By Libby Banks, The Law Office of Libby Banks, PLLC

The banking industry is under fire again and many people worry about bank failures. The FDIC insures deposits – but only up to $250,000 per deposit at each bank. If your accounts and CDs at any one bank amount to more than $250,000, you may not be covered for all of your potential losses.

But wait! Your revocable living trust might help – having a trust account increases your Federal Deposit Insurance coverage on your bank accounts.

As I’ve mentioned many times, the Revocable Living Trust is the foundation for most estate plans prepared in my office. The trust reduces expenses and provides for a smoother administration of your estate. It not only avoids the time and expense of a probate action at your death, but it also avoids court proceedings if you are incapacitated.

Now it provides the additional benefit of greater insurance coverage from the FDIC. The FDIC recognizes accounts in your revocable trust as held in a formal trust relationship, and not just in your individual capacity. The trust as owner of these accounts is insured for up to $250,000 for each beneficiary of your trust. The individual beneficiaries identified in the trust are all covered, and language in your trust leaving your assets to “my descendants” is sufficient to include all of your children as beneficiaries. As long as the number and names of the descendants can be determined, the FDIC will give you $250,000 of insurance coverage for each of your trust beneficiaries.
The FDIC examples included in its brochure found online includes a depositor with a trust account who has identified five unique beneficiaries. The FDIC coverage of $250,000 per account is increased to $1,250,000 for that depositor because his revocable trust had five individual beneficiaries. That’s quite a difference in coverage!

This gives many advantages. Because of the increased FDIC coverage using the trust, you can consolidate your bank accounts to one bank instead of opening accounts in several banks to be sure your cash, savings and money market accounts are all insured to the maximum amount. Making one bank your central repository for most accounts makes management easier during your lifetime, but even more important makes it easier for your successor trustee when they step in. The chance of an account being forgotten or unidentified is less likely with fewer accounts as well.

The revocable living trust is a great plan for most estates, and the FDIC increased insurance coverage is one more good reason to create a trust.

If you have questions about whether a trust is right for you, or a trust that needs updating, take advantage of our free initial consultation to discuss your specific situation and talk about the trust and how it might work for you. Call the office at 602-375-6752 or visit our website at libbybanks.com.

For more information on FDIC insurance coverage, access the FDIC brochure online at https://tinyurl.com/FDICtrust.