56706 Federal Register / Vol. 73, No. 190 / Tuesday, September 30, 2008 / Rules and Regulations 

1 12 CFR 330.10. 

2 Id. at 330.10(a). 

Subpart D—Delegations of Authority to 

Other General Officers and Agency 

Heads 

§ 2.29 [Amended] 

■ 3. Amend § 2.29 as follows: 

■ a. Remove paragraph (a)(11)(vii), 

■ b. Redesignate paragraphs (a)(11)(viii) 

through (a)(11)(ix) as paragraphs 

(a)(11)(vii) through (a)(11)(xiii). 

Dated: September 24, 2008. 

Edward T. Schafer, 

Secretary of Agriculture. 

[FR Doc. E8–22959 Filed 9–29–08; 8:45 am] 

BILLING CODE 3410–93–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 330 

RIN 3064–AD33 

Deposit Insurance Regulations; 

Revocable Trust Accounts 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Interim rule with request for 

comments. 

SUMMARY: The FDIC is adopting an 

interim rule to simplify and modernize 

its deposit insurance rules for revocable 

trust accounts. The FDIC’s main goal in 

implementing these revisions is to make 

the rules easier to understand and 

apply, without decreasing coverage 

currently available for revocable trust 

account owners. The FDIC believes that 

the interim rule will result in faster 

deposit insurance determinations after 

depository institution closings and will 

help improve public confidence in the 

banking system. The interim rule 

eliminates the concept of qualifying 

beneficiaries. Also, for account owners 

with revocable trust accounts totaling 

no more than $500,000, coverage will be 

determined without regard to the 

beneficial interest of each beneficiary in 

the trust. 

Under the new rules, a trust account 

owner with up to five different 

beneficiaries named in all his or her 

revocable trust accounts at one FDICinsured institution will be insured up to 

$100,000 per beneficiary. Revocable 

trust account owners with more than 

$500,000 and more than five different 

beneficiaries named in the trust(s) will 

be insured for the greater of either: 

$500,000 or the aggregate amount of all 

the beneficiaries’ interests in the 

trust(s), limited to $100,000 per 

beneficiary. 

DATES: The effective date of the interim 

rule is September 26, 2008. Written 

comments must be received by the FDIC 

not later than December 1, 2008. 

ADDRESSES: You may submit comments 

by any of the following methods: 

• Agency Web Site: http:// 

www.fdic.gov/regulations/laws/federal. 

Follow instructions for submitting 

comments on the Agency Web Site. 

• E-mail: Comments@FDIC.gov. 

Include ‘‘Revocable Trust Accounts’’ in 

the subject line of the message. 

• Mail: Robert E. Feldman, Executive 

Secretary, Attention: Comments, Federal 

Deposit Insurance Corporation, 550 17th 

Street, NW., Washington, DC 20429. 

• Hand Delivery/Courier: Guard 

station at the rear of the 550 17th Street 

Building (located on F Street) on 

business days between 7 a.m. and 5 p.m. 

(EST). 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

Public Inspection: All comments 

received will be posted without change 

to http://www.fdic.gov/regulations/laws/ 

federal including any personal 

information provided. Paper copies of 

public comments may be ordered from 

the Public Information Center by 

telephone at (877) 275–3342 or (703) 

562–2200. 

FOR FURTHER INFORMATION CONTACT: 

Joseph A. DiNuzzo, Counsel, Legal 

Division (202) 898–7349; Christopher 

Hencke, Counsel, Legal Division (202) 

898–8839; James V. Deveney, Section 

Chief, Deposit Insurance Section, 

Division of Supervision and Compliance 

(202) 898–6687; or Kathleen G. Nagle, 

Associate Director, Division of 

Supervision and Consumer Protection 

(202) 898–6541, Federal Deposit 

Insurance Corporation, Washington, DC 

20429. 

SUPPLEMENTARY INFORMATION: 

I. Background 

One of the FDIC’s fundamental goals 

is to ensure that depositors and insured 

depository institution employees 

understand the FDIC’s deposit 

insurance rules. That goal is essential in 

carrying out the FDIC’s combined 

mission of helping to maintain public 

confidence and stability in the United 

States banking system and protecting 

insured depositors. 

Despite the FDIC’s efforts to simplify 

deposit insurance rules in recent years, 

there is still significant public and 

industry confusion about the insurance 

coverage of revocable trust accounts— 

particularly living trust accounts, one of 

the two types of revocable trust 

accounts. This continuing confusion 

about the insurance coverage of 

revocable trust accounts is evidenced by 

the tens of thousands of deposit 

insurance inquiries the FDIC has 

received following recent depository 

institution failures. 

Current Rules for Revocable Trust 

Accounts 

There are two types of revocable trust 

accounts insured under the FDIC’s 

coverage rules: Informal trust accounts 

and formal trust accounts. Informal trust 

accounts are comprised simply of a 

signature card on which the owner 

designates the beneficiaries to whom the 

funds in the account will pass upon the 

owner’s death. These are the most 

common type of revocable trust 

accounts and generally are referred to as 

‘‘payable-on-death’’ (‘‘POD’’) accounts 

or in-trust-for (‘‘ITF’’) accounts or 

Totten Trust accounts. For purposes of 

this rulemaking, we will refer to all 

informal trust accounts as POD 

accounts. 

The other type of revocable trust 

accounts are accounts established in 

connection with formal revocable trusts. 

Formal revocable trusts are trusts 

created for estate planning purposes. 

They are often referred to as: living 

trusts, family trusts, marital trusts, 

survivor’s trusts, by-pass trusts, 

generation-skipping trusts, AB trusts or 

special needs trusts. For purposes of 

this rulemaking, we will refer to all 

formal revocable trusts as living trusts. 

Like an informal revocable trust, a living 

trust is a trust created by an owner (also 

known as a grantor or settlor) over 

which the owner retains control during 

his or her lifetime. Upon the owner’s 

death, the trust generally becomes 

irrevocable. A living trust is an 

increasingly popular estate planning 

tool. Like a POD account, a deposit 

account held in connection with a living 

trust account at an FDIC-insured 

institution is insured under the FDIC’s 

coverage rules for revocable trust 

accounts. 

