At Extreme Investor Network, we understand that maximizing the safety and security of your finances is crucial. That’s why we want to provide you with the latest updates on FDIC insurance coverage for trust accounts.
If you have more than $250,000 in deposits at a bank, it’s important to make sure that all of your money is insured by the federal government. The Federal Deposit Insurance Corporation (FDIC) recently implemented new requirements for deposit insurance for trust accounts starting on April 1. While the goal is to simplify insurance coverage rules for trust accounts, it may inadvertently push some depositors over FDIC limits.
As the founder of DepositAccounts and a senior industry analyst at LendingTree, Ken Tumin provides insights into these changes. The FDIC was created by Congress after the Great Depression to restore confidence in U.S. banks. Generally, FDIC insurance covers $250,000 per depositor, per bank, in each account ownership category. If you have $250,000 or less deposited in a bank, these new changes will not impact you.
Under the new rules, trust deposits are limited to $1.25 million in FDIC coverage per trust owner per insured depository institution. Each beneficiary of the trust may have a $250,000 insurance limit for up to five beneficiaries. However, if there are more than five beneficiaries, the FDIC coverage limit for the trust account remains $1.25 million.
For those who exceed the $1.25 million limit under the old system, it’s crucial to be aware of these changes. Certain investments, such as certificates of deposit, may face coverage reductions if they were established before the new rules. This could impact investors who do not want to incur penalties for early withdrawal if they exceed the coverage limit.
To mitigate coverage reductions and maximize FDIC protection, depositors have options beyond trust accounts. This includes opening accounts at multiple FDIC-insured banks, utilizing joint accounts for added coverage, or diversifying ownership categories with single and joint accounts.
At Extreme Investor Network, we aim to empower our readers with valuable insights into personal finance. Stay informed about changes in FDIC insurance coverage and explore strategies to safeguard your funds effectively. Trust us to provide you with expert advice and the latest updates on financial security.
