With all the news about the debt ceiling and the stock market in crisis, it is natural to wonder just how safe is the money we hold in bank accounts.  This question may be particularly important to for trustees and beneficiaries of Trust accounts.

Most of us know that after the Great Depression, the FDIC (Federal Deposit Insurance Corporation) was formed.  It is an independent agency of the United States government that protects bank deposits against the loss if an FDIC-insured bank or savings association fails.  The FDIC insurance is backed by the full faith and credit of the United States government. Since the FDIC’s creation in 1933, no depositor has ever lost even one penny of FDIC-insured deposits.

If you deposit money in an FDIC insured institution you will be covered for up to $250,000 of your deposit. It is important to know that if you have more than $250,000, even if it is in separated accounts it usually won’t be covered.  For instance, if you have a small business account in addition to your personal account at the same bank, and you have more than $250,000 cumulative in both accounts. Watch out!  You are not covered.

You can have more than $250,000 at one insured bank or savings association and still be fully insured provided the accounts meet certain requirements.  For instance, if you have a joint account then each person listed on the account can have $250,000. This is where living revocable trusts fit in.   A living revocable trust account at an FDIC insured bank   can have more than $250,000 as long as it has more than one beneficiary.  Each named beneficiary in the living revocable trust is insured up to $250,000 subject to specific limitations and requirements.