# Presentation: 825860

**	**_**FDIC’s National Telephone Conference**_
_**“**__**What I need to know to calculate FDIC deposit insurance coverage!”**_

_**Remaining Sessions **_
**December 05,  2008     December 10, 2008     December 19, 2008**
*******Important Note! “The information in the following slides has been updated to include these recent changes:**
**1. “New” revocable trust rules approved on September 26, 2008,**
**2.   The temporary increase of the “SMDIA” or “standard maximum deposit insurance amount”    ****	****from $100,000 to $250,000 effective October 03, 2008” through December 31, 2009, **
** ****	****  ****3.  “New” regulatory change approved On October 10, 2008 for calculating “P&I” deposits,**
**	****  ****4.   The temporary changes approved effective October 14, 2008 through December 31, 2009 for ****	****“unlimited” deposit insurance coverage for non-interest bearing transaction accounts.**
**         ****5.   Modification effective November 21, 2008 for the temporary rule of “unlimited” deposit                    ****	****insurance coverage through 12/31/09 for non-interest bearing transaction accounts will also ****	****include “IOLTA” deposits and “NOW” account deposits that earn .5% or less. ****  **

***Presentation slides have been updated for December 05, 2008 seminar****

**Notes:**
Thank you, I would like to welcome everyone to today’s presentation What I need to know to calculate FDIC deposit insurance coverage!” Please be aware that for the presentation today the slides may have been updated since you originally signed up for this presentation. 
The First page of the updated presentation should state at the very top of the first slide “Presentation slides have been updated for   ________       seminar.”
If this is not what you see, then you can access the updated slides from the FDIC Financial Institution Letter-85-2008 dated August 26, 2008, which is available on the FDIC’s website.  REPEAT The link on the FIL to access the power point presentation is on the last page. We also attempted to send all participants that signed up the new slides an email with the link to the presentation included on the e-mail. 
OK As you can see from Slide 1, we will have 2 more Scheduled Presentations. Because of the new rules, the presentation today is scheduled to run for approximately 1 hour and 15 minutes.  After the PowerPoint presentation is complete, we will try to answer as many of your deposit insurance related questions as we can. 
As I stated earlier we will have 2 more sessions. So if you do not have an opportunity to stay for the whole session or want to inform your colleagues of this presentation remember please sign up for a future session. 
As I go through today’s seminar, we will follow the PowerPoint presentation and will announce the slide numbers as we move to discussing a new slide. 
For example we are ready for Slide 2

## “What I need to know to calculate FDIC deposit insurance coverage!”

**Today’s Speaker**
**Martin Becker**
**Senior Deposit Insurance Specialist**

**Notes:**
Thank you Jim, Let me mention here that the original purpose of these telephone seminars was to describe the key concepts and tools that must be learned if you are going to correctly calculate FDIC deposit insurance coverage for your depositors.  That objective is still our goal today, but we recognize that everyone listening today is very interested in the new deposit insurance rules.  We have updated the slides prior to many of the telephone presentations over the past few months not only to cover the new deposit rules, but also in response to hundreds of questions we have answered as part of question and answer sessions.  slide 3

## Outline

-       Overview: The recent rule changes
- 	Part 1 – Fundamentals - What does FDIC insure?
- 	Part 2 – What are the different options to maximize my client’s deposit 		      	    insurance coverage?
- 			Deposit Insurance Ownership Categories
- Individuals
- Businesses/Organizations
- Government Entities/Public Units
- Mortgage Servicing Escrow Accounts
- Non-interest Bearing Transaction Accounts
- 	Part 3 - Requirements for the ten deposit insurance “Categories”
- 	Part 4 - Additional Fundamentals
- 	Part 5 - Your Questions

**Notes:**
OK  Today’s presentation is divided into 5 parts.
We will start with a brief overview of the new changes. Then under 
Part 1 - I will discuss the basic deposit insurance rules.
In Part 2, I will explain the different ownership categories provided for under the FDIC regulations and why understanding these categories is essential to accurately calculate FDIC deposit insurance coverage.
In Part 3, I will discuss the specific requirements for the Ten most common deposit insurance ownership categories. 
Under Part 4, we will discuss several important deposit insurance issues that can impact the amount of deposit insurance coverage available to depositors.
And lastly in Part 5, we will open up the program to let you ask questions you may have about FDIC insurance coverage. 
All rule changes will be explained where applicable during the presentation. Slide 4

## Overview: What has changed in the last few months?

**New deposit insurance rules: **
**Approved September 26, 2008:**
**The FDIC Board of Directors approved effective September 26, 2008 permanent**
**	****changes to the regulations pertaining to the calculation of deposit insurance coverage for revocable trust deposits including an expanded definition for “eligible beneficiaries.”  **
**Approved October 03, 2008**
**Congress passed a temporary increase of the “SMDIA” or “standard maximum**
**	****deposit insurance amount” from $100,000 to $250,000 effective October 03, 2008**
**	****through December 31, 2009.**
**Approved On October 10, 2008 **
**The FDIC Board of Directors approved effective October 10, 2008 a permanent**
**	****rule change for calculating deposit insurance coverage for  “P&I” payments**
**	****deposited into mortgage servicing escrow accounts.**
**Approved October 14, 2008****	****  **
**The FDIC Board of Directors approved a temporary change effective **
**	****October 14, 2008 through December 31, 2009 that allows for “participating” banks**
**	****the ability to offer “unlimited” deposit insurance coverage for non-interest bearing**
**	****transaction accounts.**
** ****Approved November 21, 2008**
**The FDIC Board of Directors modified the rule approved on October 14, 2008 to also include “IOLTA” deposits and “NOW” account deposits that earn .05% or less.  These deposits will also have “unlimited” deposit insurance coverage if offered by a “participating” bank. **

**Notes:**
Let me begin by mentioning there have been four significant events affecting FDIC deposit insurance coverage in the past month.  The first change occurred on Friday, September 26, 2008, when the FDIC Board of Directors met and approved effective immediately changes to the rules pertaining to the calculation of revocable trust deposits.  The second big change occurred on October 3, 2008 with the passage of the Financial Rescue Package which has temporarily raised the deposit insurance limit from $100,000 to $250,000.  The third change occurred on October 10, 2008 with the modification in the rules for insuring the payments of Principal and Interest into mortgage servicing escrow accounts. The fourth change occurred on October 14, 2008 with the passage of a temporary regulation making the deposit insurance coverage for non-interest bearing transactional accounts unlimited.    
Clearly the good news is that the combination of these changes greatly increases the likelihood that your depositors can have more or possibly all of their deposits fully insured at your bank. None of the new rules reduces any depositor’s existing deposit insurance coverage.  Slide 5

## “The FDIC insures deposits only! Types of “deposits” include”:

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

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

**Part 1 – What does FDIC Insure?****What is insured by FDIC - Deposits Only!**

**Notes:**
Let’s begin...while many of you may be familiar with the rules on the next few slides, I want take just a few minutes to quickly review some of the basics about FDIC deposit insurance coverage for anyone listening who may be new to the subject of deposit insurance.  

The first thing to remember is that FDIC only insures funds that qualify as a deposit. 

As shown here on slide 5 examples or the types of deposits include: Read

		Slide 6        

## Part 1 – What does FDIC Insure?What is not insured by FDIC - Non-Deposit Products 

***“******These products are ***_***not***_*** FDIC insured even if purchased through an FDIC insured bank!”***
- 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

**Notes:**
On slide 6 we have a list of what is not insured by the FDIC.  The issue of what is or is not insured is one of the most common questions that depositors ask the FDIC. 

As listed on this slide deposits do not include the following: Read

		Slide 7

## Part 1 – What does FDIC Insure? The Basic Coverage Limits

_**Basic Coverage for all Depositors:**_
- 	Until December 31, 2009:  Under 12 C.F.R. 330.1(n) - Standard maximum deposit insurance
- 	amount, referred to as "the SMDIA“ hereafter, means $250,000 adjusted pursuant to
- 	subparagraph (F) of section 11(a)(1) of the FDI Act (_[12 U.S.C. 1821(a)](http://www.fdic.gov/regulations/laws/rules/1000-1200.html#1000sec.11a)__(1)(F)). _
- Change in the “SMDIA” from $100,000 to up to $250,000 per depositor including
- 	principal and accrued interest. This increase is effective immediately, but ***expires on***
***	******December 31, 2009***. Under the new law, as of  January 01, 2010 the “SMDIA” returns to
- 	up to $100,000.
- The category “*Certain *Retirement Accounts” remains at $250,000 after the
- 	expiration of the law on December 31, 2009.
**Important**!
*	**	*Please remember the December 31, 2009 “expiration date” when opening time
- 		deposits. Based on the current law, time deposits with a maturity date after
- 		December 31, 2009 will revert back to the old rules of $100,000 per depositor
- 		after December 31, 2009.

**Notes:**
On slide 7 we start with the question: “How much is the basic FDIC deposit insurance coverage?
Well, effective October 3rd, 2008, basic deposit insurance coverage has been temporarily raised from $100,000 to $250,000 per depositor. This increase to $250,000 extends through December 31, 2009.  Now the category created by Congress in 2006 called “certain retirement accounts” which includes IRA deposits was already at $250,000.  This category remains unaffected by the new law and the amount coverage is still up to $250,000.  
If you are a compliance officer or have used the FDIC website before, you are then familiar with the acronym in the FDIC deposit insurance regulations described as the “S-M-D-I-A.” Those letters simply mean “the standard maximum deposit insurance amount.” Wherever in the regulations you see this acronym SMDIA, the amount of deposit insurance coverage is now changed from up to $100,000 to up to $250,000.   
I do want to emphasize and remind everyone that the increase under the current law extends the amount of deposit insurance coverage only through December 31, 2009.  Please remember if you are opening  time deposits where the maturity date of the deposit is going to extend beyond December 31, 2009, that the deposit insurance coverage will revert back to the old rules of $100,000 per depositor on January 1, 2010.  Let me repeat, if you are opening  time deposits where the maturity date of the deposit is going to extend beyond December 31, 2009 the deposit insurance coverage will revert back to the old rules of $100,000 per depositor on January 1, 2010.  slide 8

## Part 1 – What does FDIC Insure? The Basic Coverage Limits

***“******Deposit insurance coverage is calculated per bank”***
**	**
-    “*Can I deposit funds in different branches of the same bank?” *
*	**	**	**	**	**or*
*   “**How about different branches of the same bank that is*
*	**located in another state?”*
_**Answer:**__** **_
- “Funds placed in separately chartered banks are separately
- insured – not the branch offices of a bank with the same
- charter number!”

**Notes:**
The FDIC receives a lot of questions about what is covered.  For example “Can I deposit funds in different branches of the same bank and be separately insured?”...or “How about different branches of the same bank that are located in another state?”   

The easy way to remember the rule is that all deposits in the same ownership capacity that a depositor places in a bank, with the same FDIC charter number are added together. If the charter numbers are different, then the deposits are separately insured because FDIC deposit insurance coverage is separate for each FDIC insured institution.  

As we explain to depositors - FDIC deposit insurance coverage is exactly the same at each and every FDIC insured bank regardless of the size or the location of the FDIC insured bank. slide 9

## Part 1 – What does FDIC Insure? Calculating the deposit insurance limit

***You must add the principal amount and any accrued interest together in determining deposit insurance coverage. ***

| Jane Smith |  Balance |
| --- | --- |
| Principal | $  248,000 |
| Interest | $     3,000 |
| Total | $ 251,000 |
| Insured | $ 250,000 |
|  |  |
| Uninsured | $     1,000 |

**Notes:**

Another common question asked is “Does the FDIC deposit insurance coverage include the accrued interest on the principal of a deposit?” Well as the example here on slide 9 shows, the answer is yes -  but only to the extent the interest does not exceed the insurance limit.  

As you can see in this example, $3000 of interest has been earned.  However, since $250,000 is the maximum amount that can be insured in Jane Smith’s name alone, there is $1,000 of earned interest which exceeds the insurance limit and is therefore Jane Smith is uninsured in this example for $1,000.

		Slide 10  

## Part 2 – What are the different options to insure my client? Your clients want answers to the questions:

***The two most asked questions by depositors!***
*“****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?”***

**Notes:**
OK, enough with the basics....slide 10 is where we begin to answer the questions that probably everyone listening today is repeatedly asked by their depositors, 
“How much can I be insured for by the FDIC?” and “What are the different ways depositor can be insured for in an FDIC insured institution?”  Slide 11

## Part 2 – What are the different options to insure my client? Three questions you need to always ask.

***The three questions every “New Accounts” bank employee must***
***ask and answer to calculate FDIC deposit insurance coverage:***
- 	**1)****	*****Who owns the funds?***
***     ******2)******	******What ownership category is the depositor eligible to use or***
***	******	******attempting to use?***
***	******3)******	******Do they meet the requirements of that category?***

**Notes:**
If you are bank employee responsible for opening new accounts, the FDIC recommends asking and answering the following questions?”  

