FDIC Insurance

Question 1

What types of accounts are covered under FDIC insurance?

Answer 1

Deposits in insured institutions, including deposits in foreign currencies, regardless if the accountholder is a US citizen or resident or not.

Question 2

What is the amount of FDIC insurance coverage?

Answer 2

$250,000.

Question 3

What account types are recognized by FDIC for insurance coverage?

Answer 3

• single
• joint
• revocable trust
• irrevocable trust
• employee benefit plan
• self-directed retirement account
• corporation, partnership, and unincorporated association accounts
• government accounts

Question 4

What does it mean when an account has “pass through” insurance coverage under FDIC?

Answer 4

Deposit insurance that passes through one or more types of intermediaries - including agents, nominees, and custodians – that have established a deposit account at the bank, as well as any additional levels of intermediaries, to the ultimate owner of the deposit account.

Question 5

The death of a depositor will not affect insurance coverage for __ _____ following the owner’s death unless the deposit account is restructured.

Answer 5

6 months

Question 6

If insured institutions merge, separate insurance of deposits continues for __ ____ after the date of the merger. CDs will continue to be insured separately until the first renewal that occurs __ ____ after the merger date.

Answer 6

6 months

6 months

Question 7

What is SMDIA?

Answer 7

Standard maximum deposit insurance amount

Question 8

How do sole proprietor accounts receive insurance coverage?

Answer 8

They will be treated as a single-account ownership.

Question 9

How do funds owned by an individual in a revocable trust account with beneficiaries receive insurance coverage?

Answer 9

They will be insured up to the total number of different beneficiaries multiplied by the SMDIA (as long as each beneficiary has an equal share in the account).

Question 10

In order for revocable trusts to receive insurance coverage based on the beneficiary designations, how must the account be titled?

Answer 10

The titling of the account must reflect the owner’s intention that upon his/her death, the funds int he account pass directly to the named beneficiaries.

For informal trusts, POD, ITF, ATF
For formal trusts, “living trust,” “family trust” or similar.

Question 11

Does a beneficiary have to be a natural person to receive FDIC insurance coverage?

Answer 11

No, it may be a natural person, charitable institution or other nonprofit entity.

Question 12

What is the special rule for accounts with more than 5 times the SMDIA and more than 5 beneficiaries? What accounts does this apply to?

Answer 12

If an account balance is greater than $1.25 million and has more than 5 beneficiaries, the insurance will be limited to the greater of 5x the SMDIA or the aggregate amount of the interests of each beneficiary on the account, limited to the amount of the SMDIA for each beneficiary.

This rule applies to revocable trust accounts only.

Question 13

Where the owners of a revocable trust account are themselves the sole beneficiaries, the account will be insured as a ______ account.

Answer 13

joint

Question 14

Account Owner “A” has a payable-on-death account naming his niece and cousin as beneficiaries, and A also has, at the same FDIC-insured institution, another payable-on-death account naming the same niece and a friend as beneficiaries. What is the maximum insurance coverage available to the account owner?

Answer 14

The maximum coverage available to the account owner would be $750,000. This is because the account owner has named only three different beneficiaries in the revocable trust accounts–his niece and cousin in the first, and the same niece and a friend in the second. 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.)

Question 15

Account Owner “A” establishes a living trust account, with a balance of $300,000, naming his two children “B” and “C” as beneficiaries. A also establishes, at the same FDIC-insured institution, a payable-on-death account, with a balance of $300,000, also naming his children B and C as beneficiaries. What is the maximum insurance coverage available for the account owner?

Answer 15

The maximum coverage available to A is $500,000, determined by multiplying 2 times $250,000 (the number of different beneficiaries times the SMDIA). A is uninsured in the amount of $100,000. This is because all funds that a depositor holds in both living trust accounts and payable-on-death accounts, at the same FDIC-insured institution and naming the same beneficiaries, are aggregated for insurance purposes and insured to the applicable coverage limits.)

Question 16

Account Owner “A” has a living trust account with a balance of $1,500,000. Under the terms of the trust, upon A’s death, A’s three children are each entitled to $125,000, A’s friend is entitled to $15,000, and a designated charity is entitled to $175,000. The trust also provides that the remainder of the trust assets shall belong to A’s spouse. What is the maximum insurance coverage available to the account owner?

Answer 16

In this case, because the balance of the account exceeds $1,250,000 (5 times the SMDIA) and there are more than five different beneficiaries named in the trust, the maximum coverage available to A would be the greater of: $1,250,000 or the aggregate of each different beneficiary’s interest to a limit of $250,000 per beneficiary. The beneficial interests in the trust for purposes of determining coverage are: $125,000 for each of the children (totaling $375,000), $15,000 for the friend, $175,000 for the charity, and $250,000 for the spouse (because the spouse’s $935,000 is subject to the $250,000 per-beneficiary limitation). The aggregate beneficial interests total $815,000. Thus, the maximum coverage afforded to the account owner would be $1,250,000, the greater of $1,250,000 or $815,000.)

Question 17

A and B, two individuals, establish a payable-on-death account naming their three nieces as beneficiaries. Neither A nor B has any other revocable trust accounts at the same FDIC-insured institution. What is the maximum insurance coverage available for the account holders?