The FDIC’s rules provide that all 

revocable trust accounts (both POD 

accounts and living trust accounts) are 

insured up to $100,000 per ‘‘qualifying 

beneficiary’’ designated by the owner of 

the account.1 If there are multiple 

owners of a revocable trust account, 

coverage is available separately for each 

owner, per qualifying beneficiary as to 

each owner. Qualifying beneficiaries are 

defined as the owner’s spouse, children, 

grandchildren, parents and siblings.2

The per-qualifying beneficiary 

coverage available on revocable trust 

accounts is separate from the insurance 

coverage afforded to depositors in 


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3 Id. at 330.10(a) & (b). 

4FDIC Advisory Opinion 94–32 (May 14, 1994). 

5 69 FR 2825, 2827 (Jan. 21, 2004). 

6Technically, as reflected in the regulatory text, 

this limitation is the Standard Maximum Deposit 

Insurance Amount (‘‘SMDIA’’), currently $100,000. 

Thus, the coverage would automatically reflect any 

future inflation adjustments to the SMDIA 

consistent with section 11(a)(1)(F) of the FDI Act, 

12 U.S.C. 1821(a)(1)(F). For ease of reference, 

throughout this notice we will use $100,000 as the 

basic coverage amount. 

connection with other accounts they 

own in other ownership capacities at 

the same insured institution. That 

means, for example, if an individual has 

at the same insured depository 

institution a single-ownership account 

with a balance of $100,000 and a POD 

account (naming at least one qualifying 

beneficiary) with a balance of $100,000, 

both accounts would be insured 

separately for a combined coverage 

amount of $200,000. 

Under our current rules, separate, perbeneficiary insurance coverage is 

available for revocable trust accounts 

only if the account satisfies certain 

requirements. First, the title of the 

account must include a term such as 

POD or ITF or family trust (or similar 

expression or acronym), evidencing an 

intent that the funds shall belong to the 

designated beneficiaries upon the 

owner’s death. Second, as explained 

above, each beneficiary must be a 

qualifying beneficiary. And third, for 

POD accounts, the beneficiaries must be 

specifically named in the deposit 

account records of the depository 

institution. Under the current rules, the 

beneficiaries of a living trust need not 

be indicated in the institution’s 

records.3

If a revocable trust account owner 

names one or more non-qualifying 

beneficiaries in the account (or trust), 

the funds corresponding to those nonqualifying beneficiaries are considered 

the single-ownership funds of the 

depositor and insured under that 

category of coverage. For example, 

assume a depositor owns a POD account 

(and no other accounts at the same 

institution) naming his spouse and a 

friend as beneficiaries. The account has 

a balance of $200,000. The coverage 

would be $100,000 under the revocable 

trust coverage rules because he has 

named one qualifying beneficiary, and 

$100,000 would be insured under the 

single-ownership coverage rules because 

the funds attributable to the nonqualifying beneficiary (the friend) 

would be considered the owner’s singleownership funds and thus insured 

under that category of ownership. If the 

account owner in this example also has 

a single-ownership account with a 

balance of, say, $50,000, then the 

$100,000 (attributable to the nonqualifying beneficiary) from his POD 

account would be added to the funds 

held in the single-ownership account 

and be insured to a limit of $100,000. 

Thus, $50,000 would be uninsured. 

As explained above, both POD 

accounts and living trust accounts are 

types of revocable trust accounts 

insured under the revocable trust 

account category in the FDIC’s coverage 

rules. Consequently, all funds that a 

depositor holds in both living trust 

accounts and POD accounts naming the 

same beneficiaries are aggregated for 

insurance purposes and insured to the 

applicable coverage limits. For example, 

assume a depositor has a living trust 

account for $200,000 in connection with 

a living trust naming his children, A 

and B. If the depositor also has a 

$200,000 POD account naming A and B, 

the combined coverage on the two 

accounts would be $200,000—not 

$200,000 per account. 

Prior Guidance on and Revisions to the 

Revocable Trust Account Coverage 

Rules 

Prior to the late 1980s, when living 

trusts began to emerge, the coverage 

rules for revocable trust accounts were 

easy to understand and apply. 

Revocable trusts were almost 

exclusively in the form of POD 

accounts, and the coverage was 

determined based on the number of 

qualifying beneficiaries named on the 

signature card used to establish the 

account. In fact, the opening of the POD 

account (solely through the completion 

of the signature card) resulted in the 

formation of the trust. 

In 1994, as living trusts became 

increasingly popular, the FDIC 

published guidelines on the insurance 

coverage of living trust accounts.4 The 

guidelines addressed how the FDIC 

would insure living trust accounts amid 

the complicating factor that many living 

trusts contained clauses tying a 

beneficiary’s entitlement to the trust 

assets to the satisfaction of specified 

conditions, known as defeating 

contingencies. Despite the issuance of 

these guidelines, bankers and depositors 

continued to be confused and uncertain 

about the insurance coverage of living 

trust accounts. This confusion and 

uncertainty was understandable, given 

the complex legal theory and analysis 

needed to determine the coverage of 

living trust accounts involving defeating 

contingencies. In 2004, the FDIC 

simplified the rules for living trust 

accounts by amending the regulations to 

provide coverage for the owners of 

living trust accounts, irrespective of 

defeating contingencies in the trust. The 

FDIC’s objectives behind this 

rulemaking were to simplify the existing 

rules and to provide coverage for living 

trust accounts similar to POD account 

coverage.5

Despite the FDIC’s past efforts to 

simplify and clarify the coverage rules 

for living trust accounts, confusion and 

uncertainty continue to exist among 

bankers and depositors. One reason for 

this situation is that living trusts are 

becoming increasingly complex. A 

typical living trust is a trust with two 

grantors, husband and wife, who have 

full access to the trust assets during 

their lifetimes, with the trust providing 

for a life estate interest for the surviving 

spouse upon the death of the first 

spouse and then providing for a ‘‘family 

trust’’ (in the form of an irrevocable 

trust) for designated family members 

upon the death of the second spouse. It 

is also common for living trusts to 

provide for lump-sum payments to 

designated beneficiaries. The FDIC’s 

coverage rules for living trust accounts, 

as the result of the 2004 revisions, in 

theory are fairly straightforward, but 

applying them to complex living trusts 

has resulted in significant continuing 

confusion and uncertainty among 

bankers and depositors. Also, upon an 

institution failure, because of the 

complexities of living trusts, FDIC 

determinations on the coverage 

available to owners of living trust 

accounts are often time consuming; 

thus, depositors are sometimes delayed 

in receiving their insured funds. 