1
2
3		

Slide 12

## Part 2 – What are the different options to insure my client? Who Owns the Funds?

***The basis of FDIC deposit insurance starts with***
***determining the “ownership” of the deposit funds.***
***“******You cannot determine the amount of FDIC deposit insurance coverage without first determining who is the owner of the deposit funds!”***

**Notes:**
Perhaps the single most important question to answer in calculating FDIC deposit insurance coverage is – “Who owns the funds?

The answer to this question is critical because - both the amount and the method for calculating FDIC deposit insurance coverage is based on the ownership of the deposit funds.  

You cannot determine the amount of FDIC deposit insurance coverage without first determining who is the owner of the deposit funds!  Slide 13

## Part 2 – What are the different options to insure my client? “What is a deposit insurance category?”

***	******So, “What is a deposit insurance “category” and why is this important?”***
***	******A “******category******” also referred to as “******right and capacity******” in the deposit insurance regulations is a unique basis of ownership defined by either statue or by regulation that provides for separate FDIC deposit insurance coverage. ***
- In other words, think of a category as a set of rules that if your depositor can meet the rules for a specific category, then their deposits will be entitled to both of the following:
- Up to “SMDIA” amount of deposit insurance coverage that is provided for under the ownership category, and
- Separate coverage from funds that may be deposited under a different ownership category.
***	******	******Remember! There are ten commonly used deposit insurance categories. ***

**Notes:**
So, What is a category and why is this important? Well, let me explain it like this – A category is a unique basis of ownership defined by either a federal statute or by regulation that provides for separate FDIC deposit insurance coverage.  

In other words, think of a category as a set of rules that if your depositor can meet the rules for a specific category, then their deposits will be entitled to both the amount of coverage that is provided for under the ownership category, as well as separate coverage from funds deposited under a different ownership category.  Since understanding this concept is essential to calculating deposit insurance coverage, I are going to spend some time on this topic. 
Let’s look at these categories more closely beginning on 
slide 14.

## Part 2 – What are the different options to insure my client? Who is owns the funds?

***“******Who is my depositor?” **** *
***	******The answer to this question is important because it determines the category or ***
***	******categories that the depositor may be eligible to use. ***
- 	***Group 1*** – “Are my clients an individual or perhaps multiple individuals who own
- 		funds individually or jointly? Are they participants of a retirement or employee
- 		benefit plan? Are they someone looking to set up a trust deposit agreement?”
- 		(Categories 1 through 6)
***	******Group 2*** - “Are my clients the owner of a business entity such as a corporation,
- 		partnership or unincorporated entity?”  (Category 7)
***	******Group 3*** - “Are my clients a governmental entity?” (Category 8)
***	******Group 4 ***- “Is my client looking to establish a mortgage servicing escrow account for
- 	  “P&I payments?” (Category 9)
***	******Group 5 ***- “Are the funds being deposited into a non-interest bearing transaction account
- 	   which allows for unlimited transactions?” (Category 10)

**Notes:**
When we ask the question “who owns the funds? what we are really trying to do is determine “Who is the depositor?  For the purpose of deposit insurance, we have separated deposit ownership into the following five groups. Read the groups...................Slide 15

## Part 2 – What are the different options to insure my client? The Deposit Insurance Categories

**Category 2 - JOINT**** **

**Category 5 - CERTAIN RETIREMENT**

**Category 6 -EMPLOYEE BENEFIT PLAN**** **

**Category 3 - REVOCABLE TRUST**

**Category 4 - IRREVOCABLE**
**TRUST**

**Owner = Individual(s) or Trust**

**Category 7 -CORPORATION**
**PARTNERSHIP**
**UNINCORPORATED **
**ASSOCIATIONS**

**Owner = **
**Business Organizations**

**Owner = Government Entity or Political Subdivision**

**Category 8 -- GOVERNMENT**** **

**Category 9 -**
**P&I  **

**Category 10 -**
**NON-INTEREST BEARING**

**Owner = **
**Individual or Business**

**Owner = **
**Individual or Business**

**Category 1 - SINGLE**** **

**Notes:**
Once we figure out the answer to the question, “Who owns the funds” we now ask our second question, ”What ownership category is the depositor eligible to use or attempting to use?
Overall, the FDIC regulations provide for ten different primary categories of deposit insurance coverage and thereby up to ten different ways to get separate deposit insurance coverage. 
You will see on slide 16, we have split the five ownership groups between the ten categories.  In the orange box on the left of our slide, you will see that an individual or individuals can potentially have deposits in six different ownership categories including: Read.  
In the green box on the right, we have  Category 7- Business organizations which include corporations, partnerships and unincorporated associations. 
Our the box in blue is Category 8 – Governmental accounts which covers deposits owned by a governmental entity or public unit. 
The brown box is category 9 – Which is reserved for mortgage serving escrow accounts holding P&I payments from borrowers or mortgagors.  
The yellow box is a new category – Category 10 and deposit insurance coverage is based on the temporary rule allowing for unlimited deposit insurance coverage for accounts opened that are non-interest bearing transaction accounts.  
Let’s move on to slide 16.

## Part 2 – What are the different options to insure my client? How does a depositor qualify for coverage under a category?

- Category 1 –
- SINGLE** **

- Category 2 –
- JOINT

- Category 3–
- REVOCABLE TRUST

- Category 4 –
- IRREVOCABLE TRUST

- Category 5 - CERTAIN RETIREMENT ACCOUNTS

- Category 6 - EMPLOYEE BENEFIT PLANS

**Owner = Individual(s) or Trust**

**Notes:**
Let’ s say we determined our owner is an individual – then our second question to ask is ,
” Which of these six categories would the depositor like to make deposits under?” 
Based on the category or categories they select, this raises the third question to explore, “Can our depositor meet the requirements for the category they would like to use?”  In other words, just because a depositor would like to have deposit insurance coverage under each of the six categories, does not mean they can necessarily meet the requirements for each of these categories.  As an obvious example, if your client or depositor does not  have an irrevocable trust agreement, then you can’t establish a deposit and be covered under Category 4 – Irrevocable Trusts. 
To assist your depositors you will need to learn the specific requirements for each of these ten categories.
For today’s presentation, I will be discussing the basic requirements for each of the Ten deposit insurance categories.  We won’t have time to explore every issue about the categories in detail, but again at the end of the presentation, I will describe how you can get more information.  Slide 17

##  Part 3 - Requirements for Ten Insurance Categories Category 1 -  The Single Account Category

**Requirements:**
**Category 1 - Single accounts**** – “The deposit must simply be owned by a ****	****	****	****	****            *****natural person” ***
***Common misunderstanding - Category 1 - Single account deposits:***
- Sole Proprietorship Deposits:
- Funds owned by a *Sole Proprietorship or DBA* are insured in this category (not in *Category 7 – Business Organizations*)
- Decedent Deposits:
- Accounts established for a *deceased person* (i.e. Decedent’s Account) are insured in this category (not *Category 3 - Revocable Trusts*)

**Notes:**
Let’s start to look at the six categories for an individual or individuals:
The single ownership category is the most common of the six deposit insurance ownership categories.  
The rule is simple: The deposit must be owned by a natural person. 

Now in addition to deposits simply opened by an individual person, there are a few other common situations where funds are insured under this single ownership category but are confusing to depositors.
For example: A sole proprietorship account which is sometimes also called a DBA account or “doing business as” account is insured as the single ownership funds of the depositor – it is NOT insured under Category 7- the Business Organization category.
Another common question is “How does the FDIC insure an account set up for someone who has died –  this is often called a “Decedent Account.” In this situation the funds are considered legally still owned by the decedent and a decedent account is therefore insured under the single ownership category. Please note that the executor or person who may set up this account for the decedent is separately insured for any personal deposits they may have in your bank. Slide 18

##  Part 3 - Requirements for Ten Insurance Categories Category 1 -  The Single Account Category

***Deposit Insurance Coverage:***
_***NEW!***_*** “A depositor is now insured for up to $250,000 for all Category 1 – Single Account deposits.***
***Important!**** *
- 1.	**Common Misconception**: If you have a single owner and you attempt to name beneficiaries, the deposit will first be analyzed as a ***Category 3 -  Revocable Trusts*** deposit!
- 2.*	****Category 1 – Single Account*** is also the default category for depositors who do not meet the requirements of another category!

**Notes:**
So under the new rules, a deposit in the single ownership category has temporarily been increased from up to $100,000 to up to $250,000 for all Category 1 – Single Account deposits

One thing that I am going to discuss throughout this presentation and this is based on literally tens of thousands of questions the FDIC receives, are some common misunderstandings or misconceptions that we find both depositors and bank employees have in calculating deposit insurance coverage.  Well here is one of the biggest misconceptions. If you have a single owner and you are attempting to name beneficiaries on this account, the deposit will first be analyzed using the rules provided for under Category 3 -  Revocable Trust deposits! 

Another important thing to remember is that Category 1 – Single Ownership Accounts is the default category for individual depositors. In other words as you will see in the coming slides, if a depositor cannot meet the requirements of the other individual ownership categories – that is categories 2 through 6,  the depositor can still be insured for up to $250,000 under Category 1 - the single ownership category.  

So please remember that at a minimum, any natural person who is the owner of deposit funds is entitled to at least $250,000 in FDIC deposit insurance under Category -1, the single ownership category.  This applies to each and every FDIC insured bank. Slide 19

## Part 3 - Requirements for Ten Insurance Categories Jane Smith’s Category 1 - Single Accounts 

| Account Types |  Balance |  |
| --- | --- | --- |
| Savings  |  | $ 125,000 |
| CD 6 month maturity |  | $ 100,000 |
| CD 2 year maturity |  | $   50,000 |
| MMDA |  | $   50,000 |
| Total  |  | $ 325,000 |

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

| Insurance Coverage | $ 250,000 |
| --- | --- |

**Notes:**
Let’s look at a simple example for Category 1 coverage: 
Jane Smith has four Single Ownership accounts that qualify under 
Category 1.  Why are these accounts considered Category 1 - Single ownership deposits? Because Jane Smith is the sole owner of the funds and she has named no beneficiaries.  
A review of her accounts shows: a savings deposit for $125,000, a CD for $100,000, a NOW account for $50,000 and Money Market Deposit Account for $50,000.  Her four accounts have a total balance of $325,000 under Category 1 – Single accounts.  Well since only $250,000 can be insured, the excess, that is $75,000 is uninsured.  
Based on phone calls we receive, again a common misconception that some depositors have is that using different product types – such as CD’s and savings accounts provides for separate deposit insurance coverage. This is incorrect!
Remember the type of product does not make any difference in calculating deposit insurance coverage with one exception – non interest bearing transaction accounts which we will discuss further when we get to Category 10.  It is important to remember that is the ownership of the deposit that matters. Slide 20

## Part 3 - Requirements for Ten Insurance Categories Category 2 – The Joint Ownership Category

***Requirements:***
- Deposits owned by ***two*** or more ***natural persons***
- Each co-owner must be a natural person. No co-ownership with any business or trust.
- Each co-owner must sign signature card  (CD exception)
- Each co-owner must have equal withdrawal rights
- FDIC assumes that all co-owners’ shares are equal unless the deposit account records state otherwise.

**Notes:**
Let’s move to our second ownership category of deposit insurance coverage available to individuals which we will call - the joint account category. The requirements for joint ownership coverage are:
1) Each co-owner must be a natural person.  The FDIC receives questions about setting up joint accounts with say a corporation or trust.  This would not be insured under the joint account category.
2) Each co-owner must sign a signature card (with exceptions)
The common exception to this rule is when opening a Certificate of Deposit all co-owners are not required to sign a signature card.
3) Each co-owner must have the same or equal withdrawal rights to the deposit funds
This is extremely important.  To establish a valid joint account each individual on a joint account is considered an owner of the funds and must have the right to withdraw 100% of the deposit.  If one person is retaining control of the withdrawal of the funds, then the result is the FDIC will look to see who is true owner of the deposit funds and the coverage will revert back to Category 1 the Single account category. 
And the fourth and last issue is that the FDIC will assume the ownership among all owners of a joint account is equal unless otherwise stated in the bank records.   Slide 21

## Part 3 - Requirements for Ten Insurance Categories Category 2 – The Joint Ownership Category

***Deposit Insurance Coverage:***
_***NEW!***_   	*If all requirements are met, then the amount of deposit insurance coverage is *
*	**	**up to $250,000 for each owner of all ****Category 2 – Joint Account**** deposits*
***Important!***
- 	1.  Deposit insurance is _***not***_ increased by:
- rearranging the names listed on multiple joint accounts,
- substituting “and” for “or” in account titles for multiple accounts, or
- using different social security numbers on multiple joint accounts
- 	2.  **Common misconception**: If you have co-owned deposits and you attempt to name
- 	     beneficiaries, the deposit will first be analyzed as a ***Category 3 –  Revocable Trust***
- 	     deposit!
-        3.   If a depositor establishes multiple joint accounts, the owner’s share in
- 	      all joint accounts are added together and insured up to $250,000.

**Notes:**
If the requirements we discussed on slide 19 are met, then the deposit insurance coverage is temporarily up to $250,000 for each owner of Category 2 – Joint Account deposits. Again after 12/31/09 the coverage returns to $100,000 per owner.

