Bank Deposits in a Living Trust: How FDIC Coverage Works Since April 2024

Quick answer: Since April 1, 2024, the FDIC insures trust deposits for up to $250,000 per eligible beneficiary, to a maximum of $1,250,000 per owner at each insured bank when five or more eligible beneficiaries are named. For a Nashville family, that means coverage on a living trust account depends on how many owners and eligible beneficiaries there are, and on what else those owners hold in trust form at the same bank. The FDIC says this guidance is not estate planning advice, so treat it as one input to your plan.

Which accounts does the rule cover?

The rule at 12 C.F.R. Sec. 330.10 has governed both revocable and most irrevocable trusts since April 1, 2024. That includes three kinds of account:

• Informal revocable trusts, such as payable on death accounts, created by an agreement with the bank.
• Formal revocable trusts, set up by a written trust agreement. The FDIC says these are often called living trusts or family trusts and are generally created for estate planning.
• Irrevocable trusts, where the owner gives up all power to cancel or change the trust.

Some deposits fall outside this category and are insured under others, including employee benefit plans and IRAs that name beneficiaries.

How is the coverage calculated?

The FDIC’s formula is: number of owners, times number of eligible beneficiaries, times $250,000. It cannot exceed $1,250,000 per trust owner for all trust accounts at that bank.

Eligible beneficiaries	Maximum coverage per owner at one bank
1	$250,000
2	$500,000
3	$750,000
4	$1,000,000
5 or more	$1,250,000

The FDIC says how funds are allocated among beneficiaries does not factor into this. Someone receiving a small share counts the same as someone receiving a large one.

Who counts as an eligible beneficiary?

An eligible beneficiary must be a living person, a charitable organization recognized under the Internal Revenue Code, or a non-profit entity recognized under the Code. For-profit businesses and pet trusts are not eligible. You can still name them in your trust, because the FDIC’s rules do not affect distributions under state law, but they add no coverage.

A few other points trip people up:

• The owner can’t count. For this calculation, an owner cannot also be a beneficiary of the same trust.
• Each beneficiary counts once. If your payable on death account and your trust name the same two children at the same bank, you have two beneficiaries, not four.
• Contingent beneficiaries generally don’t count while the primary beneficiary is alive.
• “My family” is too vague. A designation such as “my children and grandchildren” works. “My family” is not specific enough.

What does the bank need to see?

For a living trust account, the title must include words sufficient to identify it as a trust account, or the bank’s records must otherwise identify it. The FDIC gives “living trust” and “family trust” as examples of title wording.

Banks do not have to keep a copy of your trust agreement, but the FDIC may ask for one if the bank fails. Keep that document somewhere your family can find it. Moving the account into the trust is one piece of funding it; a home takes a recorded deed instead.

Are your other trust accounts added together?

Yes, at the same bank. The FDIC adds together everything a depositor holds in informal revocable trusts, formal revocable trusts and irrevocable trusts at the same bank, then applies the limit to the total.

The FDIC’s own example is a couple with a $1,500,000 revocable trust savings account naming three children, and a $500,000 payable on death account at the same bank naming three other children. Together that is $2,000,000 and six beneficiaries. Each owner’s limit is $1,250,000, for a combined $2,500,000, so the full balance is insured.

What happens when someone dies?

An owner. The FDIC gives a six-month grace period, during which the account is insured as if the owner were alive. Its example is two owners and three beneficiaries, insured for $1,500,000. Six months after one owner dies, if the account has not been restructured, coverage drops to $750,000.

A beneficiary. No grace period applies. The death of a named beneficiary may immediately reduce coverage, unless the trust names a successor beneficiary.

What common mistakes does the FDIC warn about?

• Counting heads. One owner and one beneficiary is $250,000, not $500,000. The formula multiplies. It does not add up names.
• Counting trustees. Naming a trustee or successor trustee does not change coverage.
• Naming no eligible beneficiary. The deposit would most likely fall under the Single Accounts category, which could put you over its $250,000 limit by accident.

How does this fit with the rest of your plan?

FDIC rules only set how much insurance applies if a bank fails. They do not decide who gets the money, and the FDIC says plainly that depositors should contact a legal or financial advisor for estate planning. So once the coverage math works, the real questions are the ones in your trust.

For those, see our page on living trusts, the comparison of a will or a living trust in Nashville, and does Tennessee tax your estate. Medical decisions are separate again, in the Advance Directive for Health Care.

Why talk with Thompson Law in Nashville?

Attorney Christopher “Kim” Thompson has practiced in Middle Tennessee for over 30 years, and you work directly with him. Call (615) 832-2335 for a free consultation, or contact the firm.