Facts & Articles On The Different Types Of Insurance

New Rules for Revocable Living Trust Accounts and FDIC Insurance

On January 13, 2004, the FDIC adopted new rules for insurance coverage of living trust accounts. The new rules, which are effective on April 1, 2004, are summarized below.

What is a living trust?

A living trust (or family trust) is a formal revocable trust, usually set up by an attorney, in which the owner (also known as a grantor or settlor) specifies who will receive the trust assets when the owner dies. The owner keeps control of the trust assets during his or her lifetime and can change the trust at any time.

How are living trust accounts insured under the new FDIC rule?

The owner of a living trust account would be insured up to $100,000 per beneficiary if all of the following requirements are met:

1. The beneficiary must be the owner's spouse, child, grandchild, parent or sibling.

2. Stepparents and stepchildren, adopted children and similar relationships also qualify.

3. In-laws, cousins, nieces and nephews, friends, and charitable organizations do not qualify.

The beneficiary must become entitled to his or her interest in the trust when the owner dies -- coverage would be based on the beneficiaries who meet this requirement at the time the bank fails. Example: A living trust names an owner's three children as beneficiaries but states that each beneficiary's share will pass to the beneficiary's children if the beneficiary dies before the owner. Assuming all three children are alive at the time the bank fails, only the children -- not the grandchildren -- would be beneficiaries for insurance purposes. (That's because the grandchildren are not entitled to any trust assets while their parent is alive.) Coverage up to $300,000 ($100,000 per beneficiary) would be available on the trust's deposit accounts.

The account title at the bank must indicate that the account is held by a trust. This rule can be met by using "living trust", "family trust", or similar terms in the account title.

Coverage is based on the actual interests of each qualifying beneficiary. Unless the trust states otherwise, the FDIC will assume that the beneficiaries have an equal interest in the living trust account. Example: A father has a living trust leaving all trust assets equally to his three children. This trust's account would be insured up to $300,000 since there are three qualifying beneficiaries who would become owners of the trust assets when the owner dies.

How does the new rule differ from the old rule? Previously, many living trusts did not qualify for per-beneficiary coverage because they contained conditions that prevented a qualifying beneficiary from actually receiving his or her share of the trust assets when the owner died. Under the new rule, the FDIC will ignore these conditions for insurance purposes. In addition, the former rule required banks to keep the names of the trust beneficiaries in the bank's account records. Under the new rule, a bank only needs to indicate in the account title that the account is held by a living trust. Note: The rule for payable on death – or POD -- accounts has not changed: the names of the beneficiaries of a POD account still must be identified in the bank's records.

What if a living trust has more than one owner?

If a living trust has more than one owner, coverage would be up to $100,000 per qualifying beneficiary for each owner, provided the beneficiary would be entitled to receive the trust assets when the last owner dies. Example: A husband and wife are co-owners of a living trust. The trust states that upon the death of one spouse the funds will pass to the surviving spouse, and upon the death of the last owner the funds will pass to their three children equally. This trust's deposit account would be insured up to $600,000.

What if a beneficiary is not the owner's spouse, child, grandchild, parent or sibling?

The trust interest of a non-qualifying beneficiary is insured as the owner's single ownership funds and would be added to any other single ownership funds the owner may have at the same bank, and the total would be insured up to $100,000. Example: A living trust states that the trust assets will belong equally to the owner's husband and nephew upon her death. If the trust's account has a balance of $200,000, her husband's share -- $100,000 -- would be insured as her revocable trust funds and her nephew's share -- $100,000 -- would be insured as her single ownership funds. If, for example, the owner already had a single ownership account for $20,000, the nephew's interest ($100,000) would be added to her other single ownership funds and the total would be insured for $100,000, leaving $20,000 uninsured.

How is a beneficiary's life estate interest insured?

Living trusts often give a beneficiary the right to receive income from the trust or to use trust assets during the beneficiary's lifetime (known as a life estate interest). When the beneficiary with the life estate interests dies, the remaining assets pass to other beneficiaries. Unless otherwise indicated in the trust, the FDIC will assume that a beneficiary with a life estate interest owns an equal share of the trust with the other beneficiaries. Example: A husband creates a living trust giving his wife a life estate interest in the trust assets with the remaining assets going to their two children equally upon his wife's death. Deposits for this trust could be insured up to $300,000 ($100,000 for each qualifying beneficiary – the wife and two children).

Are living trust accounts and "payable on death" accounts separately insured?

The $100,000 per-beneficiary insurance limit applies to all revocable trust accounts – payable on death (POD) and living trust accounts – that an owner has at the same bank. Example: A father has a POD account naming his son and daughter as beneficiaries and he has a living trust account naming the same beneficiaries. The funds in both accounts would be added together and the total insured up to $200,000 ($100,000 per qualifying beneficiary).

Good luck and until next time,

Phil Craig

P.S. Feel free to forward this on to any friends.

Phil Craig is a licensed attorney and entreprenuer. He started practicing law at age 25 in 1979. He does not take on any more clients, but is advisor to some of the biggest names in the internet world. He shares his knowledge gained over the last 25 years at his Living Trust Secrets newsletter site: click here=========>http://www.LivingTrustSecrets.com

** Attn Ezine editors / Site owners ** Feel free to reprint this article in its entirety in your ezine or on your site so long as you leave all links in place, do not modify the content and include our resource box as listed above.

If you do use the material please send us a note so we can take a look. Thanks.