Some common misconceptions about Category 2 -joint account coverage include recognizing that the deposit insurance coverage is not and I repeat NOT increased by doing the following:   For example: rearranging the names listed on the deposit account.  As an example let’s say we have two owners of a joint account -  John and Mary.  An account titled  John and Mary is not insured any different then an account opened Mary and John, so switching the order of these two names in the title of the account is irrelevant.

Another misconception is substituting conjunctions on different joint accounts.  So for example, if one account is titled John and Mary and a second account is titled John or Mary, both of these accounts are added together in calculating deposit insurance coverage.  Coverage is not increased by mixing conjunctions on different accounts.

The last misconception we are asked about is whether using different social security numbers on different accounts somehow increases coverage. It does not. Again if John and Mary are co-owners of two joint accounts and  John’s social security number is used on one of the joint accounts and Mary’s SS# is used on the other joint account – this does not double the amount of deposit insurance coverage.

And again the biggest misconception we are asked about is if you have two or more owners of funds and you are attempting to name beneficiaries on this account, please remember the deposit will first be analyzed using the rules provided for under Category 3 -  Revocable Trust deposits!  And lastly item number 3 - if a depositor establishes multiple joint accounts, the owner’s share in all joint accounts are added together and insured for up to $250,000.  Let’s look at an example of this point on slide 22

## Part 3 - Requirements for Ten Insurance Categories Example: Category 2 Joint Ownership– A Depositor has 		      Ownership in Multiple Joint Accounts

| Account | Account Title | Balance |
| --- | --- | --- |
| # 1 | Jane Smith and Andrew Smith | $ 400,000 |
| # 2 | Jane Smith and Harry Jones |          $ 200,000 |
| Total  |  |          $ 600,000  |

**Notes:**
On slide 20 you see two joint accounts opened in the same bank. Are both of these deposits fully insured? Well our first account is co-owned by Jane Smith and Andrew Smith with an account balance of $400,000.  
Our second account has Jane Smith as the owner, but Harry Jones is the co-owner with her on account number 2.  The second account has a balance of $200,000.  
Slide 23

## Part 3 - Requirements for Ten Insurance Categories Example: Category 2 Joint Ownership – A Depositor has 	      Ownership in Multiple Joint Accounts

**Jane’s**
_** **__**Interest **_

**Andrew’s **
_**Interest**_

**Harry’s **
_**Interest**_

**Total**
_**Balance**_

**Account 1**

**Account 2**

**  ****Insured**

**  ****Uninsured**

**  ****Total**

**$200,000**

**$200,000**

**$400,000**

**$100,000**

**$200,000**

**$100,000**

**$300,000**

**$200,000**

**$100,000**

**$600,000**

**$250,000**

**$  50,000**

**$200,000**

**$100,000**

**$550,000**

**$  50,000**

**Notes:**
On slide 22 in calculating the amount of deposit insurance coverage, we have to look at each owner’s interest in all joint account deposits. Remember, there is a presumption that each person has an equal ownership share of the funds. So in looking at account #1, Jane Smith and Andrew Smith are the co-owners of the account with a total balance of $400,000. Their individual ownership interests for account #1 are one half of $400,000 -  or $200,000 for Jane and $200,000 for Andrew. For account #2, we see that the ownership interests are $100,000 for Jane and $100,000 for Harry.  So in looking at the column for Jane Smith in this example, you see that Jane Smith has a $200,000 ownership interest in the joint account category for account #1 and $100,000 ownership interest for account #2.  When we add Jane Smith’s ownership interest together for both of these joint accounts she has a total of $300,000 in the joint account category.  
Now the most that any one person can own in all joint accounts deposits together is $250,000 and therefore, since Jane Smith has $300,000, she is uninsured for $50,000.  
This example shows that in calculating joint account coverage, a depositor’s ownership interest in all joint account deposits must be added together in determining how much insurance coverage they have under Category 2 - joint accounts. A key point to remember from this example is that even though Jane Smith did not have more than a $250,000 ownership interest in any one joint account, it was her combined interests in multiple joint accounts that exceeded the limit of $250,000 that was a problem and this resulted in her having $50,000 of uninsured funds. Slide 23

## Part 3 - Requirements for Ten Insurance Categories Category 3 - Revocable Trust Accounts

***What is a revocable trust account?***
- A deposit account that indicates an intention that the funds will belong to one or more named beneficiaries upon the owner’s death.
***How is a revocable trust deposit account established?***
- For an informal trust, ***testamentary language*** must be in the account’s title (i.e., POD, ITF, ATF) and the beneficiaries must be named in the bank records.
- For a formal trust, the account title must reflect that the funds are held pursuant to a formal revocable trust.

**Notes:**
Now we move to our third and most popular category of deposit insurance coverage that is available to individuals - Category 3 Revocable trusts accounts. Before I discuss the new rule changes approved September 26th - lets start with some background information.
First - What is a revocable trust account? For the purpose of eligibility under Category 3- Revocable Trusts - the deposit must be a legitimate testamentary account.  Testamentary means that in establishing the account, it must be clear either in the title of the deposit account or based on a supporting trust agreement that upon the death of the owner or owners of the deposit, the ownership of the deposit funds will then belong to one or more named beneficiaries. 
Second - What does revocable mean? For the purpose of FDIC deposit insurance, the term revocable means that while the owner or owners of the deposit account are alive, they are reserving the right to change who will be the beneficiary or beneficiaries of the funds and they are also reserving the right to change or revoke the amount of money that each beneficiary will receive when the owner dies.
Third. How is a revocable trust deposit account established in the bank records? Depending on the type of trust deposit there must be at a minimum testamentary language in the bank account title. 
Let’s look at this in a bit more detail on Slide 25

## Part 3 - Requirements for Ten Insurance Categories Category 3 – Types of Revocable Trust  Deposits

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

**Account must be titled in the name of the formal trust.**

**Notes:**
Now the FDIC recognizes two forms of revocable trust deposits. 

The first type of revocable trust is created in the bank records simply using language such as payable on death, In trust for or as trustee for.  The FDIC refers to these trusts as informal revocable trust deposits. 

The second type of  revocable trust is based on a written trust agreement often drafted by an attorney.  The FDIC refers to these trusts as formal revocable trust deposits.  Slide 26

## Part 3 - Requirements for Ten Insurance Categories Category 3 – Yes, POD must be in the “Account Title”

***“******Does POD or a similar term conveying testamentary intent have to be in the account title?”  YES!***
- The disclosure requirements for payable on death accounts are found in 12 C.F.R. Part 330.10(b), which states:
- “b) Required intention. The required intention in paragraph (a) of this section that upon the owner's
- 	death the funds shall belong to one or more qualifying beneficiaries _***must be manifested in the title***_
- 	_***of the account***_ using commonly accepted terms such as, but not limited to, "in trust for," "as trustee
- 	for," "payable-on-death to," or any acronym therefor. In addition, the beneficiaries must be
- 	specifically named in the deposit account records of the insured depository institution.”
- 	So,
- POD (or another similar term) must be in the title of the bank records and;
- the specific names of the beneficiaries must be in the bank records, but the specific names do not
- 	necessarily have to also be in account title.
- This requirement is met if either a bank record (such as a CD or signature card) has the following in the title or if the
- titling of the accounts in the bank’s name and address electronic file uses the following :
- 		Example #1:    John Smith and Mary Smith, POD
-                     Example #2:     John Smith and Mary Smith
- 		                         POD
***Important!  Checking or marking a box on a bank document labeled “POD” or a “similar term” ******	****** ******	****** ***_***does not***_*** meet the regulatory requirement described above under 12 C.F.R. Part 330.10(b)***

**Notes:**
OK, on slide 26 we going to discuss a question that we are repeatedly asked by bank employees. Does POD or a similar term conveying testamentary intent have to be in the account title?”  YES!
The disclosure requirements for payable on death accounts are found in the FDIC regulations at 12 C.F.R. Part 330.10(b), which states: 
“b) Required intention. The required intention in paragraph (a) of this section that upon the owner's death the funds shall belong to one or more qualifying beneficiaries must be manifested in the title of the account using commonly accepted terms such as, but not limited to, "in trust for," "as trustee for," "payable-on-death to," or any acronym therefor.  In addition, the beneficiaries must be specifically named in the deposit account records of the insured depository institution.” 
So,  POD (or another similar term) must be in the title of the bank records.  In addition the specific names of the beneficiaries must listed in the bank records however, the names do not necessarily have to be in the account title.
The requirement for this rule can be met in the title of a bank record (such as a CD or signature card) or in the bank’s electronic files such as the name and address file. For example 
		Example #1:    John Smith and Mary Smith, POD                		Example #2:     John Smith and Mary Smith
		                         POD 
Important!  Checking or marking a box on a bank document labeled “POD” or a “similar term” does not  meet the regulatory requirement described above under 12 C.F.R. Part 330.10(b).     
Slide 27

## Part 3 - Requirements for Ten Insurance Categories Category 3 – Revocable Trust  Deposits

**How is deposit insurance calculated for Category 3 Revocable Trust deposits?**
_***Effective September 26, 2008, there are changes to the revocable trust rules!***__* *_* *
- The owner and beneficiary _***no longer***_ must meet the kinship requirement that each beneficiary
- 	must be related to the owner from one the following five groups: parent, sibling, spouse, child,
- 	or grandchild.
**Change #1** -- New rules about ***“******Who can be a “beneficiary?”***
**	****	****The beneficiary **_***must***_** be an *****eligible beneficiary***** as defined below: **
**A natural person (living)**
**A charity (must be valid under IRS rules)**
**A non-profit organization (must be valid under IRS rules)**
***Who or what is not allowed as a beneficiary!  ***– pets, deceased persons, the naming of any object or entity that does not meet the requirements above*.*
***What about deposits opened “POD to the Trust?”***
**    ****	**If** **a deposit is titled, as an example - ***“John Smith POD to the John Smith Revocable Trust***,”
**	**then** **the FDIC will assume the depositor is simply attempting to insure the deposit based on  the terms of
- 	the trust agreement, (i.e. who are the named beneficiaries and the amount to be distributed). The funds will
- 	no longer be insured as a reversion or default to the owner’s Category 1 - Single category.

**Notes:**
As I mentioned earlier, as of Friday, September 26, 2008 the FDIC Board of Directors has modified the regulations pertaining to revocable trust deposits.  The new rules for revocable trusts were described in the Financial Institution Letter # 99-2008 issued on September 26, 2008.  In addition to these new rules for revocable trusts, we also have changes effective October 3, 2008 which temporarily raises the deposit insurance limit from $100,000 to $250,000. Let me make clear that none of the new trust rules we are discussing today expire on December 31, 2009 with the exception of whenever I mention $250,000 the current SMDIA, that number will change back to $100,000 on January 1, 2010. Let’s go through each of these changes.  	
First things first. The first big change is that the requirement concerning “qualifying beneficiaries” has been eliminated. As many of you know, the rule as shown here on slide 24 had been that a beneficiary needed to be related to the owner as either a parent, a sibling, a spouse, a child or a grandchild to be eligible for additional deposit insurance coverage.  
The new rule is that a beneficiary must be what we are calling an “eligible beneficiary”.  The definition of an eligible beneficiary is a natural person, a charity or a non-profit organization. This means that an owner can now name any living person as a beneficiary with potentially up to now $250,000 per beneficiary in deposit insurance coverage.  In addition, charities and non-profit organizations that are valid organizations under IRS rules are now also allowed to be named as beneficiaries with up to $250,000 in coverage.  So under the new rules, what is left out as a beneficiary?- well not too much - but a pet or animal will not meet the definition of a beneficiary. In addition, a deceased person cannot be named as a beneficiary and really as a catch all – if you name any object or entity that does not meet the three options specifically listed on this slide, well anything else as a beneficiary would be excluded.   OK, let’s discuss a common situation we see in the titling of deposits. If a deposit is titled, as an example - “John Smith POD to the John Smith Revocable Trust,” then the FDIC will now assume the depositor is simply attempting to insure the deposit based on the terms of the trust agreement, (in other words- who are the named beneficiaries and what is the amount to be distributed to each beneficiary under the trust agreement). The funds will no longer be insured as a reversion or default to the owner’s Category 1 - Single account category. Slide 27

## Part 3 - Requirements for Ten Insurance Categories Category 3 – Revocable Trust  Deposits

_***Effective September 26, 2008 there are changes to the revocable trust rules! ***_* *
**Change #2** –  ***The rules are different depending on the number of beneficiaries named by an owner***
***	******	******     ******and the amount of the deposit.***
***What is the rule if - ***
***The owner names five or fewer beneficiaries and the total deposit(s) are $1,250,000 or less.***
*  **	*
- 	If the owner has named ***five or fewer***  beneficiaries and the total deposits allocated to all of the
- 	beneficiaries combined is ***$1,250,000 or less***, then the amount of deposit insurance coverage is
- 	equal to:
- Up to *$****250,000 times the number of beneficiaries ***named by the owner.  This	applies to
- 	the combined interests for all beneficiaries the owner has named in all  (both informal and
- 	formal) revocable trust deposits established in each bank.
***The result is the same as above even if the owner has allocated different or unequal***
***	******percentages or amounts to multiple beneficiaries. *** The FDIC will still simply allocate
- 	up to $250,000 times the number of beneficiaries named by an owner in calculating
- 	deposit insurance coverage.

