Situation: an individual wants to purchase a new home and provides an earnest money check (say $1,000) to the real estate agent who deposits it in the agent's company account. Since the individual "owns" the money, does that $1,000 count toward the individual's $100,000 limit for deposit insurance coverage? Thank you.

Yes, the funds would be aggregated with the individual funds of the purchaser.

The earnest money would be considered an agency account, subject to the guidelines in Sec. 330.7 of the FDIC insurance rules.

The pertinent part reads as follows:

"Accounts held by an agent, nominee, guardian, custodian or conservator.

(a) Agency or nominee accounts. Funds owned by a principal or principals and deposited into one or more deposit accounts in the name of an agent, custodian or nominee, shall be insured to the same extent as if deposited in the name of the principal(s)."

Thanks Mary Beth. Does it matter if the agent's account is at a different bank?

It certainly does matter.

Deposit insurance coverage is determined on a per institution basis and the funds a depositor has on deposit in one institution are not aggregated with the funds they have on deposit at any other institution for deposit insurance purposes.

(On the other hand, deposits in different branches of the same bank ARE added together.)

Ok, just more one question. So if the principal does not have their own deposit account at the agent's bank, the $1,000 would not be covered? Thank you for your help with this, I just want to make sure I respond correctly.

The deposit would be covered by insurance. It simply would not be aggregated with any other funds of the same depositor (the principal) since that person doesn't have any other funds in the same bank.

So, the funds held for them in the real estate agent's account would be insured for up to $100,000. (But, of course, in this case, the deposit is only $1,000, so the insurance would be $1,000)

One more piece of information. If the real estate agent's account in which the $1,000 earnest money is deposited is not identified on the books of the bank in such a way as to show the fiduciary/agency nature of the deposit, the funds will be considered part of the real estate agent's funds if the bank goes down the toilet. And if the bank records reflect the agency relationship, someone (usually the agency) has to have records to allow the FDIC to pass the insurance coverage through to the correct owner.