Other Article Sites

findabook.com  moneycd.info  a-mortgage.info   about-lemon-laws.info  aboutstudentloans.info
all-about-publishing.info  auctions-articles.info  bestcollege-university.com  bestispconnection.com
biblefolder.com  blogger-website.com  books-used.info  brokers-guide.info  buywindows.info  cable-dsl.info
career-miner.com  carpel-tunnel.info  cashinaflash.info  cashloanreviews.info  casinobell.com  chat-house.info
clearmycredit.info  collegeloantips.info  crones.info  depression-articles.info   dirnic.net  dishguides.info
divers-below.com  expodog.info   financewizz.com  fire-insurance.info  getgood.info  handleit.net   it-idea.info
health-supplies.info  hosting-right.com  insidealert.com  insurance-facts.info  jobs-employment.info
justgood.info  lookgold.net   lowcost-travel.info  money-source.info  myhostzone.info  numisblog.com
peoplesearchfinder.info  pr-articles.info  realeas.com   refinancing-guides.info  spyware-remove.info
telelot.info  the-law.info   toppaid.info  travel-deals.info  travelcorrect.com  wedding-guide-site.com
your-blog.info  your-credit.info

Find A Cheap Home Owner's Insurance Quote In Louisiana
Louisiana homes are prone to wind and water damage as the state is at high risk for hurricanes and rain storms. Therefore, Louisiana home owners must make sure their homes are as wind- and water-resistant as possible. Home owner insurance companies are going to look at several factors regarding these kinds of resistance as they determine a Louisiana home owner insurance quote.

Low Rate Auto Insurance
If you have ever shopped for auto insurance you know that there are many things that determine the price of your insurance Everything from the amount of miles you drive to your driving record, the cars safety features to the cars size, are looked at

Consider Cheating On Your Insurance Company
It?s happened to many of us. We?re watching television, listening to the radio, flipping through the pages of the newspaper, when suddenly we see an advertisement for an insurance company. Maybe they specialize in health insurance, or maybe it?s life insurance. Perhaps auto insurance is their focus, or they?re known for their great homeowner?s insurance policies. Whatever kind of insurance it is, the advertisement catches our eyes, and before we know it, we?re visiting the insurance company?s Web site, or on the phone with one of their insurance agents, finding out how they can save us money if we cancel our current insurance policies and purchase our new insurance policies from them.

You Need To Read This Before You Buy Family Dental Plan Insurance
Family dental plan insurance is the first thing that most people think of when they're wanting to get some type of dental coverage for their family. This makes complete sense, considering the many other types of insurance that we have to have in our daily lives. Health insurance, long term care, homeowners, automobile, just to name a few, along with many others, make the word "insurance" the very first thing that comes to mind along with the words "coverage" and "protection". However, is dental insurance really your best option for care? Let's take a look at your options.

Why Worry About Renters Insurance?
It may a simple oversight or the renter may not see the necessity for any type of insurance coverage for their valuables. The lack of protection against loss of our personal possessions is not advisable for this day and age. A landlord does not usually mention insurance or offer to insure the renters personal possessions. Consequently, the renter is responsible for any insurance coverage on valuables.

What Are The Advantages of Insurance Leads
What are the advantage of an insurance lead - Advantage of an insurance lead is that the salesperson will be speaking with someone who had at least indicated some interest in the idea that will be discussed. This imply it will not be an uphill battle from the start, and there may be some common ground on which to build. Common ground is very important in any sales situation.

Workers Compensation Insurance and Payroll: Working Together for California Businesses
E-chx, Inc. aligns with EMPLOYERS & Granite Insurance Brokers to create a seamless workers compensation program.

New Car Insurance Doesn?t Have To Be Expensive
If you have bought a brand new car it will of course be your pride and joy, as such you will want to make sure that is covered in the event of it being stolen or being in an accident or suffering malicious damage. If this is what you want then you have no option but to take out fully comprehensive car insurance, if you paid more than ?5,000 for your new car then you will have no option but to take fully comprehensive anyway. Fully comprehensive is the dearest type of car insurance but new car insurance doesn?t have to cost the earth if you choose to buy it online.

New Concepts in Car Insurance - Pay as You Drive
You can pay as you talk with a cell phone plan, so why not pay as you drive auto insurance? It sounds like a good idea; but would pay as you drive auto insurance work for you?The idea behind pay as you drive auto insurance is simple. Basically its this- if you do not drive very much, you will not pay high insurance premiums.

Term Life Insurance For The Benefit Of Others
Usually term life insurance is purchased for the protection of the family. It is purchased with the idea that in the event of your death, your spouse and children will be financially secure and able to continue with their way of life from a financial view point. It also enables your family to pay for your burial and funeral expenses as well as pay off all other debts incurred by you while you were living (such debts are passed on to surviving spouses).

How To Save Money And Get Discount Homeowner's Insurance In Massachusetts
Almost every homeowner in Massachusetts, whether required to buy homeowner's insurance by their lender or not, still chooses to voluntarily purchase such insurance.

Going Abroad For Surgery? Does Travel Insurance Provide Cover?
Let's face it; a root canal is no fun whether you have it here in the UK or in a clinic in a sunny country abroad What are the options if treatment isn't available on the NHS or the wait is too long

Life Insurance 101 Explained
While most of us do not like to think of the subject of our own death, the fact of the matter is that death is a part of life and in order to protect our families we need to give some thought to the subject of life insurance. The more you understand about life insurance the better you can prepare not only for your final expenses and protect your family.

Teen Auto Insurance - What Is The Price Of Protection?
New drivers are extremely naive for the first several years and everyone knows this Years of statistics have shown the insurance companies that these new drivers have a much greater chance of getting into an accident and this has an unfortunate effect, it causes extremely high insurance premiums