**Notes:**
OK, the second big change has to do with calculating deposit insurance coverage based on whether
beneficiaries are to receive equal or unequal allocations when the owner of the trust deposit dies.

Let’s look at the first part of the new rule.  Let’s assume we have an individual who wants to
establish a Category 3 – Revocable trust deposit naming five or fewer beneficiaries and the
total combined for all their trust deposits will be $1,250,000 or less.  If the owner has named five or
fewer beneficiaries, then the amount of deposit insurance coverage is equal to up to $250,000 times
the number of beneficiaries named by the owner.  

But what if the owner has named five or fewer beneficiaries and the percentage or dollar allocation 
is unequal?  Well here is big change under the new rule, if five or fewer beneficiaries are named
then we no longer care if the allocations are unequal. Under the new Rule, if you have named five
or fewer beneficiaries then irrespective of the percentage or dollar allocation to the beneficiaries,
you simply multiply the number of named beneficiaries times $250,000 and that is the amount of
deposit insurance coverage that will be available.  Slide 29

## Part 3 - Requirements for Ten Insurance Categories Category 3 – Revocable Trust  Deposits

_***Effective September 26, 2008 there are changes to the revocable trust rules! ***_* (continued)*
**Change #2** –  ***The rules are different depending on the number of beneficiaries named by an ******	******	******     owner and the amount of the deposit.***
**What if -**
***2.******	***_***The owner names six or more beneficiaries and the deposit is greater than $1,250,000***_***:*****	**
- If*** ***the owner has named ***six or more*** beneficiaries and the total allocated to all the
- 	beneficiaries is ***$1,250,000 or more***, then the amount of deposit insurance coverage is
***	******$250,000 times the number of beneficiaries ***named by the owner for all of revocable
- 	trust deposits the owner has established in each bank, ***provided that the allocation to***
***	******each and every beneficiary is exactly the same; that is, equal. ***
- If the owner is attempting to insure more than $1,250,000 and has named ***six or more***
- 	beneficiaries under one or more revocable trust deposits, but has ***unequal percentages or***
***	******dollar amount allocations to the beneficiaries***, then the FDIC will compute the
- 	deposit insurance coverage based on the ***old rules***.

***If under the old rules the calculation would result in deposit insurance coverage of less than $1,250,000, the FDIC under the new rule will allow the depositor to deposit up to  $1,250,000 and would fully insure the deposit.***

**Notes:**
Let’s assume the owner of a trust deposit names six or more beneficiaries and wants to deposit more than $1,250,000.  How do we calculate coverage?
Well, if the owner has named six or more beneficiaries and the allocation is equal to each beneficiary, it is easy. As before, we are simply going to multiply $250,000 times the number of beneficiaries named. So for example, if there are six beneficiaries receiving equal percentages or allocations, then six times $250,000 results in up to $1,500,000, 7 beneficiaries would be seven times $250,000 for $1,750,000. 
But what if the the owner is attempting to insure more than $1,250,000, has named six or more beneficiaries under one or more revocable trust deposits, but has unequal percentages or dollar amount allocated to the beneficiaries? 
This is a bit tricky. The answer to this situation is with unequal allocations the FDIC will compute the deposit insurance coverage first based on the old rules.  If under the old rules the calculation would result in deposit insurance coverage of less than $1,250,000, then the FDIC under the new rule will default to allowing the depositor to be fully insured for up to $1,250,000.  However, if in applying the old rules the amount of deposit insurance coverage is greater than $1,250,000, then this larger dollar amount would be the figure that would be used as the fully insured amount of coverage. We will look at some examples in a few moments that hopefully clarify this new rule. Slide 30

## Part 3 - Requirements for Ten Insurance Categories Information you need to obtain to calculate deposit insurance coverage for formal revocable trust agreements

***The six questions that must be answered before a depositor can determine FDIC insurance coverage for a formal revocable trust account are:***
**1.****	****Who are the owners of the trust?**** **(This question remains unchanged.)
*The owners are commonly referred to as a ****Grantor, Trustor or Settlor****.*
***	******Forget ****the ****trustee and successor trustee designations**** – They are irrelevant in*
*	**the determination of deposit insurance coverage !!*
**2.****	****Who are the primary beneficiaries upon the death of the owners?** (This
-   question also remains unchanged.)
*At the time an insured depository institution fails, the beneficiary must be entitled*
*	**to his or her interest in the trust assets upon the grantor’s death and that*
*	**ownership interest does not depend upon the death of another trust beneficiary.*
*	**Contingent beneficiaries do not count.*
**3.****	****Are the primary beneficiaries “eligible” beneficiaries?** (This question has
-     significantly changed under the new rule.)
*Effective immediately FDIC *_***no longer***_*  will look to see if we have a qualifying*
*	**beneficiary that is a parent, sibling, spouse, child, or grandchild.  It is necessary*
*	**that the beneficiary is a natural person, a charity or non-profit organization.*

**Notes:**
But first, as some of you who may be familiar with the FDIC Revocable trust manual know, the FDIC has developed a methodology of six questions we recommend asking and answering to determine the amount of deposit insurance coverage when you have a formal trust agreement.  The new rules we have been discussing have resulted in the need to modify some of these questions.  So let me walk you through each of the six questions as modified to comply with the new trust rules.  Read 

Slide 31

## Part 3 - Requirements for Ten Insurance Categories Information you need to obtain to calculate deposit insurance coverage for formal revocable trust agreements

**The six questions that must be answered before a depositor can determine FDIC insurance coverage for a formal revocable trust account are: **
**4.** **Are all the owners and primary beneficiaries named in the trust living?**  (This question also remains unchanged.)
*The death of either an owner(s) or beneficiary(ies) can impact the calculation of deposit insurance coverage.*
**5.** **What is the dollar amount or percentage interest each owner has allocated to each primary beneficiary?****  **(Rule changed for deposits under $1,250,000)** **
** **
*For formal revocable trust deposits of $1,250,000 or less this question is now *_***irrelevant***_*.  If the depositor has six or more beneficiaries and is looking to insure more than $1,250,000,*
*	**we must look at the allocation to each beneficiary.  Note that life estate beneficiary interests are now allowed up to $250,000 in deposit insurance coverage.*
**6.** **Is the trust properly identified in the bank's records?** (This question also
- 	remains unchanged.)
*This is simple.  Ideally the name on the trust agreement is used.  *

**Notes:**
Read the questions on the slide
Slide 31

## Part 3 - Requirements for Ten Insurance Categories Category 3 – Revocable Trust  Deposits

**Procedures for applying the new rule (as of September 26, 2008):**
**Step 1**:  	**Do we have one or two owners?**
**Step 2:  ****	****Are we attempting to insure more than $1,250,000 per owner or less  **
**      ****	****than $1,250,000 per owner? **
**Step 3:  ****	****Does each beneficiary meet the definition of an eligible beneficiary? **
**Step 4:  ****	****Assuming all eligible beneficiaries and the owner is attempting to insure          **
**        ****	*****$1,250,000 or less, *****then based on the number of beneficiaries named by  **
**	****the owner (regardless of the dollar or percentage allocation) the deposit **
**     ****	****insurance for Category 3 - Revocable trusts is calculated as follows:**
**For each owner naming  **
**	****1 beneficiary   = up to $250,000 in deposit insurance coverage**
**2 beneficiaries = up to $500,000 in deposit insurance coverage**
**3 beneficiaries = up to $750,000 in deposit insurance coverage**
**4 beneficiaries = up to $1,000,000 in deposit insurance coverage**
**5 beneficiaries = up to $1,250,000 in deposit insurance coverage**

**   ****Note: If there are two owners the amount of coverage is calculated using:**
**       “ ****(# of owners) times (# of beneficiaries) times $250,000 =  Insured amount”**** **

**Notes:**
Before we look at some examples, let’s recap the procedures we want to follow in calculating deposit insurance coverage for either an informal or formal trust deposit.  
First under Step 1, Do we have one or two owners?  As I just mentioned-  in trust agreements owners are referred to as a grantor, trustor or settlor.
Step 2 – Is our owner attempting to insure more or less than $1,250,000?  If there are two co-owners, and assuming they are equal owners - we would then want to ask “Are the two owners attempting to insure more or less than $2,500,000?
Step 3 – Are all beneficiaries eligible – that is a natural person, a charity, or a non-profit.  If for some reason you have a beneficiary that is ineligible, remember that  the interests attributable to all ineligible beneficiaries will revert back to the single ownership category and will be insured for up to $250,000 under the owner’s Category 1 – single accounts.  With the passing of the new rule, we expect to see a significant decrease in the number of beneficiaries who will not meet the definition of an eligible beneficiary.  
Step 4 Again if you are attempting to insure $1,250,000 or less the calculation is always easy since if you have one beneficiary the coverage is $250,000  “read the chart.” Slide 33

## Part 3 - Requirements for Ten Insurance Categories Category 3 – Revocable Trust  Deposits

**Step 4:   ****	**Assuming we have all eligible beneficiaries, the owner is attempting to 	insure ***more than $1,250,000 with six or more named beneficiaries and ***if 	the percentage allocation to each and every beneficiary is _***equal,***_ then the 	amount of deposit insurance coverage is as follows:
- 	**6 beneficiaries   = up to $1,500,000 in deposit insurance coverage**
**	****7 beneficiaries   = up to $1,750,000 in deposit insurance coverage**
**	****8 beneficiaries   = up to $2,000,000 in deposit insurance coverage**
**	****9 beneficiaries   = up to $2,250,000 in deposit insurance coverage**
**	****10 beneficiaries = up to $2,500,000 in deposit insurance coverage**
**	****11+                     = add up to $250,000 for each additional beneficiary**

**Step 5:** 	Assuming ***more than $1,250,000 with six or more beneficiaries named, with ******	******    ******	******an unequal ***percentage allocation to the beneficiaries, then the old deposit  	 	insurance rules apply.  If under the old rules the calculation would result in 	   	deposit insurance coverage of less than $1,250,000, the FDIC under the new 	rule will allow the depositor to deposit up to $1,250,000 and be fully insured.

** *****“******If there are at least five beneficiaries then the coverage is a minimum ***
***of  $1,250,000 with one owner and $2,500,000 with two owners”***

**Must be Equal**

**Notes:**
Looking at slide 33 - if the number of beneficiaries is six or more and the owner is looking for more than $1,250,000 of coverage, then again provided every beneficiary is receiving an equal percentage, the FDIC will simply continue to do the multiplication, that is if you have six beneficiaries the coverage is “read the chart.” And again with two equal owners, we simply would double our amounts.

With Step 5, the analysis can be a bit tricky. Assuming the owner wants to insure more than $1,250,000 with six or more beneficiaries named but under a scenario where the beneficiaries interests are unequal, then we first must apply the old deposit insurance rules apply.  But again if in applying the old rules the results of the deposit insurance calculation is less than $1,250,000, then the FDIC under the new rule will simply allow the depositor to deposit $1,250,000 and be fully insured. Slide 34

## Part 3 - Requirements for Ten Insurance Categories  Common misconceptions about revocable trust deposits 

_**Facts:**_** **
_***“***__***Husband and wife POD  daughter”***_** **
**What is the maximum insured amount for this deposit?**

** **_**Answer**_** = $500,000 not 750,000.**
**     ****The funds would be insured under Category 3 – Revocable Trusts**

**QB**
**Daughter**

**POD**

**OWNER 2**
**Wife**

**OWNER 1**
**Husband**

_**Facts:**_** **
_***“***__***John POD “FIDO” (pet)***_
**What is the maximum insured amount for this deposit?**

**B **
** **pet
- pet

**POD**

**OWNER**
**John**

_**Example 2**_

_**Answer**_** = $250,000 not 500,000  John’s deposit would be insured under Category 1 – Single Account Category**

**Part 3 - Requirements for Ten Insurance Categories **** ****Common misconceptions about revocable trust deposits**** **

**Notes:**
Time for some examples. Let’s first start with some simple examples for accounts setup as informal trust deposits. On slide 34 example 1, let’s assume a husband and wife are opening a POD deposit in your bank naming their daughter as the sole beneficiary of the deposit when both of them are deceased.  Assuming this is the only account the parents own in the bank “What is the maximum amount of deposit insurance coverage for this deposit?  The answer here is $500,000, not $750,000. With two owners and one beneficiary this creates a total of $250,000 from the father naming the daughter and $250,000 from the mother naming the daughter for a total of $500,000. 
Example ONE illustrates perhaps the single biggest misunderstanding we hear again and again in calculating FDIC deposit insurance. The misunderstanding that some depositors and bank employees make is they want to allow $250,000 for the father plus $250,000 for the mother and $250,000 for the daughter for a total of $750,000. This is not correct.  Please remember, that the rules for revocable trusts are different then from the Category 2 joint account rules where each owner is receiving up to $250,000 in deposit insurance coverage.  The daughter is a beneficiary, not the owner and she is not getting a separate $250,000. Again, it is the owner naming a qualifying beneficiary that together creates up to $250,000 of deposit insurance coverage. 
In example 2 assume our owner – John, establishes a pet trust naming his dog as the sole beneficiary of a deposit. We will assume this is the only deposit account that John has in your bank.  “What is the maximum amount of deposit insurance coverage for this deposit? Since a pet is a non-eligible beneficiary, then this deposit will not be insured under Category 3 - Revocable trust accounts. Instead, the entire deposit balance defaults back to John’s Single Ownership category and the funds are insurable up to $250,000.  If John had any other Single Ownership funds - let’s say a checking account for $5,000 in his name only, well then both deposits would be added together and John would be uninsured for $5,000. 	Slide 35

## Part 3 - Requirements for Ten Insurance Categories Category 3 – Revocable Trust  Deposits

**Applying the rules to formal revocable trust deposits:**
**Example 1:**
**Facts:**  John is the owner of a living trust.  The trust provides the following when John dies:
- 	**Beneficiary 1 = 1/6   to Sally, **
**	****Beneficiary 2 = 1/6   to James, **
**	****Beneficiary 3 = 1/6   to Amy, **
**	****Beneficiary 4 = 1/6   to the ABC Charity (which meets IRS**
**	****	****                  ****qualifications as a legitimate charity) **
**	****Beneficiary 5 = 1/6   to the college John graduated from.**
**         ****Beneficiary 6 = 1/6   to XYZ non-profit **
**       ****-----------------------------------------------------------------------------**
**	****Account Balance  =  $1,500,000**
**Can John open this deposit at your bank and be fully insured for $1,500,000?  YES!**
**Since every eligible beneficiary is to receive an equal share the rule allows **
**six beneficiaries times $250,000 = $1,500,000 in deposit insurance coverage**

**Notes:**
Let’s look at some examples for formal revocable trust deposits. Under the example here on slide 35, let’s assume John wants to insure $1,500,000 and has six beneficiaries.

