Ok - so, joint owner with 10 beneficiaries could have up to $1.2 million insured?
CubDave, are you using new math?
Joint owners, 10 beneficiaries (if they each have an equal share under the trust) -- potential insurance of $2 million. BUT if the beneficiaries don't have equal shares, the actual coverage could be half that.
Here's the deal:
POD accounts where everyone has to get an equal share will be insured on a per beneficiary basis, regardless of who the beneficiary is (as long as each is an individual, a charitable organization or a non-profit entity under the Internal Revenue Code) -- up to $100,000 per beneficiary. 20 beneficiaries, one account owner, $2 M potential insurance. 2 account owners (if state law allows POD beneficiaries on a joint account), 20 beneficiaries, $4 million potential coverage (2 owners times 20 beneficiaries, times $100,000 each).
Revocable trusts can get quite complex with beneficiaries getting wildly different allotments. FDIC says to the extent the trust is $500,000 or less and has 5 or more beneficiaries, they aren't going to have their staff waste time studying the provisions of the trust agreement. Instead, they'll just declare it insured for up to $100,000 per beneficiary, up to the $500,000 in the account. Different proportional ownership interests of the beneficiaries in the trust would not affect the deposit insurance coverage for those trusts with balances under $500,000.
If, however, the account for the revocable trust has more than $500,000 (which they say is rare) AND more than 5 fbeneficiaries (both qualifications must be met), the FDIC will actually examine the trust to determine the beneficial interest of each beneficiary and it will be insured up to $100,000 per beneficiary or $500,000 -- whichever is greater.
Example: $800,000 in trust. 2 beneficiaries. Regardless of who gets what, the account will be insured for $200,000 (up to $100,000 per beneficiary because there are fewer than 5 beneficiaries, so the two part test isn't satisfied).
Eample: $800,000 in trust. 8 beneficiaries. FDIC would look at each beneficiary's actual interest and insure each beneficiary's interest up to $100,000. If some of the beneficiaries' interests are less than that, they will be insured for less than that. Let's say 5 of the 8 are supposed to get 1/20 each -- $40,000 in our example (1/4 of the entire trust for the 5 in the aggregate or $200,000 [40X5]) , and the remaining 3 get the remaining 3/4 of the trust ($600,000, or $200,000 each), the two alternative calculations would be
$40,000 Beneficiary 1
$40,000 Beneficiary 2
$40,000 Beneficiary 3
$40,000 Beneficiary 4
$40,000 Beneficiary 5
$200,000 Beneficiary 6 (of which only $100,000 max could be insured)
$200,000 Beneficiary 7 (of which only $100,000 max could be insured)
$200,000 Beneficiary 8 (of which only $100,000 max could be insured)
So, $40,000 x 5 = $200,000, plus $100,000 x 3 = $500,000, so using either formula, the account would be insured for a max of $500,000 under either text. If we change the facts slightly and give Ben. 6 $500,000 and give #7 and #8 $50,000, then under formula 1, the insurance would only amount to $400,000 -- so formula 2 would apply because it would give them $500,000 (which is a greater amount).
If there are two grantors, the coverage is doubled, so it's up to $1M for a trust that has more than 5 beneficiaries, or up to $100,000 (x 2) for the actual interest of each beneficiary up to $100,000 (x 2) per.
Come to my webinar. We'll have flow charts and pictures and all kinds of things to simplify the explanation.