FDIC Temporarily Boosts Insurance Limit to $250,000, Including Trusts

The recently passed Emergency Economic Stabilization Act of 2008 (aka “the bailout bill”) temporarily raises the basic limit on federal deposit insurance coverage (FDIC) from $100,000 to $250,000 per depositor. The legislation provides that the basic deposit insurance limit will return to $100,000 after December 31, 2009.

“This temporary increase in deposit insurance coverage should go far to help consumers maintain confidence in the banking system and the marketplace,” said FDIC Chairman Sheila C. Bair. “And clearly the public’s confidence is key to a healthy and stable economy.”

The rise in insurance coverage applies to trust accounts as well. The owner of a revocable trust is insured up to $250,000 for each beneficiary, provided certain requirements are met and there are no more than five beneficiaries. The temporary coverage increase, coupled with an earlier FDIC interim rule simplifying the rules for determining the coverage available on revocable trust accounts means that the opportunities for increased insurance coverage of revocable trusts — both informal “pay-on-death” or formal “living trusts,” are sizeable — at least in the short term.