Children not directly named in living trust: still designated beneficiaries for FDIC?

What is the name of your state (only U.S. law)? CA

My wife and I have an A/B/QTIP trust, with the intent that our two grown sons would be the primary beneficiaries when we are both deceased. My specific question concerns FDIC coverage for accounts registered to the trust. Our sons are not directly named as beneficiaries in the trust. The specific language is: “The Trustee shall divide the Exempt and Non-Exempt Family Trusts, augmented as set forth above, into as many equal shares as there are children of the Trustors’ then living and deceased children of the Trustors leaving issue then surviving. One (1) such share shall be allocated to each then living child…”

So, the specific question is: do we have FDIC coverage equal to that which would occur if our two sons were named directly?What is the name of your state (only U.S. law)?

you need to go the institution that has these accounts registered to the trust, and ask them.

in my experience, the banks want you to fill in their own forms, and list the beneficiaries on these forms. you then will get the full insurance.

i dont know how much money you are talking about, but the other thing you could do is simply limit the amount at any one institution to the limit amount. and then you dont have to worry about it.

if you have 10 million, it would be a bit cumbersome having 100 different institutions. but if you have a more typical amount, this might be the best plan.

The recent changes to the FDIC very much involve trusts. However, I believe the new definitions require a named beneficiary for the enhanced protection. Without that I would suspect the rule will remain proportional to all beneficiaries and not full protection (to FDIC limits) to each. (I don't believe contingent beneficiaries get any protection. Their portion is not protected until it is irrevocable.)

If you are going to call and ask someone, I suggest you don't call a person who stands to gain from keeping the money in his bank. Contact the FDIC or go to their website. The new rules are sure to be posted there.

Here is a link to an FDIC FIL-99-2008:

FDIC: FIL-99-2008: Changes to FDIC Deposit Insurance Rules for Revocable Trust Accounts

In addition, the FDIC reminds insured institutions that the rules for coverage of informal revocable trust (payable on death) accounts require that the names of all trust beneficiaries be disclosed in the institution's account records. The FDIC also encourages bank customers to make certain that the names of living trust beneficiaries are included in the bank's account records.

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Keep in mind that there is the remote possibility that only one beneficiary will succeed to your trust estate. For example, what if you, your spouse and one of your children died in a traffic accident, and the next day, the bank failed? I believe this would mean that the FDIC would only guarantee the amount for one individual (your remaining child).

If you crave a federal guarantee, there are many banks available under the CDARS's program and bankrate, and if you run out, the U.S. Treasury itself, that would be happy to borrow your $$$. So, I think a trustee should think twice before exceeding the FDIC limit for an individual.

hi anteater,

that has been my experience with banks. they want the actual names of the beneficiaries in their records, before one gets full insurance per beneficiary.

hi tranquility,

my experience with the fdic is that they want to send out a booklet and tell you to go ask the bank your specific questions. i agree that there may be some bias on the bank's part, though. a bit of a catch-22, which is the reason i would solve it the way i said - DIFFERENT INSTITUTIONS.

My experience with bankers are that they are overpaid idiots who wouldn't know reality from bank policy if it bit them in the a...

I would not rely on them for an opinion for anything beyond how the bank would handle something. Even then I would be sure the bank has the ability to do as they claim.

ha ha - lots of laughs on that one.