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4000 - Advisory Opinions


Deposit Insurance Provided for "Totten" Trust Accounts Established Under the Laws of Maryland

FDIC-90-76

December 12, 1990

Claude A. Rollin, Senior Attorney

This is in response to the letters from Mr. *** and yourself concerning the deposit insurance that would be provided for certain Totten trust accounts created under the laws of the State of Maryland. In order to properly respond to your inquiries, we had to conduct a considerable amount of research and we had to consider the issues quite carefully. These efforts have caused a delay in our response to your inquiries, for which we apologize.

In your letter of September 13, 1990, you indicate that the standard language which is used in opening the vast majority of accounts at *** is as follows:

A, In Trust For Self and B, Joint Interest, subject to the order of any of them, the balance upon the death of any of them to belong to the survivor.

There is a long line of cases decided under Maryland state law which stand for the proposition that the use of such language in establishing an account creates a rebuttable presumption that a revocable trust has been created with a right of survivorship. e.g., Milholland v. Whalen, 89 Md. 212,43 A. 43 (1899); Boehm v. Harrington, 54 Md. App. 345,458 A. 2d 885 (1983); Wenger v. Rosinsky, 232 Md. 43,192 A. 2d 83 (1963). Likewise, there are a number of cases which indicate that failure to utilize this type of trust language creates no automatic presumption that a trust with right of survivorship was intended. e.g., Shaffer v. Lohr, 264 Md. 397,287 A. 2d 42 (1972); Mackey v. Davidson, 222 Md. 197,159 A. 2d 838 (1960); Mathias v. Fowler, 124 Md. 655, 93 A. 298 (1915).

Subsection 330.8(a) of the FDIC's recently amended deposit insurance regulations provides as follows:

Funds owned by an individual and deposited into any account commonly referred to as a tentative or "Totten" trust account, "payable-on-death" account, revocable trust account, or similar account evidencing an intention that upon the death of the owner, the funds shall belong to such owner's spouse, or to one or more children or grandchildren of the owner, shall be insured in the amount of up to $100,000 in the aggregate as to each such named beneficiary, separately from any other accounts of the owner or the beneficiaries. Such intention 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, and the beneficiaries of the account must be specifically named in the deposit account records of the insured depository institution. The settlor of a revocable trust account shall be presumed to own the funds deposited into the account.

Subsection 330.8(c) of the FDIC's recently amended deposit insurance regulations provides as follows:

Where an account described in paragraph (a) of this section is established by more than one owner and held for the benefit of others, some or all of whom are within the qualifying degree of kinship, the respective interests of each owner (which shall be deemed equal unless otherwise stated in the insured depository institution's deposit account records) held for the benefit of each qualifying beneficiary shall be separately insured up to $100,000. However, where a husband and a wife establish a revocable trust account naming themselves as the sole beneficiaries, such account shall not be insured according to the provisions of this section but shall instead be insured in accordance with the provisions of section 330.7 of this part.

In your letter, you indicate that in-house legal counsel for your bank has reviewed the standard language (quoted above) which is used to open the accounts in question and determined such accounts constitute Totten trust accounts under the laws of the State of Maryland. Assuming that legal conclusion is correct, such accounts would satisfy the first requirement of subsection 330.8(a), namely that funds be deposited into a Totten trust account. The second requirement, which is that the testamentary intention be manifested in the title of the account, also seems to be satisfied since the words "in trust for" appear in the title of the account. The third requirement of subsection 330.8(a), which is that the beneficiaries be specifically named in the deposit account records, also appears to be satisfied, since the above-quoted language indicates that upon the death of A or B, the balance of the account belongs to the survivor. In summary, it seems that the three basic requirements of subsection 330.8(a) are satisfied given the facts presented in your letter.

Under section 330.8(c), however, where a husband and wife establish a revocable trust account naming themselves as sole beneficiaries, the account is treated as a joint account, rather than a revocable trust account, and is insured pursuant to section 330.7 of the FDIC's amended regulations. In this case, even though the title of the account seems to suggest that A alone has established the account for the benefit of himself/herself and B, since the account is subject to the order of either A or B, it is, in essence, an account established by A and B for their joint benefit during their lifetimes and for the benefit of the survivor upon the death of the first of them to die. Both A and B have the present right to withdraw funds from the account and that right continues as long as both individuals remain alive and do not otherwise change the manner in which the account is owned. Upon the death of either A or B, whichever is first to die, the money in the account becomes the sole property of the survivor. In summary, this type of account has the same characteristics as an account established with the title "A and B in trust for A and B" and, in my opinion, would be treated as such an account under our regulations.

Accordingly, if A and B are husband and wife, the account would be treated as a joint account, rather than as a revocable trust account, and insured pursuant to section 330.7 of the FDIC's amended regulations. 12 C.F.R. §330.8(c). While subsection 330.8(c) does not address the situation where two co-owners of a revocable trust account are not married but are the sole beneficiaries of the account, I believe that the same reasoning would be applied to such an account and the account would be treated as a joint account for deposit insurance purposes since it has the same characteristics as a joint account with right of survivorship. Therefore, whether A and B are husband and wife or related in some other manner, in my opinion the account would be treated as a joint account for insurance purposes.

In your letter, you also ask about the use of the term "tenants by the entireties" in the title of the account so that it would read as follows:

A, In Trust For Self and B, tenants by the entireties, subject to the order of either, the balance upon the death of either payable to the survivor.

Your letter indicates that this language was designed to provide protection from individual creditors, which, you believe, is afforded such a titling under Maryland state law. In my opinion, this language would not change the FDIC's deposit insurance determination for these accounts. In fact, such language provides further support for my conclusion that these accounts should be treated as joint accounts, rather than revocable trust accounts.

The opinion letter written in 1965 and signed by our former General Counsel, William M. Moroney, was drafted prior to the adoption of the FDIC's amended deposit insurance regulations (in fact, it was written prior to the adoption of any deposit insurance regulations by the FDIC). Accordingly, the opinions expressed therein are superseded by those expressed in this letter.

I trust this has been responsive to your inquiry. If you have any further questions, please feel free to contact me.


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