FDIC Your Insured Deposit Revocable Living Trusts

A trust is a means by which an individual transfers legal ownership of funds to a trustee with the intention that the funds will be used by the trustee for the benefit of a designated person. A revocable living trust is one in which the trust's grantor reserves the right to revoke the trust. A revocable living trust is established through a written trust document. (Testamentary accounts are a special type of revocable living trust and are discussed in Questions 23 through 29.)

31. How is a revocable living trust insured?

Revocable living trust funds are insured as the individual funds of the grantor unless they meet the special requirements for separate coverage of testamentary accounts. (See Question 32.) This means that funds deposited under the provisions of a revocable living trust will be added to any other single ownership funds of the grantor and the total will be insured up to a maximum of $100,000. If a revocable living trust has been created by more than one grantor, funds deposited pursuant to the trust will be treated as the individually owned funds of each such grantor. The trust funds will be divided between the grantors, added to any other single ownership funds of each such grantor, and the sum will be insured up to $100,000 per owner. Under certain circumstances, however, the trust funds are insured as the jointly owned funds of the grantors. (See Question 32).

32. Can funds deposited pursuant to a revocable living trust document ever be insured separately from the individually owned funds of the grantor(s)?

Funds deposited pursuant to a revocable living trust may be separately insured from the grantor's individually owned funds if the revocable living trust document and the deposit account records satisfy the requirements of testamentary accounts. In this situation, the grantor would be insured up to $100,000 for each qualifying beneficiary. The requirements follow:

• The trust document must provide that the funds will belong to the named beneficiary upon the grantor's death. Revocable living trust documents often fail to satisfy this requirement because they usually contain provisions that may prevent the beneficiary from receiving all of the deposited trust funds upon the grantor's death.
• The named beneficiary must be the grantor's spouse, child, grandchild, parent, or sibling. Funds deposited pursuant to a revocable living trust established by a husband and wife solely for their benefit are treated as joint ownership funds. Such funds are added to any other joint ownership funds held by the husband or wife.
• The grantor's intention that, upon his or her death, the funds will belong to the named beneficiary must be shown in the title of the account. This may be accomplished by depositing the funds in the name of the trust.
• Each beneficiary must be specifically named in the deposit account records of the depository institution. It is not sufficient to designate a class of beneficiaries, such as "grandchildren."

If the revocable living trust document and supporting deposit account records fail to satisfy any of the above requirements, funds deposited pursuant to the revocable living trust will be insured as the single ownership funds of the grantor(s) or in some cases as the jointly owned funds of the grantors.

Your Insured Deposit - Irrevocable Trusts