The Federal Deposit Insurance Corporation Will Increase Insurance Coverage of Trust Bank Accounts

The Federal Deposit Insurance Corporation (FDIC) is an independent federal agency insuring deposits in U.S. banks in case of bank failure. The Banking Act of 1933 established the agency to restore public confidence in banks. As of 2023, the FDIC insures deposits up to $250,000.

Most trust funds have bank accounts insured by FDIC. However, the amount for which FDIC covers trust funds is calculated differently than individual accounts. Moreover, the FIDC treats revocable and irrevocable trusts in different ways. Revocable trusts are insured up to $250,000 per unique beneficiary, up to a maximum of five beneficiaries totaling $1,250,000. On the other hand, irrevocable trusts are only insured up to $250,000 for all deposits added together for each beneficiary.

However, as of April 1, 2024, both revocable and irrevocable trusts will be treated the same. Each trust beneficiary for irrevocable trusts, like revocable trusts, will be insured up to $250,000 per FDIC-insured bank. The total insured is limited to $1,250,000, or five beneficiaries. Further, grantors have $250,000 in insurance coverage as well. In the case of joint trusts, each grantor is insured with this amount.

If you have trust accounts in an insured bank, reviewing how much will be insured for each beneficiary and grantor between now and the beginning of April is advisable. Contact the trust experts at Law Stein Anderson today to learn more.