With the news of the problems being experienced by Silicon Valley Bank and Signature Bank dominating today’s headlines, maximizing the FDIC insurance coverage available for high value bank accounts is an issue that undoubtedly is top of mind for high-net-worth individuals, fiduciaries of trusts and estates, and corporate CFO’s alike.
As a general matter, the Federal Deposit Insurance Corporation (FDIC) protects bank deposits up to $250,000 per depositor for each qualifying account ownership category. This insurance extends to the money deposited in checking, savings, money market, CD, and retirement accounts at insured banks.
The trickier question is, what can you do to protect deposits that exceed the standard FDIC insurance amount of $250,000 per depositor?
If your deposit balance is higher than your current FDIC insurance coverage amount, consider these strategies to maximize your coverage:
Open accounts at multiple financial institutions that are FDIC-insured.
- The FDIC’s insurance coverage extends to the same depositor at each insured bank.
Open a single account for each adult family member.
- If you and your spouse or partner each have a single account insured up to $250,000, together, you’ll have a total of $500,000 coverage.
Pool your money into joint accounts.
- Joint accounts are insured separately from accounts in other ownership categories, up to a total of $250,000 per owner. This means you and your spouse can get another $500,000 of FDIC insurance coverage by opening a joint account in addition to your single accounts.
- Adding another joint account owner — such as a parent — adds another $250,000 in coverage, and so on.
Open accounts for your children.
- You may be able to get an additional $250,000 of coverage for your family by opening a custodial account (also known as a Uniform Transfers to Minors Act or Uniform Gift to Minors Act account) in a minor’s name.
- For insurance purposes, the FDIC treats these as single accounts owned by the minor.
- Note, however, that the minor will have complete control over the account upon attaining the age of majority (so a formal trust may be more desirable depending upon the circumstances).
Create a retirement account.
- Individual Retirement Accounts (IRAs) are insured up to $250,000.
Add beneficiaries to your accounts.
- You can increase your FDIC insurance coverage by creating a payable-on-death account (also known as an informal trust, in-trust-for, or Totten Trust account) or titling an account in the name of a formal trust.
- For these account types, each unique beneficiary adds $250,000 of coverage up to FDIC limits.
- For example, a payable-on-death account with 1 owner and 5 beneficiaries could be insured up to $1,250,000.
If you have specific questions about FDIC insurance and how to maximize the amount of available coverage, please contact Paul S. Doherty, III, Esq. at pdoherty@hdrbb.com, Kurt Hartmann at khartmann@hdrbb.com, or Naim D. Bulbulia at nbulbulia@hdrbb.com, or call 201.441.9056.