II. The Interim Rule 

Overview 

The FDIC’s goals in this rulemaking 

are twofold. One is to make the coverage 

rules for revocable trust accounts easy to 

understand and easy to apply (in 

determining the applicable coverage 

amount), without decreasing coverage 

currently available for revocable trust 

account owners. The other is to retain 

reasonable limitations on coverage 

levels for revocable trust account 

owners. Under the new rules, a trust 

account owner with up to $500,000 in 

revocable trust accounts at one FDICinsured institution is insured up to 

$100,000 6 per beneficiary. (This is the 

rule that will apply to the vast majority 

of revocable trust account owners.) 

Revocable trust account owners with 

more than $500,000 and more than five 

different beneficiaries named in the 

trust(s) are insured for the greater of 

either: $500,000 or the aggregate amount 

of all the beneficiaries’ interests in the 


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56708 Federal Register / Vol. 73, No. 190 / Tuesday, September 30, 2008 / Rules and Regulations 

7 If in establishing a POD account, the owner 

names a living trust as the beneficiary, we will 

consider the beneficiaries of the trust to be the 

beneficiaries of the POD account. 

8Technically, this amount is fives times the 

SMDIA. 

9This assumes the account owner has no other 

revocable trust accounts at the same depository 

institution. 

10For example, if a depositor has a POD account 

naming her son as a beneficiary and a living trust 

account at the same bank naming the same son as 

a beneficiary, the depositor would be entitled to no 

more than $100,000 with respect to having named 

her son a beneficiary of her revocable trust 

accounts. 

11 12 CFR 330.10(a). 12 64 FR 15657 (Apr. 1, 1999). 

trust(s), limited to $100,000 per 

beneficiary. 

Under the interim rule, coverage is 

based on the existence of any 

beneficiary named in the revocable 

trust, as long as the beneficiary is a 

natural person, or a charity or other 

non-profit organization.7 As discussed 

below, under the interim rule the 

concept of ‘‘qualifying beneficiaries’’ is 

eliminated. For an account owner with 

combined revocable trust account 

balances of $500,000 8 or less, the 

maximum available coverage would be 

determined simply by multiplying the 

number of beneficiaries by $100,000. 

A living trust account with a balance 

of $400,000, for example, would be 

insured for up to $400,000 as long as 

there are at least four beneficiaries 

named in the trust.9 Different 

proportional ownership interests of the 

beneficiaries in the trust assets would 

not affect the deposit insurance 

coverage. So, in this example, the 

maximum coverage would be $400,000 

even if the trust provided that 

beneficiaries A and B are entitled to 

twenty percent each of the trust assets 

and beneficiaries C and D are entitled to 

thirty percent each of the trust assets. As 

under the current rules, however, a 

depositor would receive a combined 

maximum coverage amount of $100,000 

for the same beneficiary named in more 

than one revocable trust account he or 

she owns at one insured institution.10

Eliminating the Concept of ‘‘Qualifying 

Beneficiaries’’ 

As explained above, currently 

revocable trust account coverage is 

based, in large part, on the number of 

qualifying beneficiaries named in the 

trust. Qualifying beneficiaries are 

defined as the revocable trust account 

owner’s spouse, children, 

grandchildren, parents and siblings.11

Prior to 1999, the definition included 

only the owner’s spouse, children and 

grandchildren. The FDIC’s rationale in 

1999 for expanding the definition of 

qualifying beneficiaries to include the 

account owner’s parents and siblings 

was to recognize other family members 

likely to be named in a person’s 

revocable trust. The objective was to 

prevent depositors from losing money in 

an institution failure because of their 

misunderstanding of the coverage rules 

for revocable trust accounts.12

Before and since the 1999 expansion 

of the definition of qualifying 

beneficiaries, depositors, consumer 

groups and bankers have questioned the 

fairness of limiting the coverage on 

revocable trust accounts to the naming 

of certain beneficiaries. Many have 

argued that the FDIC should expand the 

definition of qualifying beneficiaries to 

include, among others, an account 

holder’s nieces and nephew, in-laws, 

great-grandchildren, cousins, friends 

and charities. Historically, the FDIC’s 

response to such complaints has been 

that there must be a reasonable 

limitation of the amount of coverage 

available on revocable trust accounts; 

otherwise, there would be potentially 

unlimited coverage under this account 

category. Hence, the FDIC has been 

reluctant to amend the rules to provide 

coverage based on any beneficiary(ies) 

named in a revocable trust. Under the 

interim rule, however, the FDIC believes 

that it can achieve greater fairness under 

the revocable trust rules by basing 

coverage on the naming of any 

beneficiary in a revocable trust, but 

concurrently imposing coverage 

qualifications (discussed below) on 

accounts over $500,000. 

In addition to addressing the fairness 

issue, eliminating the concept of 

‘‘qualifying beneficiaries’’ makes the 

coverage rules easier to understand. 

Depositors and bankers no longer need 

to know who is a qualifying beneficiary 

and who is not. Also, this revision will 

obviate the need for FDIC claims agents, 

upon an institution’s failure, to confirm 

that a beneficiary named in a revocable 

trust account is a qualifying beneficiary. 

Thus, under the interim rule, the FDIC 

anticipates being able to make quicker 

deposit insurance determinations on 

revocable trust accounts at institution 

failures. 

