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Recently, the Federal Insurance Deposit Corporation (FDIC) implemented new requirements for deposit insurance for trust accounts starting April 1. These changes were aimed at simplifying insurance coverage rules for trust accounts, but they may have unintended consequences for depositors with large sums of money. According to Ken Tumin, founder of DepositAccounts and senior industry analyst at LendingTree, these changes could potentially push some depositors over FDIC limits.

Under the new rules, trust deposits are now limited to $1.25 million in FDIC coverage per trust owner per insured depository institution. Each beneficiary of the trust may have a $250,000 insurance limit for up to five beneficiaries. However, if there are more than five beneficiaries, the FDIC coverage limit for the trust account remains $1.25 million. This means that investors with trusts exceeding these limits could face coverage reductions and potential losses on their investments.

One significant change brought about by the FDIC is the consolidation of revocable and irrevocable trusts into one category. This means that investors with both types of trusts at the same bank may see their FDIC coverage reduced. For example, having $250,000 in a revocable trust and $250,000 in an irrevocable trust could now only be insured up to a total of $250,000. This change could have serious implications for investors who rely on trust accounts for their financial security.

The FDIC has also revised requirements for informal revocable trusts, such as payable on death accounts. Previously, these accounts had to be titled with specific phrases to access trust coverage limits. However, the FDIC has now eliminated this requirement and will instead rely on bank records to identify beneficiaries. This change could potentially impact investors who have structured their accounts based on the previous requirements.

Depositors with significant sums of money in trust accounts should be aware of these changes and take steps to ensure that their funds are adequately insured. Failure to comply with the new FDIC requirements could result in coverage reductions and potential losses on investments. It is essential for depositors to review their trust accounts and work with their banks to address any issues that may arise due to the new rules.

The recent changes to FDIC insurance coverage for trust accounts have significant implications for depositors with large sums of money. It is crucial for investors to understand these changes and take proactive steps to protect their funds. By staying informed and working closely with their banks, depositors can ensure that their trust accounts are in compliance with the new FDIC requirements.

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