F E D E R A L D E P O S I T I N S U R A N C E C O R P O R A T I O N
Winter 2012/2013
Practical Solutions for Protecting Your Money
Plus Common Questions and Misconceptions
• Different ways to be covered by FDIC deposit insurance
• Q&As on billing errors, debit card fraud, credit reports and mortgage help
• What to know when you want to stop or withhold a payment
• Simple strategies for avoiding many financial scams
• Our latest tips for safe mobile banking
F E D E R A L D E P O S I T I N S U R A N C E C O R P O R A T I O N
Winter 2012/2013
Practical Solutions for Protecting Your Money
Plus Common Questions and Misconceptions
• Different ways to be covered by FDIC deposit insurance
• Q&As on billing errors, debit card fraud, credit reports and mortgage help
• What to know when you want to stop or withhold a payment
• Simple strategies for avoiding many financial scams
• Our latest tips for safe mobile banking
F E D E R A L D E P O S I T I N S U R A N C E C O R P O R A T I O N
2Winter 2012/2013FDIC Consumer News
From December 31, 2010, through
December 31, 2012, certain transaction
accounts that pay no interest were
entitled to unlimited deposit insurance
coverage. This special, temporary
protection was created by Congress
to help maintain confidence in the
financial system for depositors who
had large balances in noninterest-
bearing checking accounts, typically for
businesses but any depositor qualified.
Now that the unlimited coverage has
ended, FDIC Consumer News wants to
clear up some common misconceptions
about this law, and a related one.
As in the past, noninterest-bearing
transaction accounts will be insured
up to the standard coverage amount
of at least $250,000, along with
any other deposits held in the same
ownership capacity (such as single
or joint accounts). “We have been
getting questions from depositors who
Unlimited FDIC Insurance for Certain Transaction Accounts Comes to an End
think noninterest-bearing transaction
accounts are no longer insured at all,
and that is incorrect,” emphasized
Martin Becker, Chief of the FDIC’s
Deposit Insurance Section.
Funds in special trust accounts that
lawyers establish for their clients
— commonly known as “Interest
on Lawyer Trust Accounts” or
“IOLTAs” — also will be protected
for at least $250,000. Under a special
exemption, IOLTAs previously qualified
for the temporary unlimited coverage
for noninterest-bearing transaction
accounts even though they can pay
interest. IOLTAs typically hold deposits
for multiple clients, and under the
rules the insurance coverage “passes
through” to each owner’s share of the
account for up to $250,000. “That
means the total, fully insured amount in
the IOLTA account can greatly exceed
$250,000,” Becker explained.
EXPLORING YOUR INSUR A N C E C O V E R A G E
You probably know that the basic FDIC
insurance coverage is $250,000 for each
depositor at each insured institution. But
did you know there are many different
ways depositors can be insured for that
amount?
“The FDIC deposit insurance rules
provide for what are commonly called
separate ‘ownership categories.” What
this means is if the depositor meets
the requirements of an ownership
category, he or she is insured up to at
least $250,000 in those categories,” said
Martin Becker, Chief of the FDIC’s
Deposit Insurance Section.
Here we will look at the six most
common FDIC insurance categories
that apply to individuals and how
depositors could be fully insured at any
one bank if their bank were to fail. Note
that the examples below are solely to
demonstrate ways you can be insured
by the FDIC; they are not intended as a
specific guide for your estate planning.
Single Accounts: The most common
way an individual is covered by FDIC
deposit insurance is to simply open an
account in his or her own name. If the
deposit does not list any beneficiaries,
the depositor’s funds are insured for
up to $250,000 under FDIC’s single
ownership category. So, if John and his
wife Mary each have single-ownership
deposits at the same bank, their
individual accounts there are separately
insured for up to $250,000.
As for John and Mary’s children, minors
typically cannot have bank accounts
unless a custodian has established bank
deposits for them. A common way to
transfer funds to a minor is to set up an
account under the Uniform Transfers
to Minors Act or “UTMA,” as adopted
by the state in which the deposit will be
established. Under UTMA, the minor
child is considered the legal owner of
the funds. Therefore, for the purpose of
FDIC deposit insurance coverage, each
child is insured for up to $250,000 in
total per FDIC-insured bank.
While any amount can be given to a
minor child, federal gift tax laws must
be complied with to avoid taxes. The
maximum gift amount in 2013 that is
excluded from federal taxes, for gifts
from one individual to another, is
$14,000 per year. “Based on current tax
law, parents can each give, free of federal
taxes, a total of $14,000 to each of their
children — $28,000 per child per year,”
noted Calvin Troup, an FDIC Senior
Consumer Affairs Specialist.
Joint Accounts: Two or more people
who are co-owners of funds can have
FDIC deposit insurance coverage under
FDIC Insurance: Understanding the Different Account Categories
How deposits are separately protected up to at least $250,000 at each bank
The standard FDIC deposit
insurance coverage amount of at
least $250,000 per depositor at
each insured institution is still in
effect. In 2008, Congress passed a law
increasing the basic FDIC coverage
from $100,000 to $250,000, but only
through 2013. Then in 2010, the
lawmakers approved a permanent
increase to the $250,000 coverage
amount. However, some depositors
are still asking whether the standard
deposit insurance coverage of $250,000
will revert back to $100,000 at the end
of 2013. “The answer is no, Congress
made permanent the standard coverage
amount of at least $250,000 in 2010,”
Becker stressed.