Can John open this deposit at your bank and be fully insured for $1,500,000?  YES!

Since all six eligible beneficiaries is to receive an equal share under this trust, the calculation could not be easier.  We simply multiply the number of beneficiaries which is six times $250,000 to give us the result of $1,500,000 in deposit insurance coverage.

		Slide 36

## Part 3 - Requirements for Ten Insurance Categories Category 3 – Revocable Trust  Deposits

**Applying the rules to formal revocable trust deposits:**
**Example 2:**
- 	**Facts:** John is the owner of a living trust.  The trust provides the following
- 	beneficiaries will receive distributions when John dies:
- 	**Beneficiary 1 = $   400,000   to Sally**
**	****Beneficiary 2 = $     50,000   to James **
**	****Beneficiary 3 = $   200,000   to Amy **
**	****Beneficiary 4 = $   300,000   to the ABC Charity (which meets IRS**
**	****	****                                ****qualifications as a legitimate charity) **
**	****Beneficiary 5 = $   300,000   XYZ college – IRS Qualifying non-profit org. **
**       ****----------------------------------------------------------------------------------------------**
**	****Balance         =  $1,250,000  **
**Can John open this deposit at your bank and be fully insured for $1,250,00?  YES!**
**The DI calculation under new rule:** Five beneficiaries times $250,000 = $1,250,000

**Notes:**
Here is example of applying the new rule where we have five or less beneficiaries and we are attempting to insure $1,250,000 or less.
Read the facts

So - Can John open this deposit at your bank and be fully insured for $1,250,000?  YES! 

Under the old rule we would take the beneficiary who is receiving the largest bequest and convert it to a percentage.  Here it would be $400,000/$1,250,000 = 32%.  Then we take $250,000 divided by 32% which would result in $781,250 in deposit insurance coverage. 

But remember, under the new rules the calculation could not be more simple.  We ignore the unequal allocations and simply multiply the number of beneficiaries which is five, therefore five times $250,000 give us $1,250,000 in deposit insurance coverage.   Slide 37

## Part 3 - Requirements for Ten Insurance Categories Category 3 – Revocable Trust  Deposits

**Applying the rules to formal revocable trust deposits:**
**Example 3: **
- 	**Facts:** John is the owner of a living trust.  The trust provides the following when John dies:
**	****  ****Beneficiary 1 = $   500,000   to Sally, **
**Beneficiary 2 = $   150,000   to James, **
**Beneficiary 3 = $   250,000   to Amy, **
**Beneficiary 4 = $   225,000   to the ABC Charity, an IRS qualifying charity) **
**Beneficiary 5 = $   175,000   to XYZ College, an IRS qualifying non-profit organization **
**Beneficiary 6 = $   200,000   to “Good Deeds,” an IRS qualifying non-profit foundation **
- --------------------------------------------------------------------------------------------------------------
**Total              = $1,500,000 **
**Can John open this deposit at your bank and be fully insured for $1,500,000?  No!**
- If $1,500,000 is deposited, then $1,250,000 is insured and $250,000 is uninsured because Sally’s
- allocation of $500,000 creates $250,00 of uninsured funds.
**What is the maximum DI coverage with 100% fully insured?:  **Calculation under old rule is
- $500,000/$1,500,000 = 33-1/3%.  $250,000 is then divided by 33-1/3% = $750,000. The DI
- coverage is the greater of computing the amount allocated to each beneficiary under the old rule
- or $1,250,000.  Therefore the coverage for this example is $1,250,000.
**Reminder:  ****	****If you have five or more eligible beneficiaries the coverage is ****	****at least $1,250,000 under the new rule.**

**Notes:**
In example 3 here on slide 37, we are applying the new rule where we have six or more beneficiaries and we are attempting to insure more than $1,250,000.
Read the facts
Can John open this deposit at your bank and be fully insured for $1,500,00?  No!
Well first we see that the beneficial interests are unequal and because we have more than five beneficiaries the rules do not allow us to simply multiply 6 times $250,000 for $1,500,000.  
Looking at the allocations we see that Sally is to receive $500,000 so $250,000 is uninsured.  If John attempts to deposit $1,500,000 then $1,250,000 would be insured and $250,000 would be uninsured.  Well what happens when we apply the old rule? The calculation under the old rule is to first convert the highest dollar bequest into a percentage which would be $500,000/$1,500,000 = 331/3%.  
Then we calculate the breakeven amount for the most that can be insured for using the trust.  We do this by taking $250,000 divided by 331/3% = $750,000 which under the old rule would have been the most that could be fully insured.  
Under the new rule, the deposit insurance coverage is the greater of the coverage using the old rule or $1,250,000.  Since under the old rule the calculation resulted in only $750,000, the old rule does not help us and therefore we will use the default amount of deposit insurance coverage when there six or more beneficiaries which is $1,250,000.  Slide 38

## Part 3 - Requirements for Ten Insurance Categories Category 3 – Revocable Trust  Deposits

**Applying the rules to formal revocable trust deposits:**
**Example #4**   **Facts:** John is the owner of a living trust.  The trust provides the following when John dies:
- 		**Beneficiary   1 = $    300,000 to Sally,  **
**	****	****Beneficiary   2 = $    150,000 to James, **
**	****	****Beneficiary   3 = $    250,000 to Amy, **
**	****	****Beneficiary   4 = $    225,000 to the ABC Charity, an IRS qualifying charity) **
**	****	****Beneficiary   5 = $    275,000 to XYZ College, an IRS qualifying non-profit organization **
**	****	****Beneficiary   6 = $    200,000 to “Good Deeds,” an IRS qualifying non-profit foundation **
- 		**Beneficiary   7 = $    150,000 to Joe**
**	****	****Beneficiary   8 = $    150,000 to Chris****	**
**	****	****Beneficiary   9 = $    175,000 to Kate**
**	****	****Beneficiary 10 = $    125,000 to Kathy**
-       		---------------------------------------------------
- 		**Total                =  $2,000,000 **
**Can John open this deposit at your bank and be fully insured for $2,000,000?  No!**
- 	If $2,000,000 is deposited, then $1,925,000 is insured and $75,000 is uninsured ($50,000 to Sally and $25,000 to XYZ College).
**What is maximum DI coverage with 100% fully  insured?: **Calculation under old rule is $300,000/$2,000,000 = 15%.  $250,000 is then divided by 15% = $1,666,666. Why do we use this number?  Because 15% of $1,666,666 equals exactly $250,000 which is the most that can be insured as to any one beneficiary when there are ***FIVE or more beneficiaries named and we have to use the “old” deposit insurance trust rule. ***
**	****Calculation under new rule:  **The coverage is the greater of computing the amount using the old rule or
- 	$1,250,000.  Therefore the maximum deposit insurance coverage using this example is $1,666,666.

**Notes:**
In example 4 on slide 38, again we are applying the new rule where we have six or more beneficiaries and we are attempting to insure more than $1,250,000.  Read the facts
Can John open this deposit at your bank and be fully insured for $2,000,00?  No!
Well we see that the beneficial interests are unequal and because we have more than five beneficiaries the rules do not allow us to simply multiply 10 times $250,000 for coverage up to $2,500,000.  Looking at the allocations we see that both Sally and XYZ college have allocations above $250,000. The allocation to Sally is $50,000 over the limit of $250,000 per beneficiary and $25,000 over limit for XYZ college.  So if John tried to deposit $2,000,000, $1,925,000 would be insured and $75,000 would be uninsured.  So how much can John deposit using this trust and have 100% of his funds fully insured? 
Again first we must first apply the old rule because we attempting to insure more than $1,250,000 with more than 5 beneficiaries. The calculation under old rule is to first convert the highest dollar bequest into a percentage which would be $300,000/$2,000,000 = 15%%.  
Then we calculate the breakeven amount for the most that can be insured for using the trust. We start by taking 250,000 and then dividing this amount by 15% which equals $1,666,666. Why do we use this number?  Because 15% of $1,666,666 equals exactly $250,000 which is the most that can be insured as to any one beneficiary when there are FIVE or more beneficiaries named and we have to use the “old” deposit insurance trust rule.  This example is different from our previous example because while we cannot deposit the full $2,000,000 and be fully insured, the old rules help us and we have determined that up to $1,666,666 can be insured which is more than the floor limit of $1,250,000.  Slide 39

## Part 3 - Requirements for Ten Insurance Categories Category 3 – Revocable Trust  Deposits

**Applying the rules to informal revocable trust deposits:**
**Example 1: **
**Account #1: John POD Mary with a balance  = $350,000**
**Account #2: John POD Sara with a balance    = $  50,000**
**                                                                               ****--------------**
**Total                                                                     = $400,000**
*Is this account fully insured? *Yes, under the new rule remember with “one owner times two
- Beneficiaries (for up to $250,000 per beneficiary) = $400,000” and therefore the total of both
- accounts is fully insured because the combined balance is less than $500,000.
**Example 2:**
**Account #1: John POD Mary with a balance =  $350,000**
**Account #2: John POD Sara with a balance   =  $175,000**
**                                                                                ****--------------**
**Total                                                                    =  $525,000**
***Is this account fully insured? *****No!** The combined amount of $500,000 is insured with $25,000
- uninsured. The calculation is one owner times two beneficiaries times $250,000 = $500,000.
**Can I “revert or default” the uninsured $25,000** back to Category 1 Single Ownership if John
- has not used this category ? **NO!**

**Notes:**
Before we leave trusts let’s look at just a few more examples to test our knowledge of the new rules.  
In example one we have Account #1: John POD Mary with a balance = $350,000
                            Account #2: John POD Sara with a balance  =  $ 50,000
                                     Total                                                       = $400,000
Are both of these accounts fully insured? The answer is yes, under the old rule the POD to Mary deposit account would have been uninsured for $100,000 because only $250,000 can be allocated from one owner to one beneficiary. What we need to remember in this example is that under the new rule since the owner has named two beneficiaries, we ignore the allocations and simply multiply one owner times two beneficiaries times $250,000 to give us potential coverage of up to $500,000. Well, since the combined actual amount for the two deposits is only $400,000, then both Account 1 and account 2 are fully insured. 
What about Example 2:
Account #1: John POD Mary with a balance =  $350,000
Account #2: John POD Sara with a balance =    $175,000
Total                                                                =   $525,000
Are both of these accounts fully insured? No! Well again we take one owner times two beneficiaries times $250,000 which is equal to $500,000.  Unfortunately, the combined amount of both deposits is $525,000 thereby resulting in $25,000 of uninsured funds. 
Now we sometimes get the question, can I take that $25,000 of uninsured funds and apply it to John’s Category 1 Single account category if he has not used this category? The answer is absolutely NO! Please be careful. The only time a  reversion of funds is allowed is when non-eligible beneficiaries are named.  The concept of reversion cannot be used to create insured funds out of uninsured funds. Slide 40

## Part 3 - Requirements for Ten Insurance Categories Category 3 – Revocable Trust  Deposits – Mixing of “informal” and “formal” trust deposits does not increase deposit insurance coverage! 

