• 27
  • July
    2010

Florida estate planning attorneys have been hearing a joke lately that there's a new version of "Friday Night Lights," but it's not about high school football in Texas. The Federal Deposit Insurance Corporation has been turning out the lights on banks around the country, and usually on Friday nights.

Take Friday, July 16, as an example: The FDIC closed three banks in Florida, two in South Carolina, and one in Michigan. That makes 96 FDIC-insured banks closed in 2010. That puts FDIC bank closings on track to top the 140 that were shuttered in 2009.

One amazing aspect of the bank closures is that some of the banks closed have reported millions of dollars in uninsured deposits. The limits on FDIC insurance are very straightforward, but apparently it happens that some people do not pay attention to them.

A living trust is one way to extend FDIC coverage. Let's look at how:

First, it is important to note that Congress recently expanded FDIC deposit insurance coverage from $100,000 to $250,000 per insured account. Depositors who have more than $250,000 to deposit will typically use more than one bank, since the limit is $250,000 per depositor per bank.

There are ways, though, to increase coverage without spreading deposits among numerous banks. One of the best ways is to use what the FDIC calls testamentary or payable-on-death accounts. If a depositor uses a living trust or makes a payable-on-death (POD) beneficiary designation on bank accounts, the FDIC coverage becomes $250,000 per beneficiary. Certain requirements must be met, however:

  1. The beneficiary must be the account holder's spouse, child, grandchild, parent, or sibling.
  2. The account title must indicate the trust relationship by using terms such as payable on death, in trust for, trust, living trust, family trust, or POD or ITF.
  3. For POD accounts, each beneficiary must be identified by name.

The FDIC has a helpful interactive tool at fdic.gov to help you calculate your FDIC coverage.