I recently opened a new bank account in my name. Once the account was opened, I added two beneficiaries. Did my maximum FDIC coverage automatically increase to $500K or do I need to also change the account title to add "POD" or "Trust" or something similar?
Answers
Each beneficiary gets 250k. Do remember the owner (you) doesn't get 250, just each beneficiary.
I'm wrestling with all of my banks and credit unions right now to verify that they have indeed titled things correctly - but neither I nor THEY seem to know what is required (and I am dealing with Managers and Branch Managers). I have read somewhere that it must be titled or coded correctly in the bank's "deposit account records" - but am having problems with Managers who don't even know what those are. And I don't know what to ask! Any guidance would be appreciated!
Sorry for repetition, but I've posted elsewhere, the NCUA document on deposit coverage, very similar to FDIC document, states that *all 3* conditions must be met: 1. Acronym in the title of the account. 2. Individual beneficiaries named. 3. Beneficiaries must be alive, or charitable institution, etc.
What you're running into with institutions is widespread and typical: There is 'wiggle room' in the wording of what constitutes an 'account title.' Some specifics are mentioned, such as signature card, cd (titles), but it devolves into things that even the institution has trouble defining, e.g., 'the electronic records of the bank' (presumably related to titling). I've found it almost impossible to get ahold of the requisite documents at a number of institutions, sometimes because *they* don't understand the requirements of NCUA/FDIC - e.g., they think that simply naming beneficiaries means you're golden.
From the horses mouth: NCUA document on increasing depositor's insurance coverage beyond 250k: https://mycreditunion.gov/sites/default/static-files/insured-funds-brochure.pdf
It states, in part (pgs. 34-36)
From page 34-35:
For the purposes of share insurance coverage, the revocable trust category includes both informal and formal revocable trusts: • Informal revocable trusts – often called payable on death (POD), Totten trust, in trust for (ITF), or as trustee for accounts (ATF) – are created when the account owner signs an agreement – usually part of the signature card – directing the credit union to transfer the funds in the account to one or more eligible named beneficiaries upon the owner’s death. • Formal revocable trusts – known as living or family trusts – are written trusts created for estate planning purposes. The owner controls the funds and other assets in the trust during his or her lifetime. The agreement establishes that the funds are to be paid to one or more identified beneficiaries upon the owner’s death. The trust generally becomes irrevocable, or partially irrevocable, upon the owner’s death.
35 All funds an owner has in both informal and formal revocable trusts are added together for insurance purposes, and the insurance limit is applied to the combined total. Coverage and Requirements for Revocable Trust Accounts In general, the owner of a revocable trust account is insured up to $250,000 for each different beneficiary, if all of the following requirements are met: 1. The account title or other account records of the credit union must indicate 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 to indicate the existence of a trust relationship. 2. For informal revocable trusts, the beneficiaries must be identified by name in the account records of the insured credit union. 3. To qualify as an eligible beneficiary, the beneficiary must be a natural person, charity, or non-profit organization (as recognized by the Internal Revenue Service). An account must meet all of the above requirements to be insured separately as a revocable trust. Typically, if any of the above requirements are not met, the portion of the account that does not qualify is added to the owner’s other individual accounts, if any, at the same credit union and insured up to $250,000. If the trust has multiple owners, the amount that does not qualify for coverage as a revocable trust would be added to each owner’s individual accounts based on their ownership interests.
You were poorly explained, incompletely understood or asked the wrong question to begin with, since then you are in the state of confusion and misinforming others.
In the same way as @Oleg's concern is worded as "do I need to also change the account title to add "POD" or "Trust" or something similar?".
1. The concern is proper and simple, but the explanations are wrong and complicated.
YES! the account title needs to be changed to types of the Informal Trust(POD, ITF or similar)
NO! YOU cannot change it.
It is an Informal Trust and you have to rely on FI'S bureaucracy to update account record.
The only way around it is to be in charge of things, to setup FORMAL Trust and have account opened on name of Trust.
2. "But she also said that if it was her money, she'd want the acronyms 'POD', 'ITF', 'ATF' etc. to be in the account *title.*" - meaningless and pointless. what is lacking here is an explanation of why.
While nobody hurt by having *title* to reflect some kind of the Informal Trust, nobody should feel totally safe when they see "'POD', 'ITF', 'ATF' etc. to be in the account" *Statement*.
The explanation is provided by @Zemo999, quote;
"2. For informal revocable trusts, the beneficiaries must be identified by name in the account records of the insured credit union."
the same goes to FDIC - § 330.10 Revocable trust accounts.
"For informal revocable trust accounts, the beneficiaries must be specifically named in the deposit account records of the insured depository institution."
The "account records" is not the same as "account statements"
It is an "account records" that NCUA and FDIC are using to establish Account Insurance Coverage, while "account statements" is an FYI document to make Depositors feel informed, unless there is a conflict and "account statements" is used as proof of FI misfit.
There are aspects and instances preventing FI's of displaying names and account "titles" the way Depositors with would "want the acronyms".
The Beneficiaries are not asked to give a consent for their names to be displayed/printed/associated with the account/Bank/CU with which they have no relationship or vested interest while Principals/FIs are alive.
Bank/CU may not display/print/associate their Accounts with person/entity existence of which they have no way of verifying.
Where Account have joint Principals and only one Principal designates Beneficiaries or where Beneficiaries numbers are in dozens because Principal declare different names, or CU listing accounts as subaccounts of particular member, etc...FIs are not obliged to program their operations to the likeness of Depositor's specific Informal Trust design.