Answer 17

The maximum coverage afforded to A and B would be $1,500,000, determined by multiplying the number of owners (2) times the SMDIA ($250,000) times the number of different beneficiaries.

Question 18

Funds held by a fiduciary, agent, and so forth for 2 or more persons will be considered to be a _____ account for the two principals.

Answer 18

joint

Question 19

For accounts held by government depositors, how will US accounts be insured?

Answer 19

Time, savings, and demand deposit accounts will be insured separately up to the SMDIA.

Question 20

How will deposit accounts held by government depositors outside the state/territory be insured?

Answer 20

Funds will be aggregated and insured up tot he SMDIA.

Question 21

Timothy Edwards inherited some money from his father and decided to put the funds in several accounts at First National Bank. Timothy has an individual savings account with a balance of $1,400,000. He and his wife, Sylvia, have a savings account with a balance of $750,000. They also have a joint NOW account with a balance of $280,000. In addition, they have the following trust accounts for their children, John and Suzanne: Timothy, trustee for John (balance $195,000); Timothy, trustee for Suzanne (balance $195,000); Sylvia, trustee for John (balance $120,000); Sylvia, trustee for Suzanne (balance $120,000). What is the total balance in the accounts of this family that is covered by deposit insurance, assuming a SMDIA of $250,000?

a. $1,380,000
b. $1,660,000
c. $1,130,000
d. $1,140,000

Answer 21

a. $1,380,000

The individual savings account owned by Timothy is covered as a single ownership account. $250,000 of it is insured. The savings account and NOW account are joint ownership account and is separately insured, but only for a total of $250,000 for each owner. The rest is uninsured The other trust accounts would be insured for the full balances since each person presumably owns a half interest and each half interest is less than $250,000.

Question 22

When maintaining an account involving a fiduciary, what must be done with the evidence of the fiduciary relationship?

a. It may be kept by the depositor in his or her records at home or at his or her place of business.
b. It must be expressly disclosed in the deposit account records.
c. It may be maintained by the depositor or the bank as long as the records are clear.
d. It must be forwarded to the FDIC at the time of account opening.

Answer 22

b. It must be expressly disclosed in the deposit account records.

Question 23

Consider the following deposit balance information: Account Name	Deposit Balance 
Ann Jones	$50,000 
Ann Jones	$50,000 
Jim Smith and Ann Jones	$50,000 
Jim Smith	$75,000 
Ann Jones: Agent for Jim Smith	$75,000 
Ann Jones and Jim Smith	$100,000 
TOTAL	$400,000 

How much of the $400,000 is FDIC insured if the SMDIA is $250,000?

a. $275,000
b. $325,000
c. $350,000
d. $400,000

Answer 23

d. $400,000

SMDIA is $100,000 Accounts Ann Jones $50,000 Ann Jones $50,000 Jim Smith and Ann Jones $50,000 Jim Smith $75,000 Ann Jones: Agent for Jim Smith $75,000 Ann Jones and Jim Smith $100,000 TOTAL $400,000 Total of balances in Ann Jones individual accounts—$100,000 Total insured—$100,000 Total of balances in Ann Jones and Jim Smith joint accounts—$150,000; assume that each has a one-half interest ($75,000 each)—total of $150,000 insured. Total of balances in individual accounts for Jim Smith—$75,000 in account styled ‘‘Jim Smith,’’ and $75,000 in account styled ‘‘Ann Jones, Agent for Jim Smith,’’ all are counted as individual accounts—total balances are $150,000; total insured: $150,000 Total insured balances: $400,000

Question 24

Assuming that the following are interest-bearing accounts at First National Bank and the SMDIA is $250,000:

Accounts	Balances
Jim	   $300,000	
Fred	   $350,000
Jim and Fred	$180,000
Fred and Jim	$160,000
Susan and Jim	$200,000

How much of Fred’s money is covered by deposit insurance?

a. $520,000
b. $420,000
c. $350,000
d. $170,000

Answer 24

b. $420,000

Under the SMDIA $250,000 limit, Fred’s single ownership account is insured to $250,000.The remaining $100,000 is uninsured. His one-half interest in the $180,000 joint account and his one-half interest in the $160,000 joint account are fully insured.

Question 25

Assuming that the following are interest-bearing accounts at First National Bank and the SMDIA is $250,000:

Accounts	Balances
Jim	   $300,000	
Fred	   $350,000
Jim and Fred	$180,000
Fred and Jim	$160,000
Susan and Jim	$200,000

How much of Jim’s money is covered by deposit insurance?

a. $500,000
b. $530,000
c. $570,000
d. $590,000

Answer 25

a. $500,000

Jim’s single ownership account is insured separately for the $250,000. His one-half interest in each of the three joint accounts is aggregated and limited to $250,000. Therefore, his joint account balance of $270,000 is insured for $250,000 and $20,000 is uninsured.

