# Presentation: 474045

## FDIC’s National Telephone Conference on 

**Basic Fundamentals of ****Deposit Insurance Coverage**** **

**Session Dates – October 16 & November 6, 2007**

## Deposit Insurance Coverage Seminar

**Today’s Speaker**

## Call the FDIC toll-free  1-877-275-3342  
	Information specialists are available from 
	8 AM until 8 PM  Eastern Time 
	Monday through Friday   

Hearing impaired: 1-800-925-4618

Send questions by e-mail using the FDIC's online Customer Assistance Form at:www2.fdic.gov/starsmail

- 	Information specialists are available from
- 	8 AM until 8 PM  Eastern Time
- 	Monday through Friday
- Hearing impaired: 1-800-925-4618
- Send questions by e-mail using the FDIC's online Customer Assistance Form at:**www2.fdic.gov/starsmail**

**FDIC Contact Information**

## www.fdic.gov/quicklinks/bankers.html

## Outline

- Basic Deposit Insurance Fundamentals
- Deposit Insurance Coverage Ownership Categories
- Individuals
- Businesses/Organizations
- Government Entities/Public Units
- Requirements for Single and Joint Accounts
- Additional Fundamentals
- Your Questions

## Checking Accounts
NOW Accounts
Savings Accounts
Certificates of Deposit (CDs)
Money Market Deposit Accounts (MMDA)

- NOW Accounts
- Savings Accounts
- Certificates of Deposit (CDs)
- Money Market Deposit Accounts (MMDA)

**Insured Bank Deposits**

## Non-Deposit Products (Not Insured)

- Stocks, Bonds, Municipal Bonds and Other Securities
- Mutual Funds (money market mutual funds and stock, bond, or other security mutual funds)
- Annuities
- Insurance Products (automobile and life insurance)
- U.S. Treasury Bills, Bonds or Notes
- Safe Deposit Box Contents

## Basic Coverage Amount is $100,000 

- Per depositor (owner of the funds)
- Per separately chartered bank
- Not per branch
**Up to $250,000 for **
***Certain****** *****Retirement Accounts**

## Deposit Insurance Coverage Applies to Principal and Interest Earned  

| Jane Smith |  Balance |
| --- | --- |
| Principal | $   98,000 |
| Interest | $     3,000 |
| Total | $ 101,000 |
| Insured | $ 100,000 |
|  |  |
| Uninsured | $     1,000 |

## What Do Customers Want To Know

- “How much can I be insured for by the FDIC?”
- “What are the different ways a depositor can be insured for in an FDIC insured institution?”

## Determining Deposit Insurance Coverage

- Who owns the deposits?
- What ownership category is the depositor eligible to use or attempting to use?
- Do they meet the requirements of that category?

## Who Owns the Deposits?

- FDIC deposit insurance is based on the ownership of the deposit funds -- also referred to as an ownership capacity or ownership category
- Insured party is the owner

## Owner Can Be:

- Individual(s)
- Business/Organization entity(ies) including corporations, partnerships or unincorporated associations (e.g. school groups, social clubs)
- Governmental entity(ies) or municipality or political subdivisions

## Eligible Ownership Categories

**EMPLOYEE**
**BENEFIT PLAN**

**GOVERNMENT**

**SINGLE**

**JOINT**

**REVOCABLE **
**TRUST**

**IRREVOCABLE**
**TRUST**

***CERTAIN ***
**RETIREMENT**

**CORPORATION**
**PARTNERSHIP**
**UNINCORPORATED **
**ASSOCIATIONS**

## Single Accounts

- Deposits owned by one person
- Coverage: $100,000

**All Single Accounts are added together and insured up to $100,000**

## Jane Smith’s Single Accounts 

| Account Types |  Balance |  |
| --- | --- | --- |
| Savings |  | $   25,000 |
| CD |  | $ 100,000 |
| NOW |  | $   25,000 |
| MMDA |  | $   25,000 |
| Total  |  | $ 175,000 |

| Uninsured Amount | $   75,000 |
| --- | --- |

| Insurance Coverage | $ 100,000 |
| --- | --- |

## Sole Proprietorship Accounts 
Insured as proprietor’s Single Account funds

Decedent Estate Accounts
Insured as the decedent’s Single Account funds 

- Insured as proprietor’s Single Account funds
- Decedent Estate Accounts
- Insured as the decedent’s Single Account funds

