4000 - Advisory Opinions
Deposit Insurance Coverage of Revocable Trust and Payable-on-Death Accounts
February 24, 1995
Adrienne George, Attorney
Your letter to Claude Rollin, concerning the insurance coverage provided to a revocable trust account and two payable-on-death accounts, has been forwarded to me for response.
First, you ask how your revocable living trust account, in the form of a $100,000 certificate of deposit, would be insured. In order to give you this information, I would need to know the exact terms of your trust--in particular, who are the settlors of the trust, who are the beneficiaries and how are they related to the settlor (or settlors), which of the beneficiaries has a vested interest in the trust upon the death of the last settlor to die, etc. To help you analyze your trust in this way, and yourself arrive at the insurance coverage, I am enclosing a copy of the "FDIC Legal Staff's Interpretive Guidelines on the Insurance of Revocable Trust Accounts (including Living Trust Accounts)." I am also enclosing a letter which provides an introduction to these "Guidelines."
Next, you write that you have two "joint accounts In Trust For our grandchildren, one account for "A" and one account for "B". I am assuming that these accounts are in the form of "Mr. & Mrs. C in trust for A ____________________________________________ " and "Mr. & Mrs. C in trust for B." If these accounts were the only accounts you had at your bank (that is, if you did not hold the revocable trust account, mentioned in the paragraph above, at the same bank), then each of these simple payable-on-death (POD) accounts could be insured for up to $200,000, provided that you, your wife and the appropriate granddaughter-beneficiary were all alive when the bank failed. (For more on the insurance of simple POD accounts, please see pages 3-4 of the "Guidelines.") However, because the revocable trust account and the two POD accounts have been deposited at the same bank, if a vested interest will pass from a settlor of your revocable trust to one of your granddaughters upon the death of the last settlor (according to the terms of your trust), that interest would be added to any vested interest passing from the same settlor to the same granddaughter through one of the POD accounts. (Because, in the POD accounts, an interest automatically passes to the beneficiary upon the death of the last settlor, all of the interests involved in these POD acocunts are viewed as vested interests.) Because the revocable trust account and the POD accounts are considered to be in the same category for insurance purposes, the total vested interest passing from a given settlor to a given granddaughter in these three accounts can be insured for no more than $100,000.
I hope that this information proves useful to you. If, after reading the enclosed materials and comparing them to the terms of your revocable trust, you have any further questions, I can be reached at (202) 898-3859.