Frozen Sooner
9/30/2008, 04:33 PM
First, some good news: the FDIC chair, Senator McCain, and Senator Obama have all called for an increase in the $100,000 FDIC insurance limit, which I think it overdue. It'll be a cost to banking, as banks will have to pay more in insurance premiums and likely face increased reserve requirements, but it's been stuck at $100,000 since 1980 or so.
Anyhow, the news talking heads throw around the $100,000 figure quite a bit to where people get very confused and they think that every account is insured to $100,000, regardless of how many accounts you have at a bank or how many owners of the account there are. This is not true. FDIC/NCUA insurance on non-commercial accounts works like so:
All of an individual's accounts that they own as an individual are aggregated and are insured to $100,000. So if you have one account with $25,000 in it and one account with $90,000 in it, you are uninsured for $15,000.
I think pretty much everyone gets that one. Here's where it gets hairy:
All of an individual's joint accounts are aggregated as to their interest in the account and insured up to $100,000. So, say you have a joint account with your wife and an joint account with your child. The child's account has $50,000 in it and the wife account has $150,000. You are insured for $25,000 on the child's account and for $75,000 on the wife's account for a total of $100,000. Your wife is insured for her $75,000 interest and your child is insured for his $25,000 interest, so all $225,000 of the money is insured. HOWEVER, if the child account had (say) $200,000 in it and the wife account had $100,000 in it, the money would be insured for only $250,000-NOT $300,000. Wife insured for $50,000, child for $100,000, and you for $100,000.
Clear as mud?
Here's where it gets REALLY fun-revocable trust accounts (which include any payable on death account.)
Trust accounts are not insured based solely on the number of signers. They are based on the number of direct relatives of the trustors who are beneficiaries of the trust. A direct relative is a grandparent, parent, child, grandchild, or sibling. In-laws do not count, but steps do. Each "direct relative" connection to a trustor is insured to $100,000.
Say you and your wife have a child together and your wife has a brother.
If you set up a trust account with you and your wife as trustors and your child as beneficiary, that account is insured to $200,000, as there's two direct relative connections (You-child, wife-child). If you add the wife's brother as a beneficiary, then it's insured to $300,000 for three connections (you-child, wife-child, wife-brother.)
Disclaimer: I cannot bind insurance for either NCUA or FDIC.
Anyhow, the news talking heads throw around the $100,000 figure quite a bit to where people get very confused and they think that every account is insured to $100,000, regardless of how many accounts you have at a bank or how many owners of the account there are. This is not true. FDIC/NCUA insurance on non-commercial accounts works like so:
All of an individual's accounts that they own as an individual are aggregated and are insured to $100,000. So if you have one account with $25,000 in it and one account with $90,000 in it, you are uninsured for $15,000.
I think pretty much everyone gets that one. Here's where it gets hairy:
All of an individual's joint accounts are aggregated as to their interest in the account and insured up to $100,000. So, say you have a joint account with your wife and an joint account with your child. The child's account has $50,000 in it and the wife account has $150,000. You are insured for $25,000 on the child's account and for $75,000 on the wife's account for a total of $100,000. Your wife is insured for her $75,000 interest and your child is insured for his $25,000 interest, so all $225,000 of the money is insured. HOWEVER, if the child account had (say) $200,000 in it and the wife account had $100,000 in it, the money would be insured for only $250,000-NOT $300,000. Wife insured for $50,000, child for $100,000, and you for $100,000.
Clear as mud?
Here's where it gets REALLY fun-revocable trust accounts (which include any payable on death account.)
Trust accounts are not insured based solely on the number of signers. They are based on the number of direct relatives of the trustors who are beneficiaries of the trust. A direct relative is a grandparent, parent, child, grandchild, or sibling. In-laws do not count, but steps do. Each "direct relative" connection to a trustor is insured to $100,000.
Say you and your wife have a child together and your wife has a brother.
If you set up a trust account with you and your wife as trustors and your child as beneficiary, that account is insured to $200,000, as there's two direct relative connections (You-child, wife-child). If you add the wife's brother as a beneficiary, then it's insured to $300,000 for three connections (you-child, wife-child, wife-brother.)
Disclaimer: I cannot bind insurance for either NCUA or FDIC.