FDIC Changes Deposit Insurance Regulations for Accounts Owned By Trusts

The Federal Deposit Insurance Corporation (FDIC) has approved a new deposit insurance rule that will affect trust accounts beginning April 1, 2024. The new rule is intended to simplify insurance coverage by combining revocable and irrevocable trust accounts into one category and using a single insurance calculation.

We recommend you review your trust accounts to understand how this new rule will affect your coverage. Do not hesitate to reach out to us to set up a time to discuss this rule.

Overview of New Rule for Trust Deposit Accounts

The new rule is intended to streamline insurance coverage for trust accounts by reducing the overall number of trust insurance rules and replacing the current coverage distinctions between revocable and irrevocable trusts with a more unified approach. Key changes include:

• Deposits held in a trust account will be insured up to $250,000 for each trust beneficiary, with a maximum of five beneficiaries. This applies regardless of contingencies or the allocation of funds between the beneficiaries and regardless of whether the trust is revocable or irrevocable.
• This change will result in a maximum deposit insurance coverage of $1.25 million per owner, per insured depository institution.
• The new rule is also designed to expedite deposit insurance determinations in the event of a bank failure by streamlining the review of trust agreements.

For more information about the new rules, please see the FDIC’s website.

Considerations

Though the new rule will extend insurance coverage for many trust owners, it may reduce coverage for those who have deposited more than $1.25 million per owner in trust accounts at one insured institution. Therefore, we highly recommend that you take the time to review your trust accounts and your trust and estate planning documents to understand how you will be affected. If you believe this new rule may impact you, please contact us to discuss your unique situation in more depth.