For Accounts With Aggregate Balances 

of $500,000 or Less, Determining 

Coverage Without the Necessity of 

Discerning Each Beneficiary’s Interest in 

the Trust(s) 

One of the most confusing and 

complex aspects of determining 

revocable trust account coverage under 

the current rules is having to discern 

and consider unequal beneficial 

interests in revocable trusts. This issue 

typically arises in the context of a living 

trust that, for example, provides either 

varying lump-sum payments for 

designated beneficiaries or different 

percentage interests in trust assets to 

certain beneficiaries, or different 

remainder interests in the assets to the 

same or other beneficiaries. The method 

for determining coverage in some 

situations involving unequal beneficial 

interests necessitates the formulation 

and solving of simultaneous equations. 

Consumers and bankers alike find 

applying the current revocable trust 

account rules to complicated living 

trusts, especially ones involving 

unequal beneficial interests, far too 

complex. The FDIC agrees. Therefore, a 

key component of the interim rule is the 

ability to determine coverage available 

to account owners without regard to 

unequal interests of the beneficiaries 

named in the revocable trust(s). The 

FDIC believes this rule change, coupled 

with the recognition of all beneficiaries, 

will make the revocable trust account 

rules simpler and more transparent. 

Retaining Current Coverage Levels for 

Account Owners With More Than 

$500,000 in Revocable Trust Accounts 

and More Than Five Beneficiaries 

Named in the Trusts(s) 

Based on our experience at recent 

institution failures, the FDIC believes 

that the vast majority of revocable trust 

account owners have less than $500,000 

in revocable trust accounts at one FDICinsured institution. Thus, under the 

interim rule coverage for an account 

owner’s revocable trust accounts will be 

determined simply by multiplying the 

number of different beneficiaries named 

in the trust(s) by $100,000. 

In order to retain reasonable limits on 

the maximum coverage available to 

revocable trust account owners and also 

to retain the coverage available to 

revocable trust account owners under 

the current coverage rules, the interim 

rule provides special treatment for 

depositors with revocable trust accounts 

over $500,000 naming more than five 

beneficiaries. Under the interim rule, 

revocable trust account owners with 

more than $500,000 and more than five 

beneficiaries named in the trusts are 

insured for the greater of either: 

$500,000 or the aggregate amount of all 

the beneficiaries’ interests in the 

trusts(s), limited to $100,000 per 

beneficiary. This coverage is no less 

than the coverage afforded to such 

account owners under the current rules, 

particularly because under the interim 

rule the coverage is based on the 

number of beneficiaries, not the number 

of qualifying beneficiaries. Also, as 

discussed below, under the interim rule 

life-estate interest holders are deemed to 


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Federal Register / Vol. 73, No. 190 / Tuesday, September 30, 2008 / Rules and Regulations 56709 

13 12 CFR 330.10(f)(3). 

14For jointly owned living trusts, upon the death 

of one of the owners, typically part of the trust 

remains revocable and part becomes irrevocable. 

15 12 CRR 330.13. 

16This assumes neither grantor has any other 

revocable trust accounts at the same insured 

institution. 

17Of course, the FDIC rules provide for a sixmonth grace period after the death of an account 

owner during which the coverage would be the 

same as if the owner (grantor) were still alive. 12 

CFR 330.3(j). 

have a $100,000 interest in the trust 

assets. 

For example, assume an individual 

has a living trust account. The living 

trust provides a life estate interest for 

that individual’s spouse, $15,000 for his 

college, $5,000 for each of three brothers 

and the remaining amount to his friend. 

The balance in the account is $600,000. 

Here the account balance exceeds 

$500,000 and the number of 

beneficiaries is more than five. Hence, 

under the interim rule, the maximum 

coverage would be the greater of either: 

$500,000 or the aggregate beneficial 

interests of all the beneficiaries (up to a 

limit of $100,000 per beneficiary). The 

beneficial interests are: $100,000 for the 

spouse’s life estate interest, $15,000 for 

the college, $5,000 for each brother 

(totaling $15,000), and $100,000 for the 

friend (because of the per-beneficiary 

limitation of $100,000). The total 

beneficial interests, thus, would be 

$230,000. Hence, the maximum 

coverage afforded to the account owner 

would be $500,000, the greater of 

$500,000 or $230,000. 

The FDIC believes that basing the 

coverage of trust accounts over $500,000 

(with more than five different 

beneficiaries in the trust(s)) on the 

ownership interest of each beneficiary 

named in the applicable trust(s) would 

prevent the potential of providing 

unlimited coverage with respect to 

revocable trust accounts. Without such 

a limitation, an account owner could 

name a limitless number of beneficiaries 

each with a nominal interest in the trust 

and obtain coverage up to $100,000 for 

naming each such beneficiary. For 

example, a revocable trust account held 

in connection with a trust entitling one 

beneficiary to $1 million and entitling 

each of nine other beneficiaries to $1 

would be insured for $1 million, 

without the limitation imposed under 

the interim rule. 

Treatment of Life-Estate Interests 

Another complicating factor in 

determining the coverage for living trust 

accounts is determining the value of life 

estate interests. A life estate interest 

usually means the life-estate beneficiary 

is entitled to the income on the trust 

assets during his or her lifetime. A large 

percentage of living trusts provide a life 

estate interest for one or more 

beneficiaries. The most typical situation 

is where a married person creates a trust 

providing a life estate interest for his or 

her surviving spouse and a remainder 

interest for their children. The FDIC’s 

current rules provide that, in such 

situations, each life-estate holder and 

each remainder-man (also known as 

residuary beneficiaries) is deemed to 

have an equal interest in the trust assets 

for deposit insurance purposes.13 This 

rule has proven difficult to apply, 

especially where the living trust 

provides for lump-sum gifts for certain 

beneficiaries, life estate interests for 

others and different percentage interests 

for the remainder-men, who may be the 

same as or different from the other 

beneficiaries. In order to simplify the 

coverage rules, the interim rule revises 

the current valuation method for life 

estate interests by deeming each such 

interest to be $100,000, for purposes of 

determining deposit insurance coverage. 

