You probably know that the standard deposit amount insured by the Federal Deposit Insurance Corporation (FDIC) is $250,000 per depositor, per insured bank, for each account ownership category. For this reason, some people have accounts at different banks, in order to keep the level of the accounts below $250,000.

The $250,000 amount can be increased, depending on the manner in which the account is held. For example, if a married couple has an account that is owned jointly by both of them, then the account will be insured for $500,000. This amount can be increased even more when the account is owned by a revocable living trust.

A revocable living trust is a trust established by the grantor. A joint revocable living trust can be established by a husband and wife and, with both spouses being a grantor.

Under the FDIC rules, an account held in a joint trust with two grantors would receive $500,000 in coverage. However, this amount would be increased by the number of beneficiaries named who would receive the account upon the death of the Grantors.

For example, if the living trust were to be held for the benefit of the two spouses for life, then go to the couple’s three children at the death of the surviving spouse, the account would be insured for $1,250,000.

This amount would be increased by $250,000 for each additional “unique beneficiary” named in the living trust.

The trust document is not required to list the children or other beneficiaries by name. It is sufficient to use language such as “my issue” or other commonly used legal terms, as long as the specific names and number of eligible beneficiaries can be determined. 

Eligible beneficiaries do not need to be family members. Charities and non-profit organizations qualify as eligible beneficiaries.

A beneficiary’s interest must not be contingent as defined by FDIC regulations. Under these rules, grandchildren cannot be counted as beneficiaries if their interest is contingent upon their parents predeceasing the grandparent. For example, if the trust names the children of the grantors as beneficiaries, but states that if a child is not living, then that child’s share will pass to the child’s then-living issue, then the grandchildren cannot be counted as beneficiaries because they would not receive a share unless their parent dies before the Grantor.