Compliance Blog

On Friday, the FDIC Board met to tweak its insurance rules for revocable trust accounts. 

The FDIC is adopting an interim rule to simplify and modernize its deposit insurance rules for revocable trust accounts. The FDIC’s main goal in implementing these revisions is to make the rules easier to understand and apply, without decreasing coverage currently available for revocable trust account owners. The FDIC believes that the interim rule will result in faster deposit insurance determinations after depository institution closings and will help improve public confidence in the banking system. The interim rule eliminates the concept of qualifying beneficiaries. Also, for account owners with revocable trust accounts totaling no more than $500,000, coverage will be determined without regard to the beneficial interest of each beneficiary in the trust.

Under the new rules, a trust account owner with up to five different beneficiaries named in all his or her revocable trust accounts at one FDIC-insured institution will be insured up to $100,000 per beneficiary. Revocable trust account owners with more than $500,000 and more than five different beneficiaries named in the trust(s) will be insured for the greater of either: $500,000 or the aggregate amount of all the beneficiaries’ interests in the trust(s), limited to $100,000 per beneficiary.

The changes took effect immediately.  Here's a link to the FDIC interim final rule.  Here's a link to a memo created for the FDIC Board on the issue.  And here's the FDIC Financial Institution Letter that also describes the new rule.

 If I were a betting man, I wouldn't be surprised to see similar rules in place for credit unions in the very near future.  When that happens, you'd better be ready to:

1. Train your front-line staff;
2. Update outdated share insurance materials wherever they may be; and
3. Notify your members about the change.