Get Free Insurance on Your Bank Account Using a Trust

On April 1, 2024 the regulations will be changing for FDIC banking insurance in regard to your trust. The new regulations are designed to simplify insurance coverage on bank accounts held in the name of a trust. Along with a reduced number of insurance rules, there will be a less complex system where using the same insurance calculation both for revocable trusts and irrevocable trusts.    

So, How Does This Apply To Me?

As many of our clients age, they decide that they want their life savings to be in a bank or CD, rather than in investments. The risks are too high, and they don’t have years of time to ride out the changes in the market. 

This can present a challenge, as the money you have saved over a lifetime can sometimes add up to quite a significant amount, and if the banking institution fails, you don’t want to risk losing a large portion of your savings. Banking insurance through the FDIC (Federal Deposit Insurance Corporation) is limited to $250,000. You can always split your wealth between many different banks in increments of $250,000 in each bank, but this can be confusing and is probably less than ideal. If you desire to keep your money at a single bank, you may be able to receive significantly more insurance coverage by using a trust for your estate planning. 

What Do The Rules Say?

According to the new regulations, a trust account can receive up to $250,000 in FDIC insurance per eligible primary beneficiary, with a maximum of five beneficiaries. In short, this can increase an individual’s trust bank account insurance coverage up to $1.25 million, assuming that individual has five beneficiaries to name. These new, simpler rules apply to both revocable and irrevocable trusts. This is really good news, because a revocable trust can become irrevocable at the time of death, making the old rules confusing and difficult to understand. You no longer have to worry that, in the event that the bank fails right after your death, your beneficiaries could lose a large portion of their inheritance because the rules suddenly changed. 

What Do I Do Next? Contact a Qualified Estate Planning Lawyer

With interest rates as high as 5% on a CD, many people are interested in leaving their wealth in the hands of a banking institution to receive a risk-free 5% growth. We don’t provide legal advice on this blog, so If you are interested in exploring your options, we recommend that you contact a qualified estate planning attorney and ask them if placing your assets into a trust would be the best planning move for you. A trust can provide so many protections for your assets, with free banking insurance being one of them. 

To listen to our full podcast about FDIC Banking Insurance, click here

Note: These regulations apply only to banks, not to credit unions or brokerages.