Are your deposits safe?
- By Milt x_Zall
- Feb 28, 2002
If you or your family has less than $100,000 in all your deposit accounts
at the same insured institution, you don't need to worry about your insurance
But if you have funds at one institution totaling $100,000 or more,
here's a sensible approach for protecting yourself with Federal Deposit
Insurance Corp. coverage.
Account for Your Accounts
If you expect to conduct a thorough, accurate review of your deposit
insurance, you need to be aware of all the accounts your family owns at
an institution, the types of accounts, and the names of the beneficiaries.
Beneficiaries especially matter with payable-on-death (POD) accounts because
a spouse, child, grandchild, parent or sibling qualify the account for extra
insurance, but other relatives don't.
Do Your Research
Read the FDIC pamphlet "Your Insured Deposit." This brochure, the FDIC's primary consumer publication
devoted to deposit insurance, explains the rules in a simple, question-and-answer
EDIE, the FDIC's Electronic Deposit Insurance Estimator, can help. This
interactive Web site estimates your coverage based on your answers to a
series of questions about your accounts. EDIE is simple to use and can be
accessed at www2.fdic.gov/edie/.
Check with an FDIC expert
Helping depositors and bankers with deposit insurance questions is a
big part of the FDIC's work. So, for peace of mind, it's smart to get an
independent confirmation of your understanding of the insurance rules and
your insurance status from the FDIC. See this FDIC Web page for phone numbers and addresses.
Make adjustments to your accounts, if necessary, to bring them within
the insurance limit. In general, there are two options for fully insuring
deposits over $100,000.
First option: You can divide the funds among various types of accounts
at the same institution, because different categories are separately insured
to $100,000. However, this is an option you need to think about carefully.
It means you are changing the legal ownership of the funds, either now or
upon your death, just to increase your insurance coverage.
Before you do that, you should understand how a change in account category
affects your rights and the rights of any beneficiaries to your funds. Example:
You can shift some funds from a payable-on-death account to a joint account,
but be aware that co-owners of your joint account will be able to access
the money while you are alive.
Second option: You can move funds in excess of $100,000 to accounts
at other insured institutions and keep no more than $100,000 at each institution.
This option works well for people who don't want, or don't qualify for,
another type of account at their existing bank. Moving some funds to another
bank also is a good choice for people who just aren't sure how the insurance
rules allow them to keep more than $100,000 at one bank and still be fully
Periodically Review Your Coverage
A one-time checkup on your deposit insurance coverage isn't enough for
individuals or families with close to or more than $100,000 at one institution.
Here are suggestions for when to take another look:
* Before you open a new account. Follow the steps described previously
to find out what effect the new account would have on your insurance coverage.
The FDIC suggests that you keep a list of the accounts that you and other
family members hold at one institution, so you can easily remember which
accounts to figure into your insurance calculations.
* After the death of a loved one. The rules allow a six-month grace
period after a depositor's death to give survivors or estate planners a
chance to restructure accounts. If you fail to act within six months, you
run the risk of, say, joint accounts becoming part of the survivor's individual
accounts, and that could put the funds over the $100,000 limit.
* If a large windfall comes your way. If you sell your house or receive
a large payment from a trust, a pension, a lawsuit or an insurance claim,
make sure any deposits, especially those made on your behalf by third parties,
won't put you over the $100,000 limit.
* If you own accounts at two institutions that merge. Accounts at the
two institutions before the merger would continue to be separately insured
for six months after the merger, and longer for some certificates of deposit,
but you have to remember to review the accounts within the grace period
to avoid a potential problem with excess funds.
Zall is a retired federal employee who since 1987 has written the Bureaucratus
column for Federal Computer Week. He can be reached at [email protected].