What Is The FDIC & What Does It Mean?

What the FDIC is and what it means.

With the economy in a recession and there not being many signs of life out there, understanding the banks and how our money works is more important than ever. This includes the FDIC. The FDIC is the Federal Deposit Insurance Corporation. However, they are not part of the government, they are independent agency. The primary purpose of the FDIC is to protect deposits that are made into a bank in the event that the bank goes under. Any person that uses a United States bank that is insured by the FDIC receives the protection, it is not only for United State citizens, it is for anyone that deposits their money into an FDIC bank.

The FDIC covers all deposits made into the banking institution. This includes checking, saving, money markets, negotiable orders and certificates of deposits, CDs. The cover is dollar for dollar, meaning the entire amount is covered, plus any interest that may have accrued while it is in the bank.However, there is a limit to the amount of coverage that the FDIC offers. Currently, the FDIC offers coverage up to $250,000 until 2013. So, if a person does have more money than this, it is best to split the money up between different banks, so that all the money is covered, not just up to $250,000. Come 2014 the amount of coverage will be reduced to $100,000, except for retirement accounts which will keep the $250,000 limit coverage. Again, this is the maximum amount of coverage an individual can receive at a given bank. So, if a person has multiple accounts that total more than $250,000 only up to $250,000 will be covered while the rest will not. Again, splitting this kind of money up into different banks is important.

The FDIC does not cover stocks, bonds, mutual funds, life insurance, annuities, municipal securities, safe deposit boxes and their contents, treasury bills, notes or binds either. However, with the treasury bills, notes an bonds these are protected by the federal government. Which right now is not much of a protection and no guarantee as of late.

There are different types of ownership categories, which may give more than $250,000 coverage while a customer is at the same bank. There are single accounts, joint accounts, some retirement accounts, revocable trusts, irrevocable trusts, corporation/partnership/unincorporated association accounts, government accounts and employee benefit plan accounts. A single account holder is insured up to $250,000, no matter how many accounts they have a one given bank. The multiple accounts would be added together and up to $250,000 would be covered. The retirement accounts include traditional IRAs, Roth IRAs, SEP IRAs and Simple IRAs. These accounts would be totaled together for a $250,000 coverage amount. A joint account can allow more coverage when both owners are people, both people have equal rights to the account and both owners sign the deposit account signature. This means that an account that has more than $250,000, say $400,000 will be completely covered, because each owner will receive $250,000 coverage from the FDIC. However, this also means that the two owners do not have any other joint accounts at the bank.A revocable trust account is covered up to $250,000 for each beneficiary if the account title is held to the trust relationship, the beneficiaries are named and the beneficiary is a living person, charity or non profit organization. Irrevocable trust accounts are covered up to $250,000 as long as the trust is valid, the owners bank records show the trust relationship, beneficiaries are able to be identified and the beneficiaries interest is not contingent. Employee benefit plan accounts, corporation/partnership/unincorporated association accounts and government accounts are covered up to $250,000 when all monies have been added together.

Multiple coverage can be received when there are multiple accounts that meet each requirement. Which then can mean keeping all money in the same bank. For example, two individuals each have an individual account, they also have a joint account together, they each have an individual IRA, they each have a revocable trust with the other person being the beneficiary, plus they have a joint living trust with their children named as the beneficiaries.


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