Question 26

ABC Bank failed with the following accounts for Natalie Nguyen on its books:
• A certificate of deposit in the name of Natalie Nguyen with a principal balance of $225,000 and accrued interest of $5,000
• A savings account in the name of Natalie and her mother Sheila with a balance of $600,000
• An IRA for the benefit of Natalie with a balance of $350,000
• An account styled Natalie Nguyen payable on death to Monica Williams (Natalie’s best friend) with a balance of $200,000

If the SMDIA is $250,000, how much of Natalie’s money is insured?

a. $980,000
b. $930,000
c. $750,000
d. $830,000

Answer 26

b. $930,000

RETIREMENT ACCOUNTS ARE INSURED SEPARATELY!

Natalie’s certificate of deposit is a single ownership account and is insured for the full principal balance of $225,000. The interest also is insured because adding it will not make the account over the SMDIA limit. Natalie’s interest in the joint account with her mother will be insured up to the SMDIA limit of $250,000. Her remaining $50,000 interest will be uninsured. The IRA is insured up to the limit of the SMDIA. $100,000 of the IRA is uninsured. The account that is payable on death account to her friend Monica is fully insured.

Question 27

Consider the following deposit balance information: Account Name	Deposit Balance 
Ann Jones	$150,000 
Ann Jones	$250,000 
Jim Smith and Ann Jones	$250,000 
Jim Smith	$175,000 
Ann Jones: Agent for Jim Smith	$475,000 
Ann Jones and Jim Smith	$300,000 
TOTAL	$1,600,000 

How much of the $1,600,000 is FDIC insured if the SMDIA is $250,000?

a. $725,000
b. $750,000
c. $1,000,000
d. $1,600,000

Answer 27

c. $1,000,000

Accounts Ann Jones $150,000 Ann Jones $250,000 Jim Smith and Ann Jones $250,000 Jim Smith $175,000 Ann Jones: Agent for Jim Smith $475,000 Ann Jones and Jim Smith $300,000 TOTAL $1,600,000 Total of balances in Ann Jones individual accounts—$400,000 Total insured: $250,000 Total of balances in Ann Jones and Jim Smith joint accounts $550,000; assume that each has a one-half interest ($275,000 each)—total of $500,000 insured Total of balances in individual accounts for Jim Smith—$175,000 in account styled ‘‘Jim Smith,’’ and $475,000 in account styled ‘‘Ann Jones, Agent for Jim Smith,’’ all are counted as individual account—total balances are $650,000; total insured: $250,000 Total insured balances: $1,000,000

Question 28

Assuming that the following are interest-bearing accounts at First National Bank and the SMDIA is $250,000:

Accounts	Balances
Jim	$250,000	
Fred	$350,000	
Susan and Jim $300,000
Jim and Fred	$180,000
Fred and Jim	$160,000

How much of Jim’s money is covered by deposit insurance?

a. $890,000
b. $640,000
c. $570,000
d. $500,000

Answer 28

d. $500,000

Under the SMDIA $250,000 limit, Jim’s single ownership account is insured separately for the $250,000. His one-half interest in each of the three joint accounts is aggregated and limited to $250,000. Therefore, his joint account balance of $320,000 is insured for $250,000 and $70,000 is uninsured.

Question 29

ABC Bank failed with the following accounts for Fred Jones on its books:
• A certificate of deposit in the name of Fred Jones with a principal balance of $250,000 and accrued interest of $6,250
• An account for Fred Jones, for which Mr. Jones has now provided documentation showing that he opened the account as a payable-on-death account for his son; the account has a balance of $1,250,000
• An IRA for the benefit of Fred Jones with a balance of $250,000 • An account styled “Fred Jones, trustee for Nancy Jones and Roger Wilson” with a balance of $200,000; Nancy is Fred’s daughter, Roger is Fred’s brother
If the SMDIA is $250,000, how much of Fred’s money is insured?

a. $950,000
b. $750,000
c. $700,000
d. $500,000

Answer 29

c. $700,000

Fred’s certificate of deposit is a single ownership account and is insured for the full principal balance of $250,000. The interest is not insurable because it would put the account over the $250,000 limit. The account that Fred now claims was a revocable trust would be considered a single ownership account and would be aggregated with the certificate of deposit for purposes of determining the application of deposit insurance. The FDIC will rely only on the bank records in this case. The intention to make the account a revocable trust must be reflected on the records of the account. The IRA is fully insured. The revocable trust account for Fred’s daughter and brother is fully insured because both beneficiaries are eligible to be covered.

Question 30

Assuming that the following are interest-bearing accounts at First National Bank and the SMDIA is $250,000:

Accounts		Balances
Jim	$250,000	
Fred $350,000	
Susan and Jim $300,000
Jim and Fred	$180,000
Fred and Jim	$160,000

How much of Fred’s money is covered by deposit insurance?

a. $420,000
b. $500,000
c. $350,000
d. $340,000

Answer 30

a. $420,000

Under the SMDIA $250,000 limit, Fred’s single ownership account is insured to $250,000.The remaining $100,000 is uninsured. His one-half interest in the $180,000 joint account and his one-half interest in the $160,000 joint account are fully insured.

Question 31

Where must the FDIC plaque be placed?

Answer 31

Anywhere where insured deposits are received and deposited.