Trust Updates Archive

FDIC—New Rules Expand Coverage for Trusts

(January 13, 2004, CHICAGO, IL)--The FDIC Board of Directors voted today to expand insurance coverage for deposits held in living trusts and eliminate the requirement that beneficiaries be named in the records of the bank.

Under existing coverage, “qualifying” beneficiaries, not subject to a “defeating contingency,” are eligible for FDIC insurance coverage. Qualifying beneficiary is defined as a grantor’s spouse, children, grandchildren, parents, and siblings. A “defeating contingency” is a condition which must be met prior to receiving any benefits under the trust, such as having attained a certain age or having graduated from college. Under the revised rule, "qualifying" beneficiary includes all “qualifying” beneficiaries regardless of defeating contingencies. The revised rule also eliminates the existing requirement that beneficiaries of living trust accounts be named in the records of the depository institution.

The new rules become effective April 1, 2004. However, the FDIC says it will apply the new rules if an insured institution fails prior to April 1 and if doing so would benefit the affected depositors. In general, the FDIC defines a living trust as a revocable trust that enables the owner (or grantor) to retain full control over the assets and the designation of beneficiaries during the owner's lifetime.

--Copyright ©2004 A.M. Publishing, Inc., Trust Regulatory News

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