PROTECTING YOUR ASSETS IN UNCERTAIN TIMES
Understanding FDIC Insurance
The failure of banks and other financial institutions has become a credible risk in these uncertain times. Understanding the limits of FDIC insurance can help you better protect your assets.
Many believe the insurance coverage limit is on a per-account basis. This is not the case. Insurance coverage is based on ownership type. There are eight ownership types: single, joint, corporation/partnership, retirement, employee benefit, revocable trust, irrevocable trust, and government. The balances of all of the accounts in one ownership type are combined and are insured to the applicable limit:
Single - $250,000*
Joint - $250,000 per owner, provided all owners share equal interest
Corporation/Partnership** - $250,000
Retirement*** - $250,000
*On January 1, 2010, the standard coverage limit will return to $100,000 for all deposit categories except IRAs and Certain Retirement Accounts, which will continue to be insured up to $250,000 per owner
**Sole proprietorships using the owner's social security number are considered a single account and will be pooled with the individual's other single accounts.
***Only includes certain retirement accounts, consult a professional to ensure your account coverage.
Insurance coverage for trusts varies greatly depending on the type of trust and other facts and circumstances should be considered on a case by case basis.
Another common mistake is to believe changing the wording on the account increases coverage. Accounts titled "Mary and John Smith" and "John Smith and Mary Smith" are still combined when applying insurance limits because the owners' social security numbers are the same. Likewise, Mary may hold an account jointly with her husband, John, and another with her son, John Jr.. Both of these accounts would be considered in the joint ownership category. Mary's combined share of the balances would be insured up to $100,000.
These insurance limites are applied separately for each bank. You can protect your assets by establishing your high balance accounts in different banks. Another strategy is to vary the title of your accounts between single and joint.
For more information, please visit the Federal Deposit Insurance Corporation.