**Depositor with a**
**POD account**
**naming 3 eligible**
**beneficiaries**

**Depositor with a**
**living trust account**
**identifying the same**
**3 beneficiaries**

**+**

**	****	****     ****Account #1:** 			             **Account #2:**
- “David Smith POD Andy, Betty and Charlie”         “David Smith Revocable Trust” which names 					          Andy, Betty and Charlie as sole beneficiaries.
**	**
**	****	****Balance is $750,000                                     Balance is $750,000**
***You cannot establish both of these accounts and receive $1,500,000 of deposit insurance!***** *****No “double dipping” rule! If you have an owner naming three beneficiaries on a POD for $750,000 you cannot get an additional $750,000 for ***
***that owner naming the same beneficiaries under a trust agreement!***

**Notes:**
Our last revocable trust example: We get these questions a lot.  Let’s assume we have account #1 which is a POD account with David as the owner and he is naming three beneficiaries that is Andy, Betty and Charlie. They will receive the deposit funds when David the owner dies.  The account is opened for the full amount that can be insured of $750,000.  
If this was the only trust deposit everything would be fine and fully insured.  But David also has a formal trust agreement and he wants to open second deposit account which we will call account #2 for $750,000.  The trust agreement linked to account #2 provides that the same three beneficiaries Andy, Betty and Charlie are again named as the beneficiaries. 
So we need to apply what our deposit insurance outreach group here in Washington refers to as the no “double dipping” rule! If you have an owner naming three beneficiaries on a POD deposit for $750,000, you cannot get an additional $750,000 for that owner naming the same beneficiaries using a formal trust agreement! 
David cannot double his coverage to $1,500,000! Slide 41

## Part 3 - Requirements for Ten Insurance Categories Category 4 - Irrevocable Trust Accounts

***“******Irrevocable” means that the grantor (person who created the trust) does not possess power to terminate or revoke trust.***
**An irrevocable trust may be created through:**
- 	Death of grantor of revocable living trust
-  	Execution or creation of an irrevocable trust agreement
-  	Statute or court order
**An irrevocable trust deposit must be linked to a written trust agreement.  **
- There is no “POD” or “ITF” option.
**Deposit Insurance Coverage for Irrevocable trust deposits is usually no more than $250,000.  **
- Contingent interests as to the beneficiaries causes the total interests to be added together for up to $250,000.

**Notes:**
OK, we will now introduce our fourth category available to individual depositors – irrevocable trusts. 
What does irrevocable mean? For the purpose of applying the deposit insurance rules, irrevocable means that the grantor (person who created trust) does not possess power to terminate or revoke the trust agreement.
How is an irrevocable trust created? An irrevocable trust may be created through: the death of the grantor of revocable living trust,  the actual execution or creation of an irrevocable trust agreement, or by Statute or a court order
An irrevocable trust deposit must be linked to a written trust agreement.  You cannot create an irrevocable trust deposit by using “POD” or “ITF” in the account title.
Let me mention that irrevocable trusts are far less common than revocable trusts.  Most of the irrevocable trusts you will encounter will be the result of the fact that the owner or owners of a revocable trust agreement have died. Slide 42

## Part 3 - Requirements for Ten Insurance Categories Category 4 - Irrevocable Trust Accounts

***	******Effective September 26, 2008!***
**New rule - When a revocable trust **_***deposit***_** converts to an irrevocable trust because of the**
**death of the owner(s), the FDIC will continue to apply the original revocable trust coverage.**
***	******“******In situations where the owner(s) of a trust agreement have died and the trust is now irrevocable (other than an AB trust situation), the deposit insurance coverage is still calculated based on Category 3 – Revocable Trust Account rules (assuming this will benefit the Depositor).”***
**Example: **
- 	**Facts:** The “John Smith Revocable Trust” names his wife with a life estate interest and his two children as remainder beneficiaries.  The trust deposit is fully funded and fully insured to the maximum allowed of $750,000. John died a year ago and the trust became irrevocable.  The trust allows for his wife to use 100% of the assets during her life time if needed. What is the maximum deposit insurance coverage allowed under today’s rules?
***	***
***	******Answer:  ******	******Under the “new” rules the coverage will remain at $750,000 ***
***	******	******	******instead of dropping to $250,000. ***

**Notes:**
The death of an owner of a revocable trust raises the last issue approved by the FDIC Board of Directors on September 26th concerning trust deposits. 
The new rule is “In situations where the owner or owners of a trust agreement have died and the trust is now irrevocable, the deposit insurance will still be calculated based on the rules for Category 3 – Revocable Trust Accounts.  
For example, John has a formal revocable trust naming his wife with a life estate interest followed by his two children as equal co-beneficiaries.  We know that this trust can be insured for up to $750,000 since there are three beneficiaries.  But what happens to the deposit insurance coverage when John the owner dies. Under the old rules if the beneficiaries interests had been contingent which they usually are, then the death of John would have created an irrevocable trust deposit insurable for only a total of $250,000. However, under the new rule, since we will insure the deposits as if John the owner is alive, then this deposit will continue to be insurable for up to $750,000 because the trust started out as a revocable trust. 
There will be more information provided on the FDIC website in the coming weeks concerning complex situations such as the creation of AB trusts or ABC trusts.
Slide 43

## Part 3 - Requirements for Ten Insurance Categories Category 5 - Certain Retirement Accounts

***Requirements:***
**Deposits must meet the requirements provided for by the statute. **
**Must be self-directed.  The participant must direct the investment of their interest in the plan assets.  If the investment decision is made by the “plan administrator” then the deposit insurance coverage is calculated using the rules under Category 6 – Employee Benefit Plan Accounts**
**All “defined benefit plans” are excluded from this category.**
- The most common type of deposit under this category is an Individual Retirement Account (IRA)
***	******Please Remember - Deposit insurance coverage will remain up to $250,000 after 12/31/09.  Deposit insurance will not drop back to $100,00 for Category 5 – Certain Retirement Account deposits after 12/31/09.  ***
***	******Common misunderstanding!  For  deposits under this category like IRAs, the deposit insurance coverage ***_***cannot and does not increase***_***  for any beneficiaries who may be named in the bank records.    ***

**Notes:**
OK we are now done with trusts.  Our 5th category of deposit insurance coverage for an individual was created by statute in 2006 and is described under the statue as – “Certain Retirement accounts.... Well, What are Certain Retirement Accounts? 
The statute for “certain retirement accounts” requires that for eligibility under this category, the participant of a retirement plan must be able to direct the investment of their interest in the plan assets.  The investment decision cannot be left to the plan administrator for the plan.
The most common type of deposit under this category is an Individual Retirement Account (IRA).  A defined contribution plan may also be eligible for coverage under this category but please note that all “Defined benefit plan” deposits are not eligible under this category.
If a retirement plan qualifies for coverage under this category, then the deposit insurance coverage is up to $250,000.  This is very important - please note that  deposit Insurance coverage for “Certain Retirement Accounts” cannot be increased by naming beneficiaries even though the bank records may do so.”  
The coverage under this category is no more than $250,000 regardless of whether the owner names beneficiaries or does not name beneficiaries.   And unlike the other deposit insurance categories, Category 5 – Certain Retirement Accounts is the only category under the new law that will remain up to $250,000 in coverage after December 31, 2009.  Slide 43

## Part 3 - Requirements for Ten Insurance Categories Category 6 - Employee Benefit Plan Accounts

***Definition:***
- Employee Benefit Plans that _***do not***_ meet the definition of self-directed:
- Defined contribution plans, including profit-sharing plans and 401(k) plans that do not qualify as “self-directed” plans
_***All***_ defined benefit plans are insured under this category only
***Deposit Insurance Coverage:***
**NEW!**   Coverage is now increased from $100,000 up to $250,000 for each participant’s non-contingent interest
- Breakeven formula is $250,000 divided by the participant with the largest percentage non-contingent ownership interest under the plan

**Notes:**
So if your depositor has a employee benefit plan but does not meet the requirements of Category 5 – Certain Retirement Accounts, we then look to Category 6 which is  simply called the Employee Benefit plan category. This category includes any defined contribution plans including profit-sharing plans and 401(k) plans that do not qualify as “self-directed” plans.  Please remember all Defined benefit plans are insured under this category.

The amount of deposit Insurance Coverage has temporarily increased from $100,000 to up to $250,000 for each participant’s non-contingent interest. Slide 45

## Part 3 - Requirements for Ten Insurance Categories Category 6 - Employee Benefit Plan Accounts

**Account Title:  “*****Happy Pet Vet Clinic Defined Benefit Plan”***
**	****	**_**Plan Participants**_**	****    **_**Share of Plan***_
- 		Dr. Todd			40%
- 		Dr. Jones			30%
- 		Tech Barnes			10%
- 		Tech Evans			10%
- 		Tech Cassidy			10%
**	****	****Plan Totals****	****	****          100%**
**	*****Assume the Actuary for the plan has determined these percentages represent the vested non-contingent share for each participant.**

**Notes:**
Let’s look at an example calculating coverage for a defined benefit plan under Category 6 - Employee Benefit plans. 
Here we have five employees that are participants of the plan.  Let’s assume the actuary has determined their vested non-contingent shares as follows:
Dr. Todd			40%
Dr. Jones			30%
Tech Barnes			10%
Tech Evans			10%
Tech Cassidy		10%

How much can be deposited in any one bank in the name of the Happy Pet Vet Clinic Defined Benefit Plan?“  Slide 46

## Maximum Deposit Amount Eligible for Full Coverage - Formula

***What is the maximum amount that can be deposited for this plan***
***and have 100% of the deposit fully insured?***
**Maximum coverage **
**	****per participant (“SMDIA”)           $250,000      **
**                                                      **
**                                                                ****Divided by  ****	****              ****	****	****	**
**Largest participant interest                               ****	****	****	****                               is Dr. Todd with 40%                           .40**
**Maximum deposit insurance**
**	****amount eligible for full **
**	****insurance coverage       ****	****      $625,000**

**Notes:**
Well we start with the participant with the highest vested non-contingent ownership interest which is Dr. Todd at 40%.  
Once we know the highest percentage interest the calculation is easy.  We then take $250,000 which represents the SMDIA or standard maximum deposit insurance amount and divide this amount by 40%.  The result is $625,000.  Let’s look at this more closely on slide 47

## Employee Benefit Plan Account Example

| Account Title:  Happy Pet Vet Clinic Defined Benefit Plan   

Plan Account Balance:  $ 625,000
 |  |  |  |  |
| --- | --- | --- | --- | --- |
| Plan Participants | Share of Plan  | Share of 
Deposit | Amount   Insured | Amount Uninsured |
| Dr. Todd | 40% | $ 250,000 | $ 250,000 |  $  0 |
| Dr. Jones | 30% | 187,500 | 187,500 | 0 |
| Tech Barnes | 10% | 62,500 | 62,500 |  0 |
| Tech Cassidy | 10% | 62,500 | 62,500 | 0 |
| Tech Evans | 10% | 62,500 | 62,500 | 0 |
| Totals | 100% | $ 625,000 | $ 625,000 | $ 0 |

**Employee Benefit Plan Account Example**

**Notes:**
Ok, this chart proves we have the right total – that is $625,000.  We know that $250,000 is the most that can be insured as to any one plan participant.  As shown here on the chart we take 40% times $625,000 you get the result of exactly $250,000 for Dr. Todd.
For Dr. Jones we take his ownership interest of 30% times $625,000 and we get $187,500.  And for the three techs their ownership interest is 10% times $625,000 so their ownership is $62,500 each.  The fully insured total for all five participants is therefore proven to be up $625,000.   slide 48

## Part 3 - Requirements for Ten Insurance Categories Category 7 - Business/Organization Accounts

***Definition: ***
- 1.    Based on state law - must be a legally created:
- Corporations (includes Subchapter S, LLCs, and PCs)
- Partnerships
- Unincorporated Associations
- 2.    The business entity must be engaged in an independent activity
***What is the maximum amount of deposit insurance coverage?***
- NEW!   Coverage is now increased from $100,000 up to $250,000 per legal
- entity through December 31, 2009.
- The existence of multiple signers does not increase coverage
- A separate business purpose for funds owned by the same legal entity does not increase coverage.
**Remember! A business (through 12/31/09) can be insured for both $250,000**
**in an interest bearing deposit (Category 7) **_***and***_** also have unlimited**
**coverage for a “Category 10 - Non-interest bearing transaction account” **
**(assuming the deposit is with a participating bank).**

**Notes:**
We now move from the six categories for individuals to the category that applies to business entities.  Category 7 Business organizations  includes Corporations including Subchapter S, LLCs, and Professional Corporations.  Also included are legally created partnership entities and  Unincorporated Associations
There is a requirement that the business entity must be engaged in an independent activity – in other words the entity cannot have been created simply for the purpose of obtaining $250,000 of deposit insurance coverage. 
The rules for the amount of coverage for business organizations are actually very simple  - the coverage has now increased from up to $100,000 to up to $250,000 per legal entity until December 31, 2009.
There are several common misunderstandings about Category 7 Business Organizations coverage.  
The existence of multiple signers or officers on the account does not increase coverage.  Also the fact that a single business entity may set up different deposit accounts for separate business activities does not increase coverage. 
As I mentioned earlier any depositor who opens at a participating bank, a non-interest bearing transactional account such as a non-interest bearing checking account has unlimited deposit insurance coverage for that deposit through December 31, 2009. This coverage is to completely separate and distinct from any interest bearing deposit accounts the depositor may also have in the bank.   Slide 49

## Part 3 - Requirements for Ten Insurance Categories Category 8 - Government/Public Unit Accounts

**What is a Governmental account? ** Deposit insurance is provided to the “*official custodian”* of governmental deposit funds of any state of the United States, or any county, municipality, or political subdivision
**What is an “Official Custodian”?**
- An  "official custodian" must have plenary authority, including control, over funds owned by the public unit which the custodian is appointed or elected to serve.
- Control of public funds includes possession, as well as the authority to establish accounts for such funds in insured depository institutions and to make deposits, withdrawals, and disbursements of such funds.
**Deposit Insurance Coverage:**
**NEW!**   Coverage until 12/31/09 is as follows:
- 1. (a)  If the public unit is located in the same state as the bank (“participating” bank):
- $250,000 for all time and savings deposits
- unlimited coverage for all non-interest bearing transaction accounts
- 1. (b) If the public unit is located in the same state as the bank (bank has “opted out”)
- $250,000 for all time and savings deposits
- $250,000 for all demand deposits
- 2. (a) If the deposit is in a bank in a different state than the public unit (“participating” bank):
- $250,000 for time and savings deposits
- unlimited coverage for all non-interest transaction accounts with unlimited transactions
- 2. (b) If the deposit is in a bank in a different state than the public unit (bank has “opted out”):
- $250,000 for all deposits

**Notes:**
Our 8th ownership category is titled Governmental Accounts.  As with business entities there is only one category that applies to governmental entities. 

