By Attorney Dan Vu
There are many benefits to having a trust. There are plenty of blogs on this website that tout the major benefits which, depending on what type of trust you have, can run from avoiding probate or achieving tax savings to protecting assets from the cost of long term care. However, there are some relatively unknown benefits that trusts also have. These benefits, in the right situation, can be a major help.
For example, did you know that your bank accounts can be FDIC insured to a higher maximum amount if they are owned by a trust? Normally, the FDIC will insure an owner up to $250,000. Consider this: If you have $300,000 in a bank account titled to you alone, $50,000 will not be insured in the event your bank cannot honor your deposits (that is, if they go under). On the other hand, if your trust is the owner of your bank account, FDIC insurance is based on the number of beneficiaries you named in the trust. So, with our example of a $300,000 bank account, FDIC insurance is calculated by multiply $250,000 by the number of beneficiaries you named. For example, if you are single individual, and your trust has named your three children as the death beneficiaries, the FDIC will cover your bank account up to $750,000 (3 X $250,000). So even though your death beneficiaries have zero ownership over the trust during your life, the FDIC will insure you in consideration for their future interest.
As a warning, the rules get complex if you start changing the type of ownership and the amount of beneficiaries. The easiest way to determine your FDIC insured amount is to use their calculator.
They call it the EDIE Estimator. Use this calculator to determine your FDIC insurance. You can find the link here: https://www.fdic.gov/edie/calculator.html
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