Your Revocable Trust May Increase Your FDIC Insurance Coverage Beyond $250,000

By Libby Banks, The Law Office of Libby Banks, PLLC

The banking industry is under fire again, with many people worried about bank failures, wondering about their own bank’s health, and their own vulnerability to losses. The FDIC insures deposits – but only up to $250,000 per deposit at each bank. If your account at a bank is over $250,000, or if you have CDs and multiple accounts exceeding $250,000, you would only be covered up to that $250,000 amount.

But wait! Your revocable living trust might help by increasing your coverage. We generally recommend that our clients who have created a revocable trust change their bank accounts and other bank deposits and products over to the name of the trust. The FDIC recognizes these accounts as held in a trust relationship and calls these trusts formal revocable trusts. The trust, as owner of these accounts, is insured for up to $250,000 for each beneficiary of the trust, as long as the beneficiaries are individuals or qualified charitable or non-profit organizations. Beneficiaries are identified in the trust, and language such as “to my descendants” is sufficient – as long as the number and names of the beneficiaries can be determined.

The FDIC examples included in its brochure, includes a depositor with a trust account who has identified five unique beneficiaries. The FDIC coverage of $250,000 per account is increased to $1,250,000 for that depositor. Quite a difference! With increased FDIC coverage using the trust, you can consolidate your bank accounts. It makes managing your accounts during your lifetime easier, which in turn also makes it easier for your successor trustee when they step in.

The revocable living trust is the foundation for most estate plans prepared in my office. The trust reduces expenses and provides for a smoother administration of your estate. It not only avoids the time and expense of a probate action at your death, but it also avoids court proceedings if you are incapacitated. It’s also easy for you to use. My clients notice very little difference in how they handle their finances once they have the trust in place and their assets titled in their names as trustees.

For bank accounts, you still can deposit checks made to your name, withdraw money, and write checks. You won’t notice any difference from an account in your name, or a joint account with your spouse. With the additional FDIC insurance coverage, the revocable trust provides great peace of mind.

If you have questions about whether a trust is right for you, or if you have a trust you think might need updating, I offer a free initial consultation to discuss your specific situation and talk about the trust and how it might work for you. To book your appointment, call my office at 602-375-6752. Please visit our website for more information on trusts and other estate planning: libbybanks.com.

For more information on FDIC insurance coverage, you can access the FDIC brochure online at https://tinyurl.com/ FDICtrust.

Our Estate Planning in Phoenix and Scottsdale is highly customized to meet your unique family situation, assets, values, and personal goals. Our complimentary first meeting allows you to get to know our Estate Planning team and talk about your unique situation and what plan will best fit your needs.

Remember, when you choose us you are not only hiring someone to prepare your Estate Plan, you are choosing a seasoned Estate Planning attorney to guide you through this often complex process and raise questions you might not have considered. You are choosing an experienced team to create a plan that serves your family in the way that you want and, after you are gone, a trusted advisor that your loved ones can depend on.

Come see us in our new, convenient office located just down the street at 5010 E. Shea Blvd, Suite 205 Scottsdale, AZ 85254 602.375.6752 | www.libbybanks.com | libby@libbybanks.com