4000 - Advisory Opinions
Revocable Trust Is Treated as a Joint Account Where Grantors and Beneficiaries Are the Same
FDIC 91-37 April 29, 1991 Adrienne George, Attorney
I am writing to confirm our telephone conversation of April 11, 1991, during which we discussed the extent to which your children's trust would be insured.
Your three children are the grantors and beneficiaries of a revocable trust, of which you are the sole trustee. During the life of the trust, the net income is to be paid to the grantors in equal shares, in such amounts and at such times as the trustee in his discretion shall determine. If one of the grantors has died at the time of such payment, his share of that payment will go to his estate.
In a similar way, the trustee is to use his discretion to decide how much of the trust's principal is to be paid to the grantors and when such payments are to be made. Again, these payments are to be made in equal shares to the three grantors, and if a grantor has died, his share is to be paid to his estate.
The trustee can lend part or all of the principal to himself, with any outstanding loans falling due upon the trust's termination.
The trust is to terminate upon the earlier of two events: (1) the death of the survivor of the grantors' mother and father, or (2) the distribution of all of the trust principal to the grantors. Upon the trust's termination, the trustee is to pay the then remaining income and principal to the grantors in equal shares (the share of a deceased grantor will be paid to his estate).
Where a revocable trust is in the form of A, B and C (the grantors) in trust for the same A, B and C (as beneficiaries), the trust is treated for insurance purposes as if it were a joint account. As such, should the insured depository institution holding these trust funds go into default, the trust funds would be added together with any joint accounts held by the same three parties at the same institution, and that entire amount insured for up to $100,000. This is so even where, as here, A, B and C hold the trust funds as tenants in common (without any right of survivorship), so that, when one grantor dies, payments of his share go to his estate rather than to the siblings who survive him.
I hope that this information will prove useful to you. If you have any further questions, I can be reached at (202)-898-3859.