Amended Deposit Insurance Regulations on Joint Accounts and Payable-on-Death Accounts
The Federal Deposit Insurance Corporation (FDIC) Board of Directors has voted to simplify the agency's deposit insurance regulations governing the coverage of two common types of accounts-joint accounts and "payable-on-death" ("POD" or revocable trust) accounts. Current regulations are frequently misunderstood by both consumers and bankers. That confusion can create losses for depositors if their insured institution fails and they mistakenly believed their funds were within the $100,000 insurance limit.
These two revisions to the deposit insurance rule will become effective on their date of publication in the Federal Register-approximately one week after the date of this Financial Institution Letter (FIL).
The final rule simplifies the deposit insurance regulations for joint accounts by replacing the current two-step process with a simple one-step rule. Under the revised rule, the interests of each individual in all joint accounts he or she owns at the same FDIC-insured depository institution are added together and insured up to $100,000. As under the current rule, this insurance for joint accounts is in addition to the separate insurance provided for other types of consumer accounts, such as individual (single ownership), POD, and retirement accounts.
The importance of this revision is that, unlike under the current rule, a depositor is eligible for $100,000 joint account coverage even if the joint account that he or she owns has a balance exceeding $100,000. For example, under the revised rule, if two individuals own a joint account with a balance of $200,000 and no other joint accounts at the same insured bank or thrift, each individual would be insured for $100,000 on the joint account. As under the current rule, however, no individual could be insured for more than $100,000 for his or her interests in all joint accounts at the same insured bank or thrift.
The FDIC's deposit insurance regulations provide that all qualifying POD accounts owned by an individual at the same insured depository institution are added together and insured up to $100,000 for each "qualifying beneficiary." Under the current rule, "qualifying beneficiaries" include the owner's spouse, children and grandchildren. The final rule expands the list to include the owner's parents and siblings.
The two revisions to the deposit insurance regulations will apply to all existing and future joint accounts and POD accounts, including existing certificates of deposit. Once the final rule is published in the Federal Register, the FDIC will send each insured institution a copy of the Federal Register notice as an attachment to another FIL on this topic.
The FDIC is revising its Internet electronic deposit insurance estimator ("EDIE"), its pamphlet "Your Insured Deposits," and its instructional manual "The Financial Institution Employee's Guide to Deposit Insurance" ("Gold Book") to incorporate these revisions to the insurance rules. An updated EDIE will soon be available on the FDIC's Web site (www.fdic.gov). We will inform you when the revised "Your Insured Deposits" pamphlet and "Gold Book" are available.
For further information, please contact Christopher Hencke (202-898-8839) or Joseph DiNuzzo (202-898-7349) of the FDIC's Legal Division, or Hugh Eagleton (202-942-3668) of the FDIC's Division of Compliance and Consumer Affairs.
William F. Kroener, III
Distribution: All Insured Banks and Savings Associations
NOTE: Paper copies of FDIC financial institution letters may be obtained through the FDIC's Public Information Center, 801 17th Street NW, Room 100, Washington, DC 20434 (800-276-6003 or (703) 562-2200).