With all of the uncertainty on Wall Street recently, many of our clients whose bank accounts are held in their Revocable Living Trusts are concerned about whether their assets are protected, and to what extent.

According to the FDIC, accounts owned by a Revocable Living Trust are indeed insured.  To what extent they are insured depends on who your beneficiaries are and when they become entitled to their interest.

The owner of a living trust account would be insured up to $100,000 per beneficiary if all of the following requirements are met:

The beneficiary must be the owner’s spouse, child, grandchild, parent or sibling. Stepparents and stepchildren, adopted children and similar relationships also qualify. In-laws, cousins, nieces and nephews, friends, and charitable organizations do not qualify.

The beneficiary must become entitled to his or her interest in the trust when the owner dies — coverage would be based on the beneficiaries who meet this requirement at the time the bank fails. Example: A living trust names an owner’s three children as beneficiaries but states that each beneficiary’s share will pass to the beneficiary’s children if the beneficiary dies before the owner. Assuming all three children are alive at the time the bank fails, only the children — not the grandchildren — would be beneficiaries for insurance purposes. (That’s because the grandchildren are not entitled to any trust assets while their parent is alive.) Coverage up to $300,000 ($100,000 per beneficiary) would be available on the trust’s deposit accounts.

The account title at the bank must indicate that the account is held by a living trust. This rule can be met by using the terms “living trust” or “family trust” in the account title.

If you have any concerns about how your account is titled and whether you are covered, please call our office for more information.

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