The example above (involving a trust 

providing for a spousal life estate 

interest and bequests to the owner’s 

college, brothers and friend) 

demonstrates how the interim rule 

would apply to a living trust providing 

for a life-estate interest. 

Treatment of Irrevocable Trusts 

Springing From a Revocable Trust 

Another current complexity in 

determining coverage for living trust 

accounts is that, when it is created, a 

living trust is a revocable trust but, 

when the owner dies, the trust becomes 

irrevocable.14 At that stage in the 

lifecycle of the living trust, the funds 

corresponding to the irrevocable trust 

are insured under the FDIC’s rules for 

irrevocable trust accounts.15 Under 

those rules, coverage is based on the 

non-contingent interest of each 

beneficiary named in the trust. In effect, 

when a living trust evolves from a 

revocable trust to an irrevocable trust 

the insurance coverage available on the 

account is based on a different set of 

rules—the irrevocable trust account 

rules. As such, the coverage on the 

account often decreases from what it 

had been when the trust was insured 

solely under the revocable trust rules. 

To eliminate this complexity and the 

confusion it generates, under the 

interim rule, the rules for determining 

the coverage of the living trust account 

will remain the same when the trust (or 

part of the trust) converts to an 

irrevocable trust. For example, a grantor 

has a living trust account held in 

connection with a trust naming three 

beneficiaries, each of whom receives a 

specified share of the trust assets if he 

or she graduates from college by age 25. 

Under the current insurance rules, when 

the grantor is alive (meaning that the 

trust is still a revocable trust) the 

maximum coverage on the account is 

$300,000—1 grantor times 3 

beneficiaries times $100,000. Also 

under the current rules, upon the 

grantor’s death (allowing for the sixmonth grace period during which 

coverage would remain the same), the 

coverage reduces to $100,000 (if none of 

the beneficiaries has graduated from 

college yet) because of the contingent 

nature of the beneficial interests 

provided for in the trust. Under the 

interim rule, contingencies would 

continue to be irrelevant for coverage 

purposes after the grantor’s death, even 

though the trust has evolved into an 

irrevocable trust. In this example, under 

the interim rule the coverage would still 

be up to $300,000. 

The FDIC believes that the continuity 

of coverage provided for under this 

component of the interim rule would 

greatly simplify the current rules for 

determining coverage for living trust 

accounts. It is important to note, 

however, that under the interim rule the 

coverage on a living trust account could 

still change during the lifecycle of the 

trust. For example, when both grantors 

in a co-grantor trust are alive, the 

maximum coverage on the account 

would be $1,000,000, because the 

formula for determining coverage would 

be: 2 (grantors) times 5 beneficiaries 

times $100,000.16 If one of the grantors 

dies, then the maximum coverage would 

be 1 (grantor) times 5 beneficiaries times 

$100,000.17 Coverage would likewise 

decrease if one or more of the 

beneficiaries named in the revocable 

trust died, assuming the death of the 

beneficiary(ies) would cause the total 

number of beneficiaries to drop below 

five. 

Impact of Proposed Rules on the Deposit 

Insurance Fund Reserve Ratio 

Eliminating the concept of qualifying 

beneficiaries and disregarding unequal 

interests in a trust (for accounts with 

five or fewer beneficiaries) theoretically 

will increase coverage immediately. 

Since no industry-wide data are 

maintained on trust accounts, a definite 

determination of the extent of this effect 

on insurance coverage for existing 

accounts is difficult. Thus, the precise 

effect the proposal will immediately 

have on the Deposit Insurance Fund 

(‘‘DIF’’) reserve ratio can be estimated, 


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56710 Federal Register / Vol. 73, No. 190 / Tuesday, September 30, 2008 / Rules and Regulations 

18The reserve ratio is determined by dividing the 

DIF fund balance by the estimated insured deposits 

by the industry (12 U.S.C. 1817(l)). 

19 5 U.S.C. 553. 

as discussed below, but cannot be 

determined with precision.18

In fifteen failures from 1999 to 2003 

and three failures from the past year for 

which final insurance determinations 

have been made, approximately ninetyseven percent of the funds in revocable 

trust accounts were insured on average 

and approximately twenty-five percent 

of domestic deposits were in revocable 

trust accounts on average. If conclusions 

from these eighteen failed institutions 

can be generalized to the banking 

industry as a whole, then, even if all 

current revocable trust deposits were to 

become insured, the effect on total 

insured deposits and on the DIF reserve 

ratio would be small. Recognizing that 

this data does not provide a strong 

statistical basis for drawing conclusions, 

we welcome comments on the effect of 

the interim rule on the level of insured 

deposits. 

In the long-term, eliminating the 

concept of qualifying beneficiaries 

could bring more insured deposits into 

the system. For example, since, under 

the interim rule, nieces and nephews 

are eligible beneficiaries, a depositor 

might add her niece and nephew to a 

trust account that previously had only a 

sister as the sole beneficiary. 

Anticipating future moves by depositors 

is even more difficult than estimating 

the immediate effect on deposit 

insurance coverage. Thus, the long-term 

effect of the interim rule on insured 

deposits and on the reserve ratio is even 

more uncertain, beyond the conclusion 

that over time the change can be 

expected to lower the reserve ratio to 

some (likely limited) degree. 

Effective Date of the Interim Rule 

The interim rule is effective on 

September 26, 2008, the date on which 

the FDIC Board of Directors approved 

the interim rule. It is also the date this 

interim rule was filed for public 

inspection with the Office of the Federal 

Register. In this regard, the FDIC 

invokes the good cause exception to the 

requirements in the Administrative 

Procedure Act 19 (‘‘APA’’) that, before a 

rulemaking can be finalized, it must first 

be issued for public comment and, once 

finalized, must have a delayed effective 

date of thirty days from the publication 

date. The FDIC believes good cause 

exists for making the interim rule 

effective immediately because, based on 

recent depository institution failures, it 

is evident that many depositors and 

depository institution employees 

misunderstand the insurance rules for 

revocable trust accounts. The interim 

rule simplifies and modernizes the 

coverage rules for revocable trust 

accounts and, hence, will provide 

greater certainty to depositors and 

depository institution employees about 

the extent to which revocable trust 

accounts are insured. 