With all due respect, you may be missing the most vital point: i.e., both NCUA and FDIC requirements for an informal trust are 'additive' in the sense that 1. ITF, POD, end equivalents must exist in the title of the account, or in the electronic records of the IDI relating to such a designation; *and* 2. Individual beneficiaries must be named; *and* 3. Beneficiaries must be living individuals, charitable institutions etc.
The *problem* is not, as you seem to state, that having those acronyms on your account statement is worthless. That was never in dispute. The problem is how do you get the instiution to cough up to the *depositor* proof that the account titling in the bank records meets NCUA/FDIC requirements to *create* an informal trust. Because simply naming beneficiaries dosen't do it.
The problem in this area arises (we might even be in agreement on this) because a lot of personnel at banks/fcus believe the naming of beneficiaries itself creates an informal trust. Couldn't be more wrong.
I cited the long-serving NCUA official as saying that beneficiaries might serve if your IDI goes belly up, but she'd want to see the required words (acronyms) in the titling of the account, to make sure it complied with the 'additive' requirements that are in the deposit insurance document, to make sure all the funds on deposit would be made good. Not worthles, IMO, just good advice.
Me
sure - I will read back what you said. you said quote ON THE REVOCABLE TRUST ACCOUNT QQ THE ACCOUNT TITLE MUST DISCLOSE THE TRUST RELATIONSHIP WITH RAISES SUCH AS BENEFICIARIES TLD S OR IDF ITF S unquote what do you mean by the account title when you said that
FDIC Rep
WHAT I MEAN WE JUST MUST BE ABLE NO NO WE THE FDIC FROM THE DOCUMENTS THE BANK RECORDS SHOULD BE ABLE TO IDENTIFY THAT THERE IS A BENEFICIARY ON THE ACCOUNT THAT S IT GA
Me
ok that sounds pretty simple. so if bank statements show that an account owner is John Smith, but not John Smith POD - as long as there are beneficiaries on the account, then that alone qualifies the account as a revocable trust account?
FDIC Rep
YES
FDIC literature is adequately descriptive for those who trained to interpret it.
if it is still opaque, there are professional seminars...available to Bank's employees.
for the rest, once simple issue made complicated, it is no longer explainable.
Depositors have no standing to give FDIC suggestions or to keep FDIC responsible,
Depositors are not FDIC Members or Insured Institutions.
Depositor relationship begins and ends with the Bank.
FDIC relationship begins end ends with the Bank.
Once Depositor opens the Account and designates Beneficiaries, Depositor appoints the Bank to be Informal Trust Administrator.
As a matter of Policy, legislated by US Congress, FDIC will confirm with the Depositor where Informal Trust Administrator performed it's fiduciary duty.
Keep the copies of YOUR Documents and Communications with the Bank in case if you don't trust your Trust Administrator.
Keep your copies even if you do!!!
there is nothing else here.
You continue misdirecting yourself into technicality thus avoiding the simple statement of Fact.
The simple fact of life is that there is are no risk and warry free business transactions, Bank/CU Deposits including.
The purpose of NCUA and FDIC existence is to mitigate these risks, but to never eliminate them completely.
The simple fact of business transaction between Depositor and Bank/CU is that the Depositor is not privileged to have any proof or access to any consequent record related to Bank/CU business with NCUA/FDIC.
The Deposits entitlements does not extend beyond Account Statement.
If Account Statement does not meet Depositor's requirements, perhaps Depositor should be doing business somewhere else or no business at all.
The Depositor is not a Customer of NCUA/FDIC, there the "requirements" you keep quoting is only Bank/CU consumption only.
NCUA/FDIC give to the Depositor the Benefit of the doubt, there is a process in place to Give Depositor an opportunity to correct any unmet requirements and proof that the intent of the Deposit was to setup Informal Trust Agreement with Bank/CU, there the "proof" comes from you - the Depositor.
There are several options;
1. Do not bank
2. Keep your own Records as "proof".
3. License yourself as Bank and satisfy every requirement of every Depositor.
4. Hire Attorney, setup Formal Trust that meet NCUA/FDIC requirements, Open Account on the
name of Formal Trust, exclude Bank/CU as Informal Trust Administrator.
As Formal Trust Administrator and Account Signatory make yourself responsible for meeting
NCUA/FDIC requirements when the need arises.
Technically, yes, $250K coverage per beneficiary times 2 = $500K coverage.
Compliance wise, under FDIC and NCUA regulations Banks and CUs under no obligation to "title" account as ITF/POD for the Customer consumption. That information must be kept internally in IDI Deposit Account Records.
Keep your own Record, copy of the beneficiary designation form submitted, copy of FI' webpage displaying Beneficiaries, or record of the chat with FI Representative confirming that "Add Beneficiaries" request was received!!!
NCUA has an excellent insurance calculator on its website. Do a google search and you’ll find it.
Confidence building.
The reason institutions do not put it in the title is because she said the way their computers are the 1099 and name in the title have to match the social security number. I suppose that is why on a joint account the 1099 only goes to one person. Ours at least were not split when we had joint accounts. I usually opened the accounts and everything was in my SS number. My husband just signed the papers. The only thing with his SS number was the first credit card we had. We had a free account in the 60's if we had a credit card. I was 18 and could not open a credit card but had a checking since I was in 7th grade. So my husband signed for a credit card so our new account would be joint and free. We had that account for years and when he went on a golfing trip years later he still had that credit card. We had never used it. They flew down there and he was the only one with a credit card so they could rent a car. One of the presidents of the bank I worked for was one of the 4 guys that went and he didn't even have a card with him. A few years later because some of the couples that golfed in a scramble fought about their putts or tee offs etc we decided to draw names. I got the presidents name the best golfer of all of us who had won the golf course tournaments many times and me the worst. I did make some good putts but that was it. We went to the club house and he ordered a double. I never let him forget it and one of us always told that story.
