Trust accounts and FDIC insurance limits

Many people in North Carolina use trusts as estate planning tools. These types of accounts can provide significant benefits in terms of estate tax planning and give funders a measure of control over how their assets can be used in the future. In order to ensure the security of these accounts, trust creators should understand the associated insurance limits provided by the Federal Deposit Insurance Corporation (FDIC).

The amount of federal insurance coverage hinges on whether the trust is revocable or irrevocable. A revocable trust names beneficiaries who will receive the trust after the owner dies. In the meantime, however, the owner has the right to change or cancel the trust. After the owner’s death, this type of trust becomes irrevocable. On the other hand, an irrevocable trust cannot be canceled or changed, and the owner gives up all rights to alter the trust upon its creation.

Revocable trusts receive coverage for up to $250,000 so long as the owner is still alive. Because the trust can be changed or canceled, the number of beneficiaries is irrelevant to the amount of insurance provided. Irrevocable trusts, on the other hand, provide $250,000 in coverage for each beneficiary, even if the owner is still alive. If there are conditions that beneficiaries must meet in order to receive the funds, however, the entire account is limited to $250,000 in coverage.

Understanding FDIC insurance limits can be very helpful during the estate planning process. An estate planning attorney can help a client plan for the future by creating trusts that will securely hold funds and provide support to loved ones.