Any questions? Call toll-free 1-877
ASK-FDIC (1-877-275-3342) or visit
www.fdic.gov/deposit/deposits. Q
From December 31, 2010, through
December 31, 2012, certain transaction
accounts that pay no interest were
entitled to unlimited deposit insurance
coverage. This special, temporary
protection was created by Congress
to help maintain confidence in the
financial system for depositors who
had large balances in noninterest-
bearing checking accounts, typically for
businesses but any depositor qualified.
Now that the unlimited coverage has
ended, FDIC Consumer News wants to
clear up some common misconceptions
about this law, and a related one.
As in the past, noninterest-bearing
transaction accounts will be insured
up to the standard coverage amount
of at least $250,000, along with
any other deposits held in the same
ownership capacity (such as single
or joint accounts). “We have been
getting questions from depositors who
Unlimited FDIC Insurance for Certain Transaction Accounts Comes to an End
think noninterest-bearing transaction
accounts are no longer insured at all,
and that is incorrect,” emphasized
Martin Becker, Chief of the FDIC’s
Deposit Insurance Section.
Funds in special trust accounts that
lawyers establish for their clients
— commonly known as “Interest
on Lawyer Trust Accounts” or
“IOLTAs” — also will be protected
for at least $250,000. Under a special
exemption, IOLTAs previously qualified
for the temporary unlimited coverage
for noninterest-bearing transaction
accounts even though they can pay
interest. IOLTAs typically hold deposits
for multiple clients, and under the
rules the insurance coverage “passes
through” to each owner’s share of the
account for up to $250,000. “That
means the total, fully insured amount in
the IOLTA account can greatly exceed
$250,000,” Becker explained.
EXPLORING YOUR INSUR A N C E C O V E R A G E
You probably know that the basic FDIC
insurance coverage is $250,000 for each
depositor at each insured institution. But
did you know there are many different
ways depositors can be insured for that
amount?
“The FDIC deposit insurance rules
provide for what are commonly called
separate ‘ownership categories.” What
this means is if the depositor meets
the requirements of an ownership
category, he or she is insured up to at
least $250,000 in those categories,” said
Martin Becker, Chief of the FDIC’s
Deposit Insurance Section.
Here we will look at the six most
common FDIC insurance categories
that apply to individuals and how
depositors could be fully insured at any
one bank if their bank were to fail. Note
that the examples below are solely to
demonstrate ways you can be insured
by the FDIC; they are not intended as a
specific guide for your estate planning.
Single Accounts: The most common
way an individual is covered by FDIC
deposit insurance is to simply open an
account in his or her own name. If the
deposit does not list any beneficiaries,
the depositor’s funds are insured for
up to $250,000 under FDIC’s single
ownership category. So, if John and his
wife Mary each have single-ownership
deposits at the same bank, their
individual accounts there are separately
insured for up to $250,000.
As for John and Mary’s children, minors
typically cannot have bank accounts
unless a custodian has established bank
deposits for them. A common way to
transfer funds to a minor is to set up an
account under the Uniform Transfers
to Minors Act or “UTMA,” as adopted
by the state in which the deposit will be
established. Under UTMA, the minor
child is considered the legal owner of
the funds. Therefore, for the purpose of
FDIC deposit insurance coverage, each
child is insured for up to $250,000 in
total per FDIC-insured bank.
While any amount can be given to a
minor child, federal gift tax laws must
be complied with to avoid taxes. The
maximum gift amount in 2013 that is
excluded from federal taxes, for gifts
from one individual to another, is
$14,000 per year. “Based on current tax
law, parents can each give, free of federal
taxes, a total of $14,000 to each of their
children — $28,000 per child per year,”
noted Calvin Troup, an FDIC Senior
Consumer Affairs Specialist.
Joint Accounts: Two or more people
who are co-owners of funds can have
FDIC deposit insurance coverage under
FDIC Insurance: Understanding the Different Account Categories
How deposits are separately protected up to at least $250,000 at each bank
The standard FDIC deposit
insurance coverage amount of at
least $250,000 per depositor at
each insured institution is still in
effect. In 2008, Congress passed a law
increasing the basic FDIC coverage
from $100,000 to $250,000, but only
through 2013. Then in 2010, the
lawmakers approved a permanent
increase to the $250,000 coverage
amount. However, some depositors
are still asking whether the standard
deposit insurance coverage of $250,000
will revert back to $100,000 at the end
of 2013. “The answer is no, Congress
made permanent the standard coverage
amount of at least $250,000 in 2010,”
Becker stressed.
Any questions? Call toll-free 1-877
ASK-FDIC (1-877-275-3342) or visit
www.fdic.gov/deposit/deposits. Q