**Related Issues**

## Joint Accounts

- Deposits owned by two or more people
- Coverage: $100,000 per owner per bank
- Each owner’s shares of all joint accounts are added together

## Joint Account Requirements 

- Each co-owner must be a natural person
- Each co-owner must sign signature card (with exceptions)
- Each co-owner must have same withdrawal rights as the others
- FDIC assumes ownership is equal unless otherwise stated

**Deposit insurance is not increased by rearranging the names listed on  accounts,  substituting “and” for “or” in account titles, or using different social security numbers**

## Example - Multiple Joint Accounts

| Account | Account Title | Balance |
| --- | --- | --- |
| # 1 | Jane Smith and Andrew Smith | $ 200,000 |
| # 2 | Jane Smith and Harry Jones | 100,000 |
| Total  |  | $ 300,000 |

## Example - Multiple Joint Accounts

**Andrew’s **
**ownership**
**interest**
**$100,000**

**Example - Multiple Joint Accounts**

**Account # 2 $100,000**

**Jane’s **
**ownership**
**interest**
**$100,000**

**Jane’s **
**ownership**
**interest**
**$50,000**

**Harry’s **
**ownership**
**interest**
**$50,000**

## Coverage – Multiple Joint Ownerships

| Owner       Account    Balance |
| --- |
| Jane Smith         |
| 
Andrew Smith  (1) |
| 
Harry Jones     (2) |
| Total |

- $100,000

- $100,000

- $  50,000

- $  50,000

**$300,000**

| 
  Insured | 
   Uninsured |
| --- | --- |
|  
$100,000 | 
$50,000 |
| 
$100,000 | 
$         0 |
| 
$  50,000 | 
$         0 |
| 
$250,000 | 
$50,000 |

- (1)

- (2)

## Certain Retirement Accounts

- Deposits owned by one participant in ***certain*** retirement accounts
- Coverage: up to $250,000 for ***certain*** retirement accounts
- Most common type of account in this category - IRA

**Insurance coverage for retirement accounts is not increased by naming beneficiaries**

## Employee Benefit Plan Accounts

- Defined contribution plans, including profit-sharing plans and 401(k) plans that do not qualify as “self-directed” plans
- Defined benefit plans

**Insurance coverage is up to $100,000 for each participant’s non-contingent interest**

## Revocable Trust Accounts

**Revocable Trust Accounts**

- Deposit accounts that evidence an intention that the funds will belong to one or more named beneficiaries upon the owner’s death

- Coverage: $100,000 per owner per
- 	qualifying beneficiary (parent, sibling, spouse, child, grandchild)

- Each owner’s funds for each qualifying beneficiary in all revocable trust accounts are added together

## Revocable Trusts Types

**Payable-on-Death (POD) accounts or other similar terms such as  “ITF”  (In-Trust-For) or  “ATF” (As-Trustee-For)**

## What Category Am I Covered Under?

**Common misunderstanding:**
- Single account with beneficiaries?
- Joint account with beneficiaries?

**An individual or jointly owned account with beneficiaries is an **
**informal revocable trust deposit!***

## Irrevocable Trust Accounts

- Irrevocable trust may be created through:
- 	Death of grantor of revocable living trust
-  	Execution of irrevocable trust agreement
-  	Statute or court order
- Irrevocable means that the grantor (person who created trust) does not possess power to terminate or revoke trust
- Insurance Coverage usually no more than $100,000 for the trust

