Before the Great Recession in 2008, many thought banks were “too big to fail” and therefore, had no real concerns whether the money in bank accounts, CD’s or money market accounts was protected by any kind of insurance.  As many learned the hard way, banks can fail, and the limit of FDIC (Federal Deposit Insurance Corporation) insurance allocated to their money is important.
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Trust Accounts

Have recent world recessions, wars, changing political climates, or pandemics influenced your financial outlook?

Some may be comfortable riding the perpetual waves of highs and lows while others grow increasingly skeptical and conservative to the point of holding onto their cash and never removing it from that “safe” savings or money market account.

No matter which side of the coin you find yourself on, one thing is definite: During times of uncertainty, people begin to worry whether their money is “safe”. Afterall, fear continues to be a major driving factor of market volatility.

Before the Great Recession in 2008, many thought banks were “too big to fail” and therefore, had no real concerns whether the money in bank accounts, CD’s or money market accounts was protected by any kind of insurance.  As many learned the hard way, banks can fail, and the limit of FDIC (Federal Deposit Insurance Corporation) insurance allocated to their money is important.

The FDIC is a federal government agency that provides protection against losses in the event a bank fails. While the coverage has increased over time, the limit is currently $250,000 per depositor, per bank, per ownership category.

For example: if an individual has a $150,000 certificate of deposit along with a money market account of $200,000 at the same institution for a total of $350,000, $100,000 of this individual’s money is not covered by the FDIC in the event of a bank failure.

The lack of coverage in the previous scenario has the potential to create a degree of financial hardship. To avoid the exposure illustrated in the example, the individual should consider implementing a revocable trust to move the account(s) into.

As previously mentioned, the FDIC insures up to $250,000 of deposits according to ownership categories. which includes beneficiaries of a trust account. Therefore, if the owner in our above example implements a revocable trust for their accounts and designates two beneficiaries of his/her trust, the account can be insured up to $500,000 ($250,000 per beneficiary).

Because of the COVID-19 crisis, several clients have contacted our Firm to ask if their trust accounts are protected.

For more information visit: https://www.fdic.gov/deposit/covered/trust.html

If you have questions regarding your current FDIC coverage, call us at (866) 708-2335 to speak with one of our attorneys to see how trusts can protect your family from potential financial exposure.