How a Revocable Living Trust Can Increase FDIC Insurance on Your Bank Accounts
When you have significant financial assets, it’s important to consider how to protect them in the event of an unexpected loss. One way to do this is by setting up a revocable living trust and using it to hold your bank accounts. Doing so can increase the amount of FDIC insurance coverage on your accounts, which can provide peace of mind and added protection for your wealth.
First, let’s define some key terms. A revocable living trust is a legal document that allows you to transfer ownership of your assets to a trust while still maintaining control over them during your lifetime. The trust can be amended or revoked at any time, making it a flexible estate planning tool. FDIC insurance is a type of protection offered by the Federal Deposit Insurance Corporation, which insures deposits in participating banks and savings institutions against loss in the event of a bank failure.
So how does setting up a revocable living trust and using it to hold your bank accounts increase the amount of FDIC insurance coverage on those accounts? Let’s take a look at an example:
Suppose you have a bank account with a balance of $500,000 and three beneficiaries listed on the account. Under FDIC rules, each account holder is insured up to $250,000 per ownership category per bank. In this case, there are three account holders, so the total insurance coverage would be $750,000 ($250,000 per beneficiary).
However, if you transfer the ownership of the account to a revocable living trust with the same three beneficiaries listed, each beneficiary would be insured up to $250,000 per ownership category per bank, just like before. But now there is an additional ownership category: the trust itself. That means the account would be insured up to $1,000,000 ($250,000 per beneficiary and $250,000 for the trust).
By using a revocable living trust to hold your bank accounts, you can effectively increase the amount of FDIC insurance coverage on those accounts. This can be particularly valuable if you have multiple bank accounts with large balances, as it allows you to maximize your insurance coverage without having to spread your funds across multiple banks.
It’s worth noting that there are some important considerations to keep in mind when setting up a revocable living trust for your bank accounts. For example, you’ll need to ensure that the trust is properly structured and that the beneficiaries are listed correctly in order to take advantage of the increased insurance coverage. It’s also important to work with a qualified attorney who can help you navigate the legal complexities involved in setting up and maintaining a trust.
In conclusion, setting up a revocable living trust and using it to hold your bank accounts can be a smart way to increase the amount of FDIC insurance coverage on those accounts. By doing so, you can provide added protection for your wealth and enjoy greater peace of mind knowing that your assets are safeguarded against unexpected loss.
For more information on asset protection, contact Antonoplos & Associates to schedule an asset protection consultation.