FDIC Insurance On Bank Accounts

We have received inquiries from clients wondering how to maximize protection of accounts in the event of bank failure. While FDIC and banks have published explanations, there is confusion.

Each account held in a name different from other accounts has its own $250,000.00 protection. But changing the order of names may not be useful. One account owned in husband’s name, POD to wife, and one in wife’s name, POD to husband, and a joint account, would be three separate accounts. But an account in husband and wife’s name and another in wife and husband’s name would result in insurance up to $250,000.00, per owner. The ownership is really the same regardless of the difference in order.

A bigger problem has occurred with trusts. Accounts held in the name of a trust will likely have one $250,000.00 protection regardless of the way the trust name is shown. For example, showing different trustees will not make accounts separate. Customers have obtained advice from banks and even FDIC employees that creates serious problems. One bank account in trust name, POD to a trust beneficiary, and another account in trust name, POD to another trust beneficiary does not give additional coverage. If the Grantor dies, that money may belong to the POD beneficiary, which would contradict the trust.
We suggest that if one wishes to have accounts in excess of the FDIC insurance amount in the same bank, all accounts should clearly be different. Keep focus on the big picture. Do not try to make two accounts look different when they really are not. Doing so could result in the FDIC denying coverage.

Attorney Michael A. Pyle, of Pyle & Dellinger, PL, 1655 N. Clyde Morris Blvd., Suite 1, Daytona Beach, Florida, 32117 Telephone: 386.615.9007. E-mail: mikep@pylelaw.­com or www.pylelaw.com