I need some help as I've never run across this before.

Customer opens a CD as joint ownership between he and his wife. The beneficiary is their IRREVOCABLE trust, which, allegedly is already established. How does FDIC Insurance work on this? I know you can identify a LIVING trust as the beneficiary and then count the number of persons named as beneficiaries in the trust.

However, I've never seen anyone name an IRREVOCALBE trust and when I entered into EDIE, it wasn't even an option. Given that, I'd say they are covered for upot to $500,000 and if the CD is laarger, the excess would not be covered...correct?

And in most states, can an IRREVOCABLE trust be a beneficiary?

Note the last two paragraphs in this FDIC memo. What you really need to know is whether your state, not the majority of states, would recognize a trust as a POD beneficiary.

Doug: As Ken notes, you need to look at the controlling state law to determine if a trust can be a POD beneficiary. If the bank account in question was opened in NM, you will need to review Chapter 45 of the NMSA to determine if a trust is a "person" within the meaning of 45-6-201(C).

The answer to the state law question has nothing to do with your FDIC coverage question as FDIC regulations control the answer to that part of your question.

FDIC Regulation 330.10(c) provides eligible beneficiaries for a revocable trust account must be an individual or a charity recognized by the IRS. FDIC has adopted the policy of looking through revocable trusts when they are listed as POD beneficiaries and determining coverage based on the trust's beneficiaries. Section 330.10(h) provides an irrevocable trust which was originally a revocable trust will continue to be treated as a revocable trust for insurance coverage purposes. Your post doesn't indicate if the trust was originally a revocable trust which subsequently became an irrevocable trust.

Assuming the trust was established as an irrevocable trust from day 1, then the trust would not be an eligible beneficiary per 330.10(c). You then must look at 330.10(d) which provides:

(d) Interests of beneficiaries outside the definition of beneficiary in this section. If a beneficiary named in a trust covered by this section does not meet the definition of beneficiary in paragraph (c) of this section, the funds corresponding to that beneficiary shall be treated as the individually owned (single ownership) funds of the owner(s). As such, they shall be aggregated with any other single ownership accounts of such owner(s) and insured up to the SMDIA per owner. (Example: Account Owner "A" establishes a payable-on-death account naming a pet as beneficiary with a balance of $100,000. A also has an individual account at the same FDIC-insured institution with a balance of $175,000. Because the pet is not a "beneficiary," the two accounts are aggregated and treated as a single ownership account. As a result, A is insured in the amount of $250,000, but is uninsured for the remaining $25,000.)

As you can see, the funds will be insured under the individual ownership category and must be aggregated with any other funds the individual owner has on deposit (either in their name or held for their benefit in a custodial account which is eligible for pass-through coverage) with the same bank. Your post doesn't indicate if the trust owners have any individual accounts on deposit with your bank or are the beneficiaries of a custodial account. If the owners' respective share of the trust CD funds must be aggregated with other funds, then the owners may not have full coverage for the trust CD.

I find it best for a bank not to make coverage determinations for its customers because a bank may not take the aggregation and pass-through coverage rules into consideration, and then the bank risks providing an incorrect calculation to its customers. I believe it best to refer the customer to the FDIC rules and suggest the customer contact the FDIC for an explanation of how those rules will be applied to them in connection with the determination of the extent of their coverage.