## Business/Organization Accounts

- Coverage is $100,000 for:
- 	Corporations
-  	Partnerships
-  	Unincorporated Associations
- Must be an actual legal entity engaged in an independent activity

## Government/Public Unit Accounts

- Insurance coverage provided to each **“official **
**custodian”** of each public unit or political subdivision
- Deposit in a bank in same state:
- $100,000 for all time and savings deposits
- $100,000 for all demand deposits
- Deposit in a bank in different state:
- $100,000 for all deposits

## Eligible Ownership Categories

**EMPLOYEE**
**BENEFIT PLAN**

**GOVERNMENT**

**SINGLE**

**JOINT**

**REVOCABLE **
**TRUST**

**IRREVOCABLE**
**TRUST**

***CERTAIN ***
**RETIREMENT**

**CORPORATION**
**PARTNERSHIP**
**UNINCORPORATED **
**ASSOCIATIONS**

## Maximum Deposit Insurance Coverage

| 

 | 

  Single 
  Accounts | 
Certain
Retirement
Accounts | 

Joint 
Accounts | 
Revocable
Trust
Accounts* | 

Total
Coverage |
| --- | --- | --- | --- | --- | --- |
| 
Husband | 
$100,000 | 
$250,000 | 
$100,000 |       
$300,000* | 
$   750,000 |
| 
Wife | 
$100,000 | 
$250,000 | 
$100,000 | 
$300,000* | 
$   750,000 |
| 
Total | 
$200,000 | 
$500,000 | 
$200,000 | 
$600,000* | 
$1,500,000 |

*** ****Assumes that husband and wife have named 3 qualifying beneficiaries in their revocable trust account and that the beneficiaries have equal beneficiary interests**

## Additional Concepts & Fundamentals

**Fiduciary Accounts**
**Death of an Account Owner or Beneficiary**
**Bank Merger**
**Bank Failure**

## Fiduciary Accounts

- Agent
- Nominee
- Guardian
- Custodian
- Executor

- Escrow
- Broker
- Attorney trust  (IOLTA)
- Title company
- Uniform Transfer to Minors Act (UTMA)

**Funds deposited by:**

**Examples:**

- Bank’s account records must disclose the fiduciary relationship in the account title
- Bank’s account records or fiduciary’s records must disclose owner’s identity and interest**	**

## Death of an Account Owner

- Death of an account owner will in most cases reduce the amount of insurance coverage
- However, FDIC provides a six month grace period, during which the account will be insured as if the account owner had not died

## Beneficiary’s Death  

- Six-month grace period does not apply
- Immediately reduces the deposit insurance coverage for an informal revocable trust account

## Insurance Coverage after a Bank Merger

- Separate insurance for six months
- Separate insurance for CDs issued by the former bank until maturity

##  	FDIC pays depositors “as soon as possible” 	(historically within next business day)
 	FDIC pays 100% on the dollar for all insured 	deposits
 	Depositors with brokered deposits will take longer to 	recover their insured funds
 	Depositors with uninsured deposits may recover a 	portion of their uninsured funds

-  	FDIC pays 100% on the dollar for all insured 	deposits
-  	Depositors with brokered deposits will take longer to 	recover their insured funds
-  	Depositors with uninsured deposits may recover a 	portion of their uninsured funds

**Insurance Coverage after a Bank Failure**

## Telephone Seminar Scedule

**Telephone Seminar Scedule**

**October 16****th****   -****	****Basic Concepts and Fundamentals**
**October 18****th****   -****	****Retirement Accounts**
**October 23****rd****   -****	****Trusts Accounts**
**October 25****th****   -****	****Business & Government Accounts**
**------------------------------------------------------------------**
**November 6****th****    -****	****Basic Concepts and Fundamentals**
**November 8****th****    -****	****Retirement Accounts**
**November 13****rd****  -****	****Trusts Accounts**
**November 15****th****  -****	****Business & Government Accounts**

## Questions
and 
Answers

**and **
**Answers**