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FDIC Consumer News - Summer 1998

Important Update: Changes in FDIC Deposit Insurance Coverage

The FDIC deposit insurance rules have undergone a series of changes starting in the fall of 2008. As a result, certain previously published information related to FDIC insurance coverage may not reflect the current rules. For details about the changes, visit Changes in FDIC Deposit Insurance Coverage. For more information about FDIC insurance, go to www.fdic.gov/deposit/deposits/index.html or call toll-free 1-877-ASK-FDIC (1-877-275-3342). For the hearing-impaired, the number is 1-800-925-4618.

FDIC Considers Simpler Insurance Rules forJoint Accounts and Payable-on-Death Accounts

The FDIC wants to further simplify the deposit insurance rules to make them easier for consumers and bankers to understand. A proposal, which was issued for public comment in July, would revise and clarify the insurance rules for two common types of accounts—joint accounts and “payable-on-death” (POD) accounts.

“The FDIC is considering this simplification of the insurance rules as part of our ongoing effort to help depositors know whether they have funds over the $100,000 insurance limit and act, if necessary, to protect their savings,” said FDIC Chairman Donna Tanoue.

 Consumers run the risk of losing money in a bank or thrift failure if they mistakenly believe their funds are within the $100,000 insurance limit. Joe DiNuzzo, an FDIC attorney in Washington, says the proposed changes to the rules for joint accounts and POD accounts “would strike at the source of the remaining confusion that bankers and consumers have about deposit insurance.”     

Remember, these are only proposed changes. The current rules for joint accounts and POD accounts will remain in effect until any changes are final. Also, if you and your family have less than $100,000 in deposits at any one institution, you don’t need to be concerned about the specifics here. Your money certainly will be fully protected within the $100,000 limit. In general, here’s what’s under consideration…

Joint accounts are owned by two or more people. Let’s say two people own joint accounts totaling $200,000. Under current rules, the funds would be insured to $100,000, not $200,000, as many people mistakenly believe. That’s because the rules say that all joint accounts owned by the same combination of people at an insured institution are added together and insured up to $100,000 in total. To deal with this confusion, the FDIC is considering changing the maximum insurance coverage that one group of people can have in joint accounts—from $100,000 in total to $100,000 for each person. However, what would not change is another part of the joint account rules—one that says each person’s shares in all joint accounts at that same institution are added together and insured up to $100,000.

    Payable-on-death accounts (also known as “in trust for” accounts or revocable trust accounts) are those where the funds will be paid to one or more named beneficiaries upon the death of the owner. The current rules say that a person’s POD accounts will be insured up to $100,000 for each “qualifying” beneficiary, defined as the owner’s spouse, children or grandchildren (including adopted and “step” children and grandchildren). This means a POD account that lists a spouse and two children as the beneficiaries would be insured for up to $300,000, not just $100,000. But to clarify who can be a qualifying beneficiary on a POD account (and thus make the account eligible for special insurance coverage), the FDIC has proposed to add parents and siblings to the list.

To see the proposed rules, contact our Public Information Center or view them on the Internet (www.fdic.gov/lawsregs/fedr and click on “proposed rules”). Written comments are due by October 15, 1998.

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Last Updated 07/30/1999 communications@fdic.gov