Importantly, under the interim rule, 

no depositor will be insured for an 

amount less than he or she would have 

been entitled to under the current 

revocable trust account rules. Some 

depositors will be entitled to greater 

coverage under the interim rule than 

under the current rules, especially 

because under the interim rule a 

beneficiary need no longer be a 

qualifying beneficiary for the account 

owner to be insured on a per-beneficiary 

basis. Moreover, the FDIC believes that 

the interim rule will result in faster 

deposit insurance determinations after 

depository institution closings and will 

help improve public confidence in the 

banking system. 

For these reasons, the FDIC has 

determined that the public notice and 

participation that ordinarily are 

required by the APA before a regulation 

may take effect would, in this case, be 

contrary to the public interest and that 

good cause exists for waiving the 

customary 30-day delayed effective 

date. Nevertheless, the FDIC desires to 

have the benefit of public comment 

before adopting a permanent final rule 

and thus invites interested parties to 

submit comments during a 60-day 

comment period. In adopting the final 

regulation, the FDIC will revise the 

interim rule, if appropriate, in light of 

the comments received on the interim 

rule. 

III. Request for Comments 

The FDIC requests comments on all 

aspects of the proposed rulemaking. We 

solicit specific comments on: (1) 

Whether ‘‘over $500,000’’ is the proper 

threshold for determining coverage for 

revocable trust account owners based on 

the beneficial interests of the trust 

beneficiaries; (2) whether the FDIC’s 

irrevocable trust account rules should 

be revised so that all trusts are covered 

by substantially the same rules; and (3) 

what effect the interim rule will have on 

the level of insured deposits. 

IV. Paperwork Reduction Act 

The interim rule will revise the 

FDIC’s deposit insurance regulations. It 

will not involve any new collections of 

information pursuant to the Paperwork 

Reduction Act (44 U.S.C. 3501 et seq.). 

Consequently, no information collection 

has been submitted to the Office of 

Management and Budget for review. 

V. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

requires an agency that is issuing a final 

rule to prepare and make available a 

regulatory flexibility analysis that 

describes the impact of the final rule on 

small entities. 5 U.S.C. 603(a). The 

Regulatory Flexibility Act provides that 

an agency is not required to prepare and 

publish a regulatory flexibility analysis 

if the agency certifies that the final rule 

will not have a significant economic 

impact on a substantial number of small 

entities. 

Pursuant to section 605(b) of the 

Regulatory Flexibility Act, the FDIC 

certifies that the interim rule will not 

have a significant impact on a 

substantial number of small entities. 

The interim rule simplifies the deposit 

insurance rules for revocable trust 

accounts held at FDIC-insured 

depository institutions. 

VI. The Treasury and General 

Government Appropriations Act, 

1999—Assessment of Federal 

Regulations and Policies on Families 

The FDIC has determined that the 

proposed rule would not affect family 

well-being within the meaning of 

section 654 of the Treasury and General 

Government Appropriations Act, 

enacted as part of the Omnibus 

Consolidated and Emergency 

Supplemental Appropriations Act of 

1999 (Pub. L. 105–277, 112 Stat. 2681). 

The interim should have a positive 

effect on families by clarifying the 

coverage rules for revocable trust 

accounts, a popular type of consumer 

bank account. 

VII. Small Business Regulatory 

Enforcement Fairness Act 

The Office of Management and Budget 

has determined that the interim rule is 

not a ‘‘major rule’’ within the meaning 

of the relevant sections of the Small 

Business Regulatory Enforcement Act of 

1996 (‘‘SBREFA’’) (5 U.S.C. 801 et seq.). 

As required by SBREFA, the FDIC will 

file the appropriate reports with 

Congress and the General Accounting 

Office so that the interim rule may be 

reviewed. 

VIII. Plain Language 

The FDIC has sought to present the 

interim rule in a simple and 

straightforward manner. The FDIC 

invites comment on whether it could 

take additional steps to make the rule 

easier to understand. 


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Federal Register / Vol. 73, No. 190 / Tuesday, September 30, 2008 / Rules and Regulations 56711 

List of Subjects in 12 CFR Part 330 

Bank deposit insurance, Banks, 

banking, Reporting and recordkeeping 

requirements, Savings and loan 

associations, Trusts and trustees. 

■ For the reasons stated above, the 

Board of Directors of the Federal 

Deposit Insurance Corporation amends 

part 330 of chapter III of title 12 of the 

Code of Federal Regulations as follows: 

PART 330—DEPOSIT INSURANCE 

COVERAGE 

■ 1. The authority citation for part 330 

continues to read as follows: 

Authority: 12 U.S.C. 1813(l), 1813(m), 

1817(i), 1818(q), 1819 (Tenth), 1820(f), 

1821(a), 1822(c). 

■ 2. Section 330.10 is revised to read as 

follows: 

§ 330.10 Revocable trust accounts. 

(a) General rule. Except as provided in 

paragraph (e) of this section, the funds 

owned by an individual and deposited 

into one or more accounts with respect 

to which the owner evidences an 

intention that upon his or her death the 

funds shall belong to one or more 

beneficiaries shall be separately insured 

(from other types of accounts the owner 

has at the same insured depository 

institution) in an amount equal to the 

total number of different beneficiaries 

named in the account(s) multiplied by 

the SMDIA. This section applies to all 

accounts held in connection with 

informal and formal testamentary 

revocable trusts. Such informal trusts 

are commonly referred to as payable-ondeath accounts, in-trust-for accounts or 

Totten Trust accounts, and such formal 

trusts are commonly referred to as living 

trusts or family trusts. (Example 1: An 

individual has a living trust account 

with four beneficiaries named in the 

trust. The account owner has no other 

revocable trust accounts at the same 

FDIC-insured institution. The maximum 

insurance coverage would be $400,000, 

determined by multiplying 4 (the 

number of beneficiaries) times $100,000 

(the current SMDIA). Example 2: An 

individual has a payable-on-death 

account naming his niece and cousin as 

beneficiaries and, at the same FDICinsured institution, has another payableon-death account naming the same 

niece and a friend as beneficiaries. The 

maximum coverage available to the 

account owner would be $300,000. This 

is because the account owner has named 

three different beneficiaries in the 

revocable trust accounts. The naming of 

the same beneficiary in more than one 

revocable trust account, whether it be a 

payable-on-death account or living trust 

account, does not increase the total 

coverage amount.) 

