Guest column by Financial Federal's Colley: Ensure your deposits are insured

Published on: November 5, 2018

MEMPHIS BUSINESS JOURNAL

By Ean Colley, Financial Federal Bank

The FDIC (Federal Deposit Insurance Corp.) protects depositors of insured U.S. banks against the loss of their deposits in the case that an insured bank fails.

The FDIC covers core deposit accounts from checking and savings to money market deposits and CDs (certificates of deposit). Any person or entity is automatically granted access to FDIC insurance, which covers depositors’ accounts dollar-for-dollar up to a standard limit of $250,000 per depositor, per insured bank.

But, did you know that if your deposit account holds more than $250,000, there may be ways to extend your coverage at no cost?

Many deposit accounts over $250,000, especially CDs, are not fully covered. But, they could be through a variety of elections, an estimate of which is available through an interactive calculator online at FDIC.gov or with your banking deposit specialist.

For example, a joint account is a deposit owned by two or more people. FDIC insurance covers joint accounts owned in any manner that conforms to state law.

All co-owners — whether spouses, siblings or business partners — must be living people and have equal rights to withdraw deposits from the account.

There is no kinship requirement for joint account coverage, and the balance of a joint account can exceed $250,000 and still be fully insured.

How? For example, if two co-owners jointly both own a $350,000 CD and a $150,000 savings account at the same insured bank, the two accounts can be added together and insured up to $500,000, providing up to $250,000 in insurance coverage for each co-owner.

Additionally, one may add a beneficiaryto a revocable trust, a deposit owned by one or more people who identify one or more beneficiaries who will receive deposits upon the death of the owner. 

A revocable trust — whether a bank agreement signature or a formal living trust — can be revoked, changed or terminated at any time at the discretion of the owners.

An eligible beneficiary must be a living person, a charity or a nonprofit organization qualified by the IRS. When a revocable trust owner names five or fewer beneficiaries to the account, the owner’s trust deposits are insured up to $250,000 for each unique beneficiary.

That means a revocable trust with five unique beneficiaries is up to $1.25 million. Therefore, if one chooses to add his or her two children, one sibling, alma mater, and a local nonprofit, the total FDIC coverage for that account may reach over $1 million.

Since the FDIC’s beginnings in 1934, no depositor has ever lost a penny of their U.S. government-backed insured deposits. Don’t miss out on the opportunity to cover every possible penny of your deposits.