely their's, but the account is reported under your SS number, and they would have to report that portion on their tax filing.

Paoli, I believe a joint account doubles the FDIC insurance, merely adding one beneficiary does not. A beneficiary is NOT an account holder, gets a different consideration.
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Bozo
  |     |   1,375 posts since 2011
Me1004, one thing I am not worried about is my joint tenant (my wife). We hit our 50th wedding anniversary next year.
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