(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 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 therefore. In addition, 

for informal revocable trust accounts, 

the beneficiaries must be specifically 

named in the deposit account records of 

the insured depository institution. The 

settlor of a revocable trust shall be 

presumed to own the funds deposited 

into the account. 

(c) Definition of beneficiary. For 

purposes of this section, a beneficiary 

includes natural persons as well as 

charitable organizations and other nonprofit entities recognized as such under 

the Internal Revenue Code of 1986. 

(d) Interests of beneficiaries outside 

the definition of beneficiary in this 

section. If a beneficiary named in a trust 

covered by this section does not meet 

the definition of beneficiary in 

paragraph (c) of this section, the funds 

corresponding to that beneficiary shall 

be treated as the individually owned 

(single ownership) funds of the 

owner(s). As such, they shall be 

aggregated with any other single 

ownership accounts of such owner(s) 

and insured up to the SMDIA per 

owner. (Example: If an individual 

establishes an account payable-on-death 

to a pet, the account would be insured 

as a single-ownership account.) 

(e) Revocable trust accounts with 

aggregate balances exceeding five times 

the SMDIA and naming more than five 

different beneficiaries. Notwithstanding 

the general coverage provisions in 

paragraph (a) of this section, for funds 

owned by an individual in one or more 

revocable trust accounts naming more 

than five different beneficiaries and 

whose aggregate balance is more than 

five times the SMDIA, the maximum 

revocable trust account coverage for the 

account owner shall be the greater of 

either: five times the SMDIA or the 

aggregate amount of the ownership 

interests of each different beneficiary 

named in the trusts, to a limit of the 

SMDIA per different beneficiary. 

(Example: A has a living trust account 

with a balance of $600,000. Under the 

terms of the trust, upon A’s death, A’s 

three children are each entitled to 

$50,000, A’s friend is entitled to $5,000 

and a designated charity is entitled to 

$70,000. The trust also provides that the 

remainder of the trust assets shall 

belong to A’s spouse. In this case, 

because the balance of the account is 

over $500,000 (which is five times the 

current SMDIA of $100,000) and there 

are more than five different beneficiaries 

named in the trust, the maximum 

coverage available to A would be the 

greater of: $500,000 or the aggregate of 

each different beneficiary’s interest to a 

limit of $100,000 per beneficiary. The 

beneficial interests in the trust 

considered for purposes of determining 

coverage are: $50,000 for each of the 

children (totaling $150,000), $5,000 for 

the friend, $70,000 for the charity, and 

$100,000 for the spouse ($375,000, 

subject to the $100,000 limit per 

beneficiary). The aggregate beneficial 

interests, thus, are $325,000. Hence, the 

maximum coverage afforded to the 

account owner would be $500,000, the 

greater of $500,000 or $325,000.) 

(f) Joint revocable trust accounts. (1) 

Where an account described in 

paragraph (a) of this section is 

established by more than one owner, the 

respective interest of each account 

owner (which shall be deemed equal) 

shall be insured separately, per different 

beneficiary, up to the SMDIA, subject to 

the limitation imposed in paragraph (e) 

of this section. (Example 1: A & B, two 

individuals, establish a payable-ondeath account naming their three nieces 

as beneficiaries. Neither A nor B has any 

other revocable trust accounts at the 

same FDIC-insured institution. The 

maximum coverage afforded to A&B 

would be $600,000, determined by 

multiplying the number of owners (2) 

times the SMDIA (currently $100,000) 

times the number of different 

beneficiaries (3). In this example, A 

would be entitled to revocable trust 

coverage of $300,000 and B would be 

entitled to revocable trust coverage of 

$300,000. Example 2: A and B, two 

individuals, establish a payable-ondeath account naming their two 

children, two cousins and a charity as 

beneficiaries. The balance in the 

account is $700,000. Neither A nor B 

has any other revocable trust accounts at 

the same FDIC-insured institution. The 

maximum coverage would be 

determined (under paragraph (a) of this 

section) by multiplying the number of 

account owners (2) times the number of 

different beneficiaries (5) times 

$100,000, or $1 million. Because the 

account balance is less than the 

maximum coverage amount, the account 

would be fully insured. Example 3: A 

and B, two individuals, establish a 

living trust account with a balance of 

$1.5 million. Under the terms of the 

trust, upon the death of both A & B, 

each of A & B’s three children is entitled 

to $200,000, B’s cousin is entitled to 

$150,000, A’s friend is entitled to 


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56712 Federal Register / Vol. 73, No. 190 / Tuesday, September 30, 2008 / Rules and Regulations 

$30,000 and the remaining amount 

($720,000) goes to a charity. Under 

paragraph (e) of this section, the 

maximum coverage, as to each joint 

account owner, would be the greater of 

$500,000 or the aggregate amount (as to 

each joint owner) of the interest of each 

different beneficiary named in the trust, 

to a limit of $100,000 per account owner 

per beneficiary. The beneficial interests 

in the trust considered for purposes of 

determining coverage for account owner 

A are: $300,000 for the children (three 

times $100,000), $75,000 for the cousin, 

$15,000 for the friend and $100,000 for 

the charity ($360,000 subject to the 

$100,000 per-beneficiary limitation). As 

to A, the aggregate amount of the 

beneficial interests eligible for deposit 

insurance coverage, thus, is $490,000. 

