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Julie Sturgeon: Maximize the FDIC coverage of your bank accounts

It's Your Money

Posted: July 15, 2010 4:55 a.m.
Updated: July 15, 2010 4:55 a.m.

The Federal Deposit Insurance Corp. (FDIC) has been providing deposit insurance coverage to depositors of insured banks since 1933. This protection is important to all investors. Given the current economy, individuals are more concerned their money is protected. The elderly tend to be most heavily invested in cash and are dependent on this money to cover living expenses.

If your banking institution is a "covered" institution, it will display an official sign at each teller window or teller station. All FDIC institutions will have a brochure available to answer your questions regarding coverage. For more information visit

All types of deposits are covered by the insurance. Any individual - a U.S. citizen or not - can have insurance coverage.

However, only deposits payable in the U.S. are covered. All securities, mutual funds and other investments, whether or not purchased through a bank, are not covered. Creditors are not covered nor are safe-deposit boxes or their contents.

FDIC insurance covers deposit accounts in full, including any accrued interest through the date of the insured bank's closing up to the standard maximum deposit insurance amount (SMIDA). The SMIDA amount had been $100,000 per account ($250,000 for retirement accounts) until the Emergency Economic Stabilization Act of 2008 increased the amount to $250,000 for all accounts for the period of Oct. 3, 2008, until Dec. 31, 2009. This increased amount has been extended until Dec. 31, 2013. If Congress does not act, the insured amount will drop back to $100,000 after 2013.

Coverage by FDIC is often thought to be on a per-account basis. In fact, it is not on a per-account basis but on an ownership basis. The type of account - Social Security number or federal identification number - has any bearing on the coverage. Instead, separate insurance coverage is provided for funds held in different ownership categories. Here are examples of ownership accounts: single ownership, joint ownership, business accounts, revocable trust accounts and retirement accounts.

In single ownership accounts, if the owner gives another person the right to withdraw funds from the account, the account will be insured as a joint ownership. If no withdrawal right is given but only power of attorney for the individual to withdraw funds by one person on the owner's behalf, it is considered a single-ownership account.

Joint-ownership accounts are defined as those owned by two or more individuals, and each individual must have a right to withdrawal.

Business accounts are considered to be owned by the entity and therefore insured separately.

A revocable-trust account is any account on which the owner has designated a beneficiary who will receive the deposit at the owner's death. In general, these accounts are insured up to $250,000 per beneficiary. It is important to look into all of the requirements in setting up these accounts.

Retirement accounts are all added together and treated as owned by the same person. The include IRAs, Roth IRAs, SEP IRAs and SIMPLE IRAs. For married couples, retirement accounts are not added together. Each individual owns his or her accounts separately.

By carefully structuring account ownership, many people can easily cover all their bank deposits at any one bank. If it is not possible to keep the deposits under one roof, they can increase their FDIC-covered accounts at a single bank by using the Certificate of Deposit Account Registry Service. Using this service, deposits exceeding the $250,000 are placed by a participating bank into smaller denomination certificates of deposit at multiple FDIC-insured financial institutions. This program is not affiliated with the FDIC.

Julie M. Sturgeon is a certified public accountant in Valencia specializing in individual and business tax issues. Her column represents her own views and not necessarily those of The Signal. "It's Your Money" appears Thursdays and rotates between a handful of the valley's financial professionals.


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