|
|
|
 |
Compliance Gurus
Lending Gurus
Security Gurus
Marketing Gurus
Technology Gurus
eBanking Gurus
|
Insurance Of Revocable Trusts
Answers by Ken Golliher and Mary Beth Guard, BOL Gurus
QUESTION: Does the existence of a non-qualifying beneficiary negate the deposit insurance coverage of the interests of other qualifiying beneficiaries in a "living trust?" For example, a portion of the funds are to go to a charity, with the balance to the grantors children. Let's say the revocable trust agreement calls for $20,000 to go to a charity with $100,000 to each of two children. Will the portion of the funds for the two children be insured under the revocable trust rules, even though the $20,000 is to a non-qualified beneficiary?
ANSWER by Ken Golliher:
BIO AND CONTACT INFO
Following is an excerpt from the FDIC's 1999 memorandum, "Deposit Insurance on Revocable Trust Accounts"
The insurance of revocable trust funds is a highly complicated topic. Revocable trust documents can be many pages in length, and vary greatly in their terms, with a single term making a big difference in the amount of insurance coverage permitted. For this reason, it is difficult to make quick and easy statements about how these trust accounts are insured.
For your question, my answer to another banker is that there is no provision that the existence of nonqualifying beneficiaries negates coverage for qualifying beneficiaries. However, if I was still a real banker and heard myself advising a customer to this effect I would know that I should go back and re-read the preceding paragraph.
Bankers who get questions on deposit insurance for revocable trusts supported by written documentation should provide their customers with a copy of the memorandum referenced above and leave it at that.
ANSWER by Mary Beth Guard:
BIO AND CONTACT INFO
As a side note, it's also important to remember that even if a beneficiary appears to fall within the categories of qualifying beneficiary (spouse, child, grandchild, parent, or sibling), they still may not be entitled to per beneficiary FDIC insurance coverage if their interest is subject to what FDIC calls a "defeating contingency" -- i.e. a condition or restriction which may prevent them from being entitled to receive their share (such as a provision in a trust from Tom Cruise's mother that says he is to get the funds only if he remarries Nicole Kidman).
While it's certainly feasible for a banker to explain to a customer the general provisions relating to insurance of revocable trusts, it's best to let the customer's lawyer, who is most familiar with the trust document, determine how those provisions will apply.
First published on BankersOnline.com 2/4/02
Home | Compliance | Lending | Operations | Security | Marketing | Technology | eBanking
BOL Archives Privacy Policy Important Disclaimer Recommend This Site ! Contact Us
BankersOnline is a free service made possible by the generous support of our
advertisers and sponsors. Advertisers and sponsors are not responsible for site content. Please help us keep BankersOnline FREE to all
banking professionals. Support our advertisers and sponsors by clicking
through to learn more about their products and services.
|
|
|
Print Friendly!
Email This Article!
Discuss NOW!