#help.tut EXTRA HELP FOR TUTORIALS #define.stb ON LINE LEGAL GLOSSARY /* This is part 2 of the official text of the Federal Deposit Insurance Corporation's informational booklet on Federal Deposit Insurance. With banks failing, we thought you'd like to know if you are in an insured account what your rights are. */ 12. If a person has an interest in more than one joint account, what is the extent of his or her insurance coverage? All joint accounts owned by the same combination of individuals are first added together and the total is insurable to $ 100,000. Then the person's insurable interests in each joint account owned by different combinations of individuals are added together and the total is insured up to the $ 100,000 maximum. For example, assume that H and W own a joint account containing $ 105,000 and H and C own a joint account containing $ 80,000. The $ 105,000 account owned by H and W is insured only to $ 100,000, leaving $ 5,000 uninsured. Since the interests of the co-owners of a joint account are deemed equal for insurance purposes (except in the case of a tenancy in common if unequal interests are shown on the account records of the bank), the $ 100,000 is prorated equally between H and W, giving each an insurable interest of $ 50,000; the $80,000 in the other account is prorated equally between H and C, giving each $ 40,000 insurable interest in that account. Thus, H has a total insurable interest of $ 9O,000 in the two accounts, and W and C have insurable interests of $ 50,000 and $ 40,000 respectively. Since no person's total insurable interest exceeds the $ 100,000 limit, the two accounts totaling $ 185,000 are entitled to $ 180,000 in insurance, representing the sum of the total insurable interests of each co-owner. 13. What is the insurance coverage on a revocable trust account, a tentative or "Totten" trust account, or a "payable-on-death" account? These accounts, or any similar accounts in which the funds are intended to pass on the death of the owner to a named beneficiary, are considered testamentary accounts and are insured as a form of individual account. If the beneficiary is a spouse, child, or grandchild of the owner, the funds are insured for each owner up to a total of $ 100,000 separately from any other individual accounts of the owner. If the beneficiary is other than a spouse, child or grandchild of the owner, the funds in the account are added to any other individual accounts of the owner and insured to a total of $ 100,000. In the case of a revocable trust account, the person who holds the power of revocation is considered the owner of the funds in the account. If such an account is maintained by two or more owners and held for the benefit of others who are within the qualifying degree of kinship, the respective interest of each owner held for the benefit of each beneficiary will be separately insured up to the total amount of $ 100,000. For example, assume H and W establish a testamentary account in the amount of $ 400,000 in favor of their children A and B. During his lifetime H is insured up to $ 100,000 as to A and up to $ 100,000 as to B separately form his individually owned account. W is similarly insured for her interest in the deposit. The maximum insurance coverage for the deposit is $ 400,000. However, assume H and W establish a testamentary account of $ 400,000 naming themselves as grantors, for the benefit of their child A and nephew C. Since C is not within the qualifying degree of kinship, $ 100,000 of the $ 400,000, representing C's beneficial interest derived from H, will be combined with any individually held funds of H and insured in the aggregate to $ 100,000. Likewise $ 100,000 of the $ 400,000 representing C's beneficial interest derived from W will be combined with any individually held funds of@ and insured in the aggregate to $ 100,000. In addition, the interests of H and W held for the benefit of their child A will each be insured up to the maximum amount of $ 100,000, or a total of $ 200,000. TRUST ACCOUNTS 14. What is the insurance coverage on a trust account held under the provisions of an irrevocable express trust? The trust interest of a beneficiary in a valid irrevocable trust, if capable of evaluation in accordance with published rules, is insured up to $100,000 separately from the individual accounts of the trustee or other beneficiary. However, all trust interests created by the same settlor (grantor) in the same bank for the same beneficiary will be added together and insured in the aggregate to the maximum of $100,000. 15. Where an insured bank acts as trustee, guardian, administrator, executor, agent, or in some other fiduciary capacity, are the uninvested funds so held by the insured bank protected by insurance? Yes. The uninvested funds of each separate trust estate held by an insured bank in a fiduciary capacity are insured to a maximum of $100,000. 16. Is an interest in a pension or profit sharing account insured any differently than a depositor's individual account? Yes. For insurance purposes, pension and profit sharing deposits are considered to be trust funds. Each participant's interest in such a fund is insured to $100,000, in addition to the $100,000 allowed on his or her individually owned funds. This is true even though the funds of several participants in a pension or profit sharing plan are deposited by the trustee in the same account. 17. May a person receive separate insurance on each of several pension or profit sharing plans established by his/her employer with the same bank? No. Except provided below with respect to IRA and Keogh funds, if two or more pension plans, or a profit sharing plan and a pension plan, are established by an employer for the same individual, the beneficiary's interest in the two accounts will be added together in computing deposit insurance. 