4000 - Advisory Opinions
Insurance Coverage Provided an Inter Vivos Trust Account Where the Trustee is Sole Beneficiary of the Trust
June 19, 1991
Mark A. Mellon, Attorney
This is in response to your letter of June 10, 1991 pertaining to deposit insurance. In your letter, you pose the hypothetical of an individual ("X") who has an account in an insured depository institution in his own name. You inquire whether X would receive separate insurance up to the statutory limit on an additional account set up pursuant to an inter vivos trust, entitled "X, Trustee UTA Trust Agreement dated. . . .FBO X."
If the inter vivos trust is irrevocable, it will not receive separate insurance because the settlor and beneficiary are one and the same. The definition of "trust interest" in our insurance regulations specifically excludes any interest retained by a settlor. 12 C.F.R. § 330.11(c)(1). The funds in the trust account would therefore be aggregated with the funds in the individual account and insured only to $100,000 since they are held in the same right and capacity. 12 C.F.R. § 330.3(a).
If the inter vivos trust is revocable, the same result occurs. This is because revocable trust accounts are insured as such under the FDIC insurance regulations only if certain requirements are met. One of these requirements is that the beneficiaries of the revocable trust be either the spouse, child or grandchild of the account owner. 12 C.F.R. § 330.8(a). This requirement is not met in your hypothetical since the owner, X, lists himself as the beneficiary. As a result, the two accounts are not entitled to separate insurance coverage. In the event of an insurance determination, the non-qualifying revocable trust account would be treated as individual funds, aggregated with the funds in X's other account and insured to the statutory limit of $100,000. 12 C.F.R. § 330.8(b).
To further illustrate and clarify federal deposit insurance coverage of revocable trust accounts, I am enclosing copies of a letter and guidelines on the question. I hope that you find them helpful and that this letter has been responsive to your inquiry. Please do not hesitate to contact me if you have any questions on this or any other matter.