This category is a different since the regulations provide that the Insurance coverage is provided to the “official custodian” or custodians for the public unit or political subdivision If the deposit is made in a bank in same state as the location of the public unit... then the amount of coverage is :

Now under the old rule,  the official custodian could have $250,000 in total for interest bearing deposits such as time and savings deposits, and also have $250,000 in coverage for a demand deposit account.  Under the new rules the official custodian can now have a total of $250,000 for interest bearing accounts but can now have unlimited deposit insurance coverage for any non interest bearing transaction deposits.  Here is another change under the new rule.  The in-state out of state rule is suspended until 12/31/09.  In other words, regardless if the governmental entity is located in the same state as the bank or if the governmental entity is located in another state outside of where the bank is located, the governmental entity is entitled to $250,000 in interest bearing accounts and unlimited coverage for non-interest bearing accounts .   Slide 50

## Deposit Insurance for Accounts Held by 

**Deposit Insurance for Accounts Held by **
**Government Depositors **
**www.fdic.gov/deposit/deposits/FactSheet.html**

**Part 3 - Requirements for Ten Insurance Categories ****Category 8 - Government/Public Unit Accounts**

**Notes:**
Most questions that arise for Governmental accounts concern determining whether different functions of a governmental entity qualify as separate entities for the purpose of separate FDIC deposit insurance coverage.  The determination of whether there are multiple governmental entities really must be done by the officials for the governmental entity itself since there are local or state statutes that describe the creation and powers of the governmental entity.  On slide 50 you will see referenced a link to a Fact Sheet created by the FDIC for bank employees to provide to their governmental depositors to assist in determining the amount of deposit insurance coverage they may be eligible for.  Slide 51

## Part 3 - Requirements for Ten Insurance Categories Category 9 – Mortgage Servicing Deposits into P&I Accounts

***“******What is the deposit insurance coverage for co-mingled “mortgage servicing deposits,  ***
***including P&I payments?”***
***“******Old rule”***** – **The payments of P&I held in a commingled mortgage servicing escrow deposit was insured up to the “SMDIA” ($100,000 now $250,000) as to each mortgagee under the account. The mortgagee’s interest in all deposits was added together in the bank.
***“******New rule”*** -  Coverage is provided to the mortgagee or investors, but coverage is separate from other accounts maintained by the mortgagees or investors.  The amount of coverage is up to the “SMDIA” of $250,000 per mortgagor.
***Example***: A mortgage servicer collects from one thousand different borrowers their monthly mortgage payment of $2,000 (P&I) (for this month) and places the funds into a mortgage servicing escrow account. The aggregate of all payments - $2,000,000 - is fully insured because each mortgagor’s payment of $2,000 (P&I) is now insured separately for up to $250,000 (until 12/31/09, then up to $100,000).
***Why the change?*** Enables the FDIC to make deposit insurance determinations on mortgage servicing accounts more quickly and to pay deposit insurance more quickly.  A borrowers P&I payment is not added with any other category of deposit insurance (_i.e_., Category 1 thru 6).
***Note that under the new rules the payment of T&I is unaffected:****  *As under the current insurance rules, under the interim rule amounts in a mortgage servicing account constituting payments of taxes and insurance premiums is insured on a *pass-through *basis as the funds of each respective mortgagor. Such funds are added to other individually owned funds held by each such mortgagor at the same insured institution and insured to the applicable limit.

**Notes:**
Based on the regulation passed on October 10th , 2008 we have added a new ninth category of deposit insurance coverage which we will refer to as Mortgage Servicing Deposits for P&I Payments Category.  What we are referring to here are the deposits that are escrow accounts that include usually hundreds of payments from mortgagors of their monthly principal and interest on their mortgages.    
The big change is that under the new rule, we now look at each mortgagor’s principal and interest payment in calculating deposit insurance coverage for up to the “SMDIA” of $250,000 per mortgagor.   
Let me give you an example - Lets assume a mortgage servicer collects from one thousand different borrowers their monthly P&I mortgage payment of $2,000 each and funds are then deposited into a single mortgage servicing escrow account. What is the insurance coverage? Well, the aggregate of all payments is $2,000,000 and this amount is fully insured because EACH and I repeat EACH mortgagor’s payment of $2,000 (P&I) is now insured separately for up to $250,000.  Please remember that while this new regulation is permanent, the SMDIA of $250,000 will change back to $100,000 on January 01, 2010.  
The reason for this change is it will allow the FDIC to make deposit insurance determinations on mortgage servicing accounts more quickly and thereby pay deposit insurance more quickly when a bank fails.  And remember, since we are treating these payments as a separate category, the mortgagors P&I payment is not added with any other category of deposit insurance. 
The last thing I want to mention about this category is the new rules do not change the existing regulation pertaining to the payment of Taxes&Insurance.  As under the current insurance rules, under the interim rule the payments of taxes and insurance premiums is insured on a pass-through basis as the funds of each respective mortgagor. Such funds are added to other individually owned funds held by each such mortgagor at the same insured institution and insured to the applicable limit. Slide 52

## Part 3 - Requirements for Ten Insurance Categories Category 10 – Non-Interest Bearing Transaction Accounts -                        (Unlimited deposit insurance coverage through 12/31/09)

***“******New Rule” ***
- Effective October 14, 2008, there is unlimited deposit insurance coverage for non-interest bearing transaction accounts through December 31, 2009 unless the insured depository institution opts out of the program.
- Deposits under this category are insured separately from any funds the depositor may have in deposits in the same bank under any of the other nine deposit insurance categories.
- Definition: “Non-interest-bearing transaction account” means a transaction account on which the institution pays no interest
- 	and does not reserve the right to require notice of intended withdrawals. It encompasses traditional checking accounts that
- 	allow for unlimited deposits and withdrawals at any time.
- 	There was a modification effective November 21, 2008 for this temporary rule.  Included under this section are  “IOLTA”
- 	deposits and “NOW” account deposits that earn .5% or less.
-   	*Official checks* (those issued by institutions – for example, cashiers’ checks, certified checks, money orders) **do** come within
- 	the definition. (The interim rule requests comment on whether NOWs should be provided unlimited coverage.)
***Why the change?***
- This new rule is intended to help stabilize large balance non-interest bearing transaction deposits such as payment-processing accounts, (e.g. payroll accounts) used by businesses, however, any depositor is eligible to use this category if they meet the requirements.
***What are the requirements for the bank? ***
- All FDIC-insured institutions are covered under the program for the first 30 days without incurring any costs.  After that initial period, however, institutions wishing to no longer participate must opt out or will incur an insurance assessment for future participation.  If an institution opts out, the guarantees are good only for the first 30 days or when the bank opts out.

**Notes:**
Ok - Here is our second new category today which we will refer to as Category 10 - Non-Interest Bearing Transaction Accounts.  Now unlike category 9 for mortgage servicing accounts we just discussed, Category 10 is a temporary category and by law this category sunsets on December 31, 2009 unless it is specifically extended.
So what is the rule? Well effective October 14, 2008, there is unlimited deposit insurance coverage for non-interest bearing transaction accounts through December 31, 2009 unless your financial institution opts out of the program.  
So to be clear, if a depositor establishes a non-interest bearing transaction account under this category, they have unlimited deposit insurance coverage and they are insured completely and totally separate from any interest bearing deposit funds they may have in any of the other categories in the same bank. “Noninterest-bearing transaction account” means a transaction account on which the institution pays no interest and does not reserve the right to require notice of intended withdrawals. It encompasses traditional checking accounts that allow for unlimited deposits and withdrawals at any time. NOW accounts and MMDAs (because they pay interest) do not come within the definition.  Official checks (those issued by institutions – for example, cashiers’ checks, certified checks, money orders) do come within the definition. (The interim rule requests comment on whether NOWs should be provided unlimited coverage.)
Why was this change enacted? Well this new rule is intended to help stabilize large balance non-interest bearing transaction deposits such as payment-processing accounts, (e.g. payroll accounts) used by businesses, however, any depositor is eligible to use this category if they meet the requirements. 
What are the requirements for the bank? All FDIC-insured institutions are covered under the program for the first 30 days without incurring any costs.  After that initial period, however, institutions wishing to no longer participate must opt out or will incur an insurance assessment for future participation. If an institution opts out, the guarantees are good only for the first 30 days or when the bank opts out. 
As for sweep products (where funds are transferred from one account to another – typically from a checking account to either another deposit product or a non-deposit product), if the funds are swept into an interest-bearing account, that account would not qualify for unlimited coverage.  The interim rule makes an exception for retail sweep accounts in which funds are swept from a noninterest-bearing checking account to a noninterest-bearing savings account.  Even though the savings account is not a transaction account, the FDIC will consider the funds in that account eligible for the full coverage (available to noninterest-bearing transaction accounts) under the Program. Slide 53

## Part 3 - Requirements for Ten Insurance Categories Category 10 – Non-Interest Bearing Transaction Accounts -                        (Unlimited deposit insurance coverage through 12/31/09)

***Example:***
- 	***Facts: “ABC Corporation” has the following deposits in “XYZ Bank”: ***
- Account #1 - $1,000,000 in a non-interest bearing transaction payroll account (unlimited transactions allowed)
- Account #2 - $200,000 in a non-interest bearing transaction operating account (unlimited transactions allowed)
- Account #3 - $245,000 in a one year interest bearing Certificate of Deposit (excess cash) which was opened on 10/15/08.
***Are all three accounts fully insured? YES!***
**	****Explanation**:	Accounts #1 and #2 are added together since they are non-interest 			bearing transaction accounts insured under Category 10 through 			12/31/09 with unlimited deposit insurance coverage.
- 		Account #3 is an interest bearing account insured under Category 7 – 	Business Organizations for up to $250,000.  (Since the CD will mature 	before the sunset of the 12/31/09 the reversion of the  SMDIA coverage 	from $250,000 to $100,000 is not an issue).

**Notes:**
Let’s look at example on Slide 53 for Category 10.  Let’s assume a fictitious company “ABC Corporation” has three deposit accounts as follows: 

Account #1 - $1,000,000 in a non-interest bearing transaction payroll account with unlimited transactions allowed, Account #2 - $200,000 in a non-interest bearing transaction operating account with unlimited transactions allowed, Account #3 - $245,000 which is a one year interest bearing Certificate of Deposit (excess cash) which was opened on 10/15/08. 
Are all three accounts fully insured? YES!
Explanation: Accounts #1 and #2 are added together since they are non-interest bearing transaction accounts insured under Category 10 through 12/31/09 with unlimited deposit insurance coverage.  
Account #3 is an interest bearing account insured under Category 7 – Business Organizations for up to $250,000.  (Since the CD will mature before the sunset of the 12/31/09 the reversion of the  SMDIA coverage from $250,000 to $100,000 is not an issue).   Slide 54

## Eligible Ownership Categories

**Category 1 - SINGLE**** **

**Category 2 - JOINT**** **

**Category 5 - CERTAIN RETIREMENT**

**Category 6 -EMPLOYEE BENEFIT PLAN**** **

**Category 3 - REVOCABLE TRUST**

**Category 4 - IRREVOCABLE**
**TRUST**

**Owner = Individual(s) or Trust**

**Category 7- CORPORATION**
**PARTNERSHIP**
**UNINCORPORATED **
**ASSOCIATIONS**

**Owner = Business Organizations**

**Owner = Government Entity or Political Subdivision**

**Category 8 - GOVERNMENT**** **

**Category 9 -**
**P&I  **

**Category 10 -**
**NON-INTEREST BEARING**

**Owner = **
**Individual or Business**

**Owner = **
**Individual or Business**

**Eligible Ownership Categories**

**Notes:**
So we have now completed our review of the ten most common FDIC ownership categories that are available to depositors.  