18. What insurance coverage is provided for IRA and Keogh deposits? IRA and Keogh funds, when held by the bank in a trust or custodial capacity, are insured separately from other deposits. IRA and Keogh funds held in time or savings deposits are insured up to the maximum of $100,000 and funds held in demand deposits are, in most cases, separately insured to the maximum of $100,000. Alternatively, IRA and Keogh funds held by a nonbank trustee or custodian and deposited in a time or savings deposit in an insured bank are separately insured to the maximum of $100,000. SPECIAL TYPES OF ACCOUNTS 19. Are accounts held by a person as executor, administrator, guardian, custodian, or in some other similar fiduciary capacity insured separately from his or her individual account? Yes. If the records of the bank indicate that the person is depositing the funds in a fiduciary capacity, such funds are insured separately from the fiduciary's individually owned account. Funds in an account held by an executor or administrator are insured as funds of the decedent's estate. Funds in accounts held by guardians, conservators or custodians (whether court- appointed or not) are insured as funds owned by the ward and are added to any individual accounts of the ward in determining the $100,000 maximum. OTHER QUESTIONS 20. When an account is held by a person designated as agent for the true owner of the funds, how is the account insured? The account is insured as an account of the principal or true owner. The funds in the account are added to any other accounts owned by the true owner and the total is insured to the maximum of $100,000. 21. Is an account held by a corporation, partnership, or unincorporated association insured separately from the individual accounts of stockholders, partners, or members? Yes. If the corporation, partnership, or unincorporated association is engaged in an independent activity, its account is separately insured to a total of $100,000. The term "independent activity" means any activity other than one directed solely at increasing insurance coverage. 22. Where a corporation, partnership, association or other organization maintains two or more separate accounts with the same bank, are the accounts separately insured if the funds in each are earmarked for different purposes (except funds held specifically in a trust, agency or similar fiduciary capacity which may be used for no purpose other than that indicated)? No. Except as noted below, since all of the funds are owned by the same organization, the accounts are added together and insured only to $100,000 in the aggregate. However, where deposits are held by a corporation, partnership, association, or other organization, or by an insured bank in a trust, agency or similar fiduciary capacity, the rules governing insurance of trust or custodial accounts apply- (See examples in preceding items 14 through 20.) 23. If a depositor has more then $100,000 on deposit in a closed insured bank, does he or she retain a claim against the bank for the amount of the deposits in excess of the $100,000 insurance paid by the Corporation? Yes. Owners of deposit claims in excess of $100,000 will share, pro rata, in any proceeds from the liquidation of the bank's assets with any other creditors of equal standing, including the Corporation. 24. Can a bank's membership in the FDIC be terminated? Yes, but notice is always given to depositors before termination of insurance. Insurance protection does not stop immediately after termination, but continues up to two years on deposits existing at the date of termination, less subsequent withdrawals, up to the $100,000 maximum. In the event the deposits of a bank are assumed by another insured bank, the demand and savings deposits which are assumed continue to be separately insured for a period of six months. Time deposits are separately insured to the earliest maturity date after the six-month period. GLOSSARY OF TERMS * Beneficial interest - Interest or right of the person who is to receive benefits under a trust, will, or similar transfer of property. Commercial Bank - A financial institution which offers checking accounts and short-term loans to the general public as well as to businesses. Demand Deposit - A Bank deposit which does not earn interest and can be withdrawn at any time or in less than seven days. Fiduciary - Someone holding a position of trust or confidence recognized by the law. IRA and Keogh Accounts - Accounts allowing individuals to set aside a certain percentage of income without incurring tax liability until retirement. Mutual Savings Bank - A bank in which depositors are the owners and share in the earnings. Negotiable Instrument - An unconditional written promise to pay a specified sum of money at a specified date to the order of a specified payee or the bearer. Right and Capacity - The terms "right" and "capacity" refer to the nature of the ownership deposits, etc. Savings Deposit - A bank deposit which earns interest on the balance periodically and on which the bank may require seven days notice prior to withdrawal. Settlor or Grantor - Someone who creates a trust. Tenancy - Possession under right or title. Testamentary - Relating to disposition of property after death. Time Certificate of Deposit - A time deposit evidenced by a certificate issued by the bank specifying the amount deposited and maturity. Time Deposit - A bank deposit which is payable in not less than seven days. "Totten" Trust Account - A revocable trust created by depositing money for the benefit of another with the intention that the deposit pass to the beneficiary upon the depositor's death. Trust - A transfer of property from one person, called the settlor or donor, to another person, called the trustee, who is to hold the property for a specified beneficiary or use. Right and Capacity - The terms "right" and "capacity" refer to the nature of the ownership of deposits, such as jointly owned funds, trust deposits, etc. * The glossary is provided for the purposes of this booklet only and is not intended as a supplement or a replacement of any definitions which pertain to deposit insurance. NOTICE This booklet provides examples of insurance under the Corporation's rules on certain types of accounts commonly held by depositors in insured banks. The information provided in this booklet is presented in a non-technical way and is not intended to be a legal explanation of the FDlC's laws and regulations on insurance coverage. For greater detail concerning the technical aspects of insurance coverage, depositors or their counsel may wish to consult the Federal Deposit Insurance Act (12 U.S.C. 181 1-1832) and the FDlC's regulations relating to insurance coverage (12 C.F.R. part 330). Depositors are advised that no person may by any representations or interpretations affect the extent of insurance coverage provided by the Federal Deposit Insurance Act, the Rules and Regulations for Insurance of Deposit Accounts, and the published interpretative and explanatory material referred to above. FEDERAL DEPOSIT INSURANCE CORPORATION 550 17th. Street, N.W., Washington. D.C. 20429