Topic: Deposit Insurance Coverage
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Based on a recent FDIC financial institution letter (FIL), can we no longer subtract collateralized amounts from our uninsured deposits?
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We do not believe that banks may reduce uninsured deposits to reflect collateralization of deposits by pledged assets when reporting estimated uninsured deposits on their Call Reports. If you have subtracted collateralized amounts from uninsured deposits on Call Reports in the past, we believe you must amend these Call Reports as advised in the FDIC’s…
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We have a client who manages a deposit and savings account, which are titled as revocable trusts. The trusts are now irrevocable because the owner died two years ago. However, the accounts are “ten-year trusts” — ten years after the owner’s death, the trust will automatically split up among the four beneficiaries (or last man standing). The trust manager is one of these beneficiaries. Is each beneficiary covered by deposit insurance up to $250,000 at this time, or does the ten-year delay somehow come into play?
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We believe that the trust account funds are insured in an amount of $1,000,000, or $250,000 for each beneficiary — provided that the beneficiaries are named in the account title or in your account records and that they are natural persons, charitable organizations, or nonprofits. The FDIC’s current deposit insurance coverage regulations for revocable trust…
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A customer with a campaign account under his name and social security number would like to change the account type from “individual” to “non-profit, political organization,” as he now has a non-profit entity with an employer identification number (EIN). The customer currently holds a political office and has a handful of employees, each of whom he would like to be issued a debit card for the account. Are there any Illinois guidelines we must follow for this type of account, and what type of FDIC insurance is available for this type of account?
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We recommend closing the campaign account under the customer’s name and social security number and opening a new account for the non-profit entity using its EIN. We also recommend following your Customer Identification Program (CIP) procedures for non-profit organizations, since your customer’s organization technically is a new customer for your bank. The Illinois Election Code…
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We are an Illinois state-chartered nonmember bank, and our trust department has a master deposit account for our trust funds. We would like to pledge securities to this account to provide additional deposit protection for trusts that occasionally exceed the FDIC insurance limits. Are there any regulations or requirements we need to be aware of to establish this pledging?
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Generally, Illinois state banks may pledge their assets to secure private trust funds, but they must seek the FDIC’s approval before doing so. Additionally, we recommend reviewing the individual trust account agreements to determine whether any collateralization requirements apply to trust funds. The FDIC Trust Examination Manual states that “in order for a state nonmember…
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We have a potential business customer that is a receivership and asset management company. The company has a court order appointing it as receiver for a distressed condominium building, which it has full authority to operate, manage and conserve. The company would like to open a business checking account titled in its name, while using the tax identification number for the building’s condominium association. We are not comfortable with this title format and would like to know the correct way to title the account. Also, all checks deposited into the account will be made payable to the company as receiver for the building.
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We recommend titling the account to indicate the fiduciary nature of your customer’s relationship with the condo association for deposit insurance purposes. For example, you could title the account as [Company Name], Receiver/Agent/Custodian for [Condo Association Name]. The FDIC’s deposit insurance rules provide separate deposit insurance for the principal in a fiduciary relationship (the condominium…
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Our bank is purchasing the custodial rights for a portfolio of brokered certificates of deposit (CDs) from a bank that previously was the deposit broker for the CDs. Our bank will become the deposit broker and custodian of the CDs, which have individual owners and are deposited at a separate bank. However, the CD accounts at the depository bank will be held in our name with our EIN, and we will receive a percentage of the interest from the CDs. Along with the portfolio, we will receive one year’s worth of physical records for the CDs and all prior records for the CDs in electronic form. The records will include the identifying information for the owners of the CDs that the selling bank obtained as part of its Customer Identification Program (CIP). We will not conduct our own CIP for these accounts. What are the record retention requirements for these documents?
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Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021. Please note that this change may affect the continued accuracy of this guidance as it pertains to the ECSA. We believe that your bank should retain any identifying information for the individual owners of…
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We have a charitable foundation customer that has opened dozens of accounts with our bank, each with a distinct name and purpose. The foundation opens these accounts for individuals and groups who want to fund a charitable purpose and acts as fiduciary for the accounts. Should each of these accounts be treated separately for FDIC insurance purposes, or should they be lumped together? The foundation’s EIN is listed for each of the accounts, and the FDIC’s Electronic Deposit Insurance Estimator (EDIE) lumps all of the accounts together.
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We believe that these accounts could be insured separately as fiduciary accounts, provided that your bank’s account records expressly disclose the fiduciary relationship between the charitable foundation and the individuals and groups for which it holds accounts. For purposes of FDIC deposit insurance, the charitable foundation will be considered an agent for each of these…
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A customer opened a joint account with her daughter, who is younger than one year old. The mother signed the account agreement on behalf of her child as “child’s name by mother’s name, mother.” Is it permissible for a minor to be added as a joint owner on an account with a right of survivorship when the child to too young to sign their name? Does the child technically have transaction authority on the account? Is the account FDIC insured?
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The Illinois Banking Act permits banks to establish deposit accounts for minors with the same terms as if the minor is an adult. However, it is not clear under Illinois law whether a parent’s signature on behalf of a minor would be binding to create a joint tenancy with a right of survivorship for an…
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One of our business customers set up several 401(k) accounts several years ago. We opened the accounts as traditional IRAs, named in the company’s name. The company’s owner signed the signature cards. The only document showing the employee’s signature is a form provided by the company showing that the employee marked that they want to hold the IRA at our bank. Is that correct? We are concerned that one of the employees took an early distribution for a family funeral expense — and because the company is set up as the IRA’s primary owner, we send an IRS 1099-R form to the company as well as the employee.
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If these accounts truly are 401(k) accounts, they should not have been set up as Traditional IRAs. Because vastly different tax rules and reporting requirements apply to these types of accounts, it is important to correctly identify the accounts as 401(k) accounts rather than IRAs in your account records. The 1099-R form used to report…
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What would be the maximum FDIC insurance on an account held by an S-Corp or C-Corp owned by two or