Hence, the maximum coverage afforded 

to joint account owner A would be 

$500,000, the greater of $500,000 or 

$490,000 (the aggregate of all the 

beneficial interests attributable to A, 

limited to $100,000 per beneficiary). 

The same analysis and coverage 

determination also would apply to B. 

(2) Notwithstanding paragraph (f)(1) 

of this section, where the owners of a 

joint revocable trust account are 

themselves the sole beneficiaries of the 

corresponding trust, the account shall 

be insured as a joint account under 

section 330.9 and shall not be insured 

under the provisions of this section. 

(Example: If A and B establish a 

payable-on-death account naming 

themselves as the sole beneficiaries of 

the account, the account will be insured 

as a joint account because the account 

does not satisfy the intent requirement 

(under paragraph (a) of this section) that 

the funds in the account belong to the 

named beneficiaries upon the owners’ 

death. The beneficiaries are in fact the 

actual owners of the funds during the 

account owners’ lifetimes.) 

(g) For deposit accounts held in 

connection with a living trust that 

provides for a life-estate interest for 

designated beneficiaries, the FDIC shall 

value each such life estate interest as the 

SMDIA for purposes of determining the 

insurance coverage available to the 

account owner. 

(h) Revocable trusts that become 

irrevocable trusts. Notwithstanding the 

provisions in section 330.13 on the 

insurance coverage of irrevocable trust 

accounts, a revocable trust account shall 

continue to be insured under the 

provisions of this section even if the 

corresponding revocable trust, upon the 

death of one or more of the owners 

thereof, converts, in part or entirely, to 

an irrevocable trust. (Example: Assume 

A and B have a trust account in 

connection with a living trust, of which 

they are joint grantors. If upon the death 

of either A or B the trust transforms into 

an irrevocable trust as to the deceased 

grantor’s ownership in the trust, the 

account will continue to be insured 

under the provisions of this section.) 

(i) This section shall be effective as of 

September 26, 2008 for all existing and 

future revocable trust accounts and for 

existing and future irrevocable trust 

accounts resulting from formal 

revocable trust accounts. 

Dated at Washington DC, this 26th day of 

September 2008. 

By order of the Board of Directors. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

[FR Doc. E8–23058 Filed 9–26–08; 4:15 pm] 

BILLING CODE 6714–01–P 

FEDERAL HOUSING FINANCE BOARD 

12 CFR Part 906 

FEDERAL HOUSING FINANCE 

AGENCY 

12 CFR Part 1206 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

Office of Federal Housing Enterprise 

Oversight 

12 CFR Part 1701 

RIN 2590–AA00 

Assessments 

AGENCIES: Federal Housing Finance 

Board; Office of Federal Housing 

Enterprise Oversight; Federal Housing 

Finance Agency. 

ACTION: Final rule. 

SUMMARY: The Federal Housing Finance 

Board, Office of Federal Housing 

Enterprise Oversight and Federal 

Housing Finance Agency (FHFA) are 

establishing policy and procedures for 

the FHFA to impose assessments on the 

Federal National Mortgage Association 

(Fannie Mae), Federal Home Loan 

Mortgage Corporation (Freddie Mac), 

and Federal Home Loan Banks (Banks) 

(collectively, Regulated Entities), 

through a final rule, pursuant to 12 

U.S.C. 4516. 

DATES: The final rule will become 

effective on September 30, 2008. 

FOR FURTHER INFORMATION CONTACT: 

Frank Wright, Senior Counsel (OFHEO), 

(202) 414–6439; Mark Kinsey, Chief 

Financial Officer (OFHEO), (202) 414– 

3816; Michele Horowitz, Chief Financial 

Officer (FHFB), (202) 408–2878; Janice 

A. Kaye, Associate General Counsel 

(FHFB), (202) 408–2505 (not toll free 

numbers), Fourth Floor, 1700 G Street, 

NW., Washington DC 20552. The 

telephone number for the 

Telecommunications Device for the Deaf 

is (800) 877–8339. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On July 30, 2008, the President signed 

the Federal Housing Finance Regulatory 

Reform Act of 2008 (Act) (Pub. L. 110– 

289, 122 Stat. 2564). Among other 

things, the Act transferred the 

supervisory and oversight 

responsibilities over the Banks, Fannie 

Mae, and Freddie Mac to a new 

independent executive branch agency 

known as the Federal Housing Finance 

Agency. To fund the operations of the 

FHFA, the Act amended section 1316 of 

the Federal Housing Enterprises 

Financial Safety and Soundness Act of 

1992 (Safety and Soundness Act), 

codified at 12 U.S.C. 4516. The Act also 

removed the provisions of section 38 of 

the Federal Home Loan Bank Act, which 

were codified at 12 U.S.C. 1438(b), that 

had authorized the Federal Housing 

Finance Board (FHFB) to impose 

assessments on the Banks in an amount 

sufficient to provide for the payment of 

the FHFB’s estimated expenses for the 

period covered by the assessment. This 

final rule will implement the FHFA’s 

authority to establish and collect 

assessments from the Regulated Entities 

and will also remove the regulatory 

provisions that had implemented the 

authority of the Office of Federal 

Housing Enterprise Oversight (OFHEO) 

to assess Fannie Mae and Freddie Mac 

(12 CFR part 1701) and the authority of 

the FHFB to assess the Banks (12 CFR 

906.1–2). 

II. Analysis of the Final Rule 

In accordance with section 1316A of 

the Act, part 1206 of the final rule 

authorizes the FHFA to impose 

assessments on the Regulated Entities to 

pay its estimated costs and expenses. 

See 12 U.S.C. 4516. The rule recognizes 

and addresses the differences between 

the Banks and the Enterprises, where 

appropriate. 

The final rule authorizes the FHFA to 

establish annual assessments for the 

Regulated Entities to provide for the 

payment of the FHFA’s costs and 

expenses and maintain a working 

capital fund. The final rule provides for 

the allocation of the annual assessments 

between the Enterprises and the Banks, 

with the Enterprises paying 

proportional shares sufficient to provide 

for payment of the costs and expenses 


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