Dear Liz: My wife and I will be receiving a sizable amount of money. We want to put the money into a high-yield joint savings account. We don’t want to exceed the FDIC protection. Can we each open joint accounts at the same bank and have each account covered up to the $250,000 limit?
Answer: That’s not quite how it works.
FDIC insurance is per depositor, per ownership category. Ownership categories include single accounts, joint accounts, certain retirement accounts such as IRAs and trust accounts, among others.
A joint account for the two of you would be covered up to $500,000, or $250,000 for each owner. A second joint account at the same bank would not increase your insurance coverage. If you had one joint account plus two single accounts, then your total coverage at the bank would be $1 million ($500,000 for the joint account, plus $250,000 for each individual account).
This assumes none of the accounts has beneficiaries. Naming one or more beneficiaries turns either joint or single accounts into trust accounts, for insurance purposes. Each owner of a trust account is covered up to $250,000 per beneficiary, to a maximum of $1.25 million for five or more beneficiaries.
Dear Liz: In your 8/26/24 column you wrote, “Each owner of a trust account is covered up to $250,000 per beneficiary, to a maximum of $1.25 million for five or more beneficiaries.” My wife and I are grantors, trustees, and beneficiaries of a rather typical revocable living trust. Upon our deaths, the trust provides that our two children as beneficiaries will receive our estate. But they aren’t benefitting yet (i.e. currently they receive nothing from the trust). Are our bank accounts held in the name of the trust FDIC insured now up to $500,000 or up to $1 million?
As I understand it, $1 million, but check with your bank. Here’s the relevant FDIC page (check under the subhead “Multiple Trust Account Owners:” https://fdic.gov/financial-institution-employees-guide-deposit-insurance/trust-accounts