Again in using these categories you should be asking “

1) Who owns the funds?

2) What ownership category is the depositor eligible to use or attempting to use?

3) Does the depositor meet the requirements for the category they are attempting to use?

		Slide 55

## Example: Husband and Wife maximizing coverage by opening accounts under four different deposit insurance “categories.”

| 

 | Category 1

  Single 
  Accounts | Category 2

Joint 
Accounts | Category 3
Revocable
Trust
Accounts* | Category 5
Certain
Retirement
Accounts | 

Total
Coverage |
| --- | --- | --- | --- | --- | --- |
| 
Husband
(Individually) | 
$250,000 (#1) |  | 
 |       
$250,000 (#5)
 | 
     $    500,000 |
| Wife
(Individually)

Together
 | 
$250,000 (#2) | 

  $500,000 (#3) | 

$1,500,000 (#4)* | 
$250,000 (#6) 

 | 
     $    500,000

     $ 2,000,000 |
| 
Total | 
    $500,000
 | 
   $500,000 | 
 $1,500,000 | 
  $500,000 | 
    $ 3,000,000 |

*** The Category 3 – Revocable Trust deposit accounts assume the husband and wife have opened an account  titled “ John and Mary Smith POD Alice, Betty and Cathy.”  **
**Remember: Two owners times three beneficiaries times $250,000 =$1.500,000. **
**Note: The example on this slide is solely to show coverage under different**** deposit insurance categories and is **_***not***_** intended to provide estate planning advice.    **

**Notes:**
As a recap of our discussion about the different deposit insurance categories let’s look at a hypothetical example for a husband and wife as depositors in your bank.  
In this example we will be using 4 of the 6 insurance categories for individual depositors: 

Starting with Category 1, on the left side of the slide the husband under account #1 and the wife under account #2 can each have separate deposit accounts that name no beneficiaries that would each be insurable for up to $250,000 under Category 1 Single accounts.

Under Category 2, the joint account category the husband and wife together under account #3 can have an account that is insurable for up to $500,000.

Under Category 3, the revocable trust category let’s assume the husband and wife together own funds and they name their three children as equal beneficiaries on POD account. The total potential deposit insurance for account #4 would be up to $1,500,0000.     
And lastly, under Category 5, Certain retirement accounts, the husband under account #5 and the wife under account #6 could each have deposits that are insurable for up to $250,000.
And let me emphasize, that the example on this slide is solely to show coverage under different deposit insurance categories and is not intended to provide estate planning advice.    Slide 55

## Part 4 - Additional Fundamentals Additional Concepts & Fundamentals

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

**Notes:**
Our final area today is a discussion of four topics that generate a large number of questions each month from depositors.  These topics include:  Fiduciary Accounts, The Death of an Account Owner,  The death of a Beneficiary, 
What happens when banks merge and What happens when a bank fails?

		Slide 57

## Part 4 - Additional Fundamentals Fiduciary Accounts

**OWNER**

**Funds Deposited by **
**an Agent, Broker Nominee, Guardian, Custodian or Executor**

**BANK**

***Requirements for “pass-through” insurance coverage:***
***Bank’s account records must disclose the fiduciary relationship in the account title and ***
***Either the bank’s account records or the fiduciary/custodian’s records must disclose each owner’s identity and their ownership interest in the deposit***
***	******“******If both requirements are met, then the deposit insurance coverage is the same ***
***	******as if the depositor directly deposited the funds at the bank”***

**“****Types of fiduciary accounts include: Escrow, Broker, Uniform Transfer to Minors Act “UTMA”**

**Notes:**
First let me state that a fiduciary account is not a separate category of deposit insurance. 
A fiduciary account is a deposit opened by an Agent, a Broker, Nominee, a Guardian, A Custodian or an Executor for the benefit of the actual owner of the funds. Examples of fiduciary accounts include escrow accounts, deposits placed by a broker, Attorney Trust accounts  (IOLTA), and accounts for minors based Uniform Transfer to Minors Act “UTMA” The thing to remember is if the rules for a fiduciary deposit are met, then there will be what is called pass-through deposit insurance coverage.  

In other words, the deposit insurance coverage will pass through from the party opening the account to the depositor or principal owner of the funds.  The deposit insurance coverage is therefore the same as if the depositor had opened the account themselves directly at the bank.  

There are two essential requirements for “pass-through” deposit insurance coverage: first the Bank’s
account records must disclose the fiduciary relationship in the account title.  This can be done in any
number of ways using language such as: For the Benefit of Others, or the use of the word escrow in
the title or perhaps using the word custodian in the title of the account.   

The second essential requirement is that either the bank’s account records or the fiduciary
establishing the account must maintain documentation that can be provided to the FDIC
disclosing each owner’s identity and the owner’s interest in the deposit “If both of these
requirements are met, then the deposit insurance coverage is the same as if the depositor
had directly deposited the funds at the bank” Slide 58

## Part 4 - Additional Fundamentals Fiduciary Accounts

_***Example:***_
- 	**Facts**: Assume the following four owners independently ask their broker “ABC Brokerage” to invest
- 		funds in a bank deposits on their behalf - John Smith - $245,000, Mary Jones - $100,00,
- 		Sally and David - $495,000, and Betty Wilson - $160,000.  The firm opens a co-mingled 	deposit in “First Great Service and Rates Bank” titled, “ABC Brokerage FBO” for a total of 	$1,000,000.  Note that Sally and David independently are also depositors of  “First Great 	Service and Rates Bank” and maintain an interest bearing MMDA account with a balance 	currently at $15,000.
***Are all of these funds fully insured in “First Great Service and Rates Bank”?  NO!***
***                      ***
***	******Important! ***Remember with fiduciary or custodial accounts that it is “all” of the depositors funds in the same ownership category that are added together in calculating deposit insurance coverage regardless of the source of the funds.  Sally and David have $510,000 in Category 2 – Joint Account category funds of which only $500,000 is insured resulting in $10,000 of uninsured funds.

|  | ABC brokerage FBO | On their own | Total in Bank | Insured  | Uninsured |
| --- | --- | --- | --- | --- | --- |
| John Smith | $   245,000 |  | $   245,000 | $   245,000 | $         0 |
| Mary Jones | $   100,000 |  | $   100,000 | $   100,000 | $         0 |
| Betty Wilson | $   160,000 |  | $   160,000 | $   160,000 | $         0 |
| Sally & David | $   495,000 | $ 15,000 | $   510,000 | $   500,000 | $10,000 |
| Total | $1,000,000 | $ 15,000 | $1,015,000 | $1,005,000 | $10,000 |

**Notes:**
Let’s look at a simple example of a fiduciary or custodial deposit. To start - we will assume we have four different people that independently ask their broker “ABC Brokerage” to invest funds in a bank deposits on their behalf - John Smith - $245,000, Mary Jones - $100,00, Sally and David - $495,000, and Betty Wilson - $160,000.  
So ABC Brokerage then negotiates an interest rate and opens a commingled certificate of deposit account for the four investors at “First Great Service and Rates Bank.”  The account is titled, “ABC Brokerage FBO” and the total balance of the account is $1,000,000.   Is the account fully insured? Well, we first look at the four depositors that make up this account.  Pass-through insurance applies because ABC brokerage can provide us the names and the ownership interests for the deposit.  
In looking at John Smith, Mary Jones and Betty Wilson each is insured under the single ownership category for up to $250,000 and therefore their interests are fully insured.  Sally and David have a Category- 2 joint account that is insurable for up to $500,000. 
But here is the problem, independent of the ABC Brokerage deposit, Sally and David are also depositors of  “First Great Service and Rates Bank” and maintain an interest bearing MMDA account with a balance currently at $15,000.  As we saw back on slide 22 with Jane Smith, it is the interests of all deposits in the same category here Category 2 joint account that we have to consider.  

Therefore, under the joint account category, Sally and David have a total of $510,000 under the joint account category and $10,000 uninsured.  Slide 59

## Part 4 - Additional Fundamentals Death of an Account Owner

***“******The death of an account owner will in most cases reduce the amount of insurance coverage”***
***	******However, if an account owner dies, FDIC provides a six ******	******month grace period for the purpose of calculating ******	******deposit insurance coverage during which the account  ***
***	******	******will be insured as if the account owner had not died.***

**Notes:**
What happens when a deposit account owner dies?
Here we are talking about any one of the six categories pertaining to individuals. 
In situations where the owner of an account has died- the death of an account owner will in most cases result in a reduction in the amount of deposit insurance coverage.  The important thing to remember is that the FDIC allows for a six month grace period which provides if the bank was to fail within six months of the death of the owner of a deposit account, the FDIC will continue to insure the deposit as if the owner was still alive. As we discussed - on slide 41, there is a special exception if an owner of revocable trust dies, the six month grace period is now extended indefinitely.

		Slide 60

## Part 4 - Additional Fundamentals Beneficiary’s Death  

***There is no six-month grace period for the death of beneficiaries***
***Deposit Insurance coverage is immediately reduced for an informal revocable trust account ***

**Notes:**
What if a beneficiary dies?
Well, please do not confuse death of an owner with the death of a beneficiary. There is no grace period for when a beneficiary dies.  Depending on the specific facts, the deposit Insurance coverage may immediately be reduced for trust accounts when a beneficiary dies. 

		Slide 61

## Part 4 - Additional Fundamentals Insurance Coverage after a Bank Merger

***Basic rule****** - ******There is separate deposit insurance coverage (i.e. for deposits at each bank) for up to six months (starting with the effective date of the merger) if a depositor had funds in two banks that merge.***
***Special exception for time deposits****** ******– There is separate deposit insurance coverage for time deposits (that were issued by the former bank) which is the greater of either six months or the first maturity date of the time deposit.  ***

**Notes:**
What is the insurance coverage when a depositor has accounts in two banks that merge? Well, when two banks merge the accounts are insured as if the banks were still separate legal entities for six months.
There is a Special exception for time deposits such as Certificates of deposits.  Deposit insurance coverage for time deposits (that were issued by the former bank) are insured the greater of either six months or the first maturity date of the time deposit.  

Slide 62

##       FDIC pays depositors “as soon as possible”
FDIC’s goal is to make deposit insurance payments within two business days of the failure of the insured institution
FDIC pays 100 cents or 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’s goal is to make deposit insurance payments within two business days of the failure of the insured institution***
***FDIC pays 100 cents or 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***

**Part 4 - Additional Fundamentals ****Insurance Coverage after a Bank Failure**

**Notes:**
What happens when a bank fails?
In looking at this slide a number of you are probably asking “Why do I need to know this information since my bank is in great financial shape?”
Well, let me suggest this reason - the FDIC receives questions every day from depositors asking “How long will I have to wait to get my money if my bank fails?  
Now the federal statue requires that the FDIC must make deposit insurance payments and the exact words are “as soon as possible.” It is important for bank employees to be aware that the FDIC is committed to make payments of deposit insurance in most situations as quickly as one or two business days after a bank fails. Now if the funds were placed by a deposit broker it will take a bit longer to complete these payments since the broker must first provide documentation to the FDIC indicating who are the owners of the funds and each owner’s interest in the deposit. Once the insurance determination is complete the FDIC does pay 100% on the dollar for all insured deposits. Finally, if a depositor has uninsured funds, typically they will recover a portion of their uninsured funds as the FDIC liquidates the failed bank assets.
As a final note, please be aware and also wary of anyone attempting to suggest that the FDIC takes 10 years, 30 years or even 99 years to pay deposit insurance coverage.  This is false and has no basis is fact. Slide 63

## 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

FDIC’s Website  www.fdic.gov

FDIC’s Electronic Insurance Estimator (EDIE) www.fdic.gov/edie

- 	Information specialists are available from
- 	8 AM until 8 PM  Eastern Time
- 	Monday through Friday
- 	Hearing impaired: 1-800-925-4618
**FDIC’s Website  **_[www.fdic.gov](http://www.fdic.gov/)_
**FDIC’s Electronic Insurance Estimator (EDIE) **_[www.fdic.gov/](http://www.fdic.gov/edie)__[edie](http://www.fdic.gov/edie)_

**FDIC’s Resources**

**Notes:**
FDIC has a number of resources available.
If you have specific deposit insurance questions, you can call the FDIC using the toll free number listed here on slide 63  Please be aware that we are experiencing significant call volume at this time.  If you are unable to reach a specialist please try again.  The best times to call are before 11am eastern time zone or we suggest calling towards the end of the week.  Please be aware that the Call Center is currently answering calls on both Saturday and Sunday.  
Another option to ask a deposit insurance question is to send the FDIC an email at the address on slide 63  But please be aware that we are receiving a significant number of emails at this time and a response can take 2 to 3 weeks.  If you do send in an email, please provide as much information on your inquiry as possible along with your phone # in case we need to call to clarify your question with you. SLIDE 64

## Questions
and 
Answers

**and **
**Answers**

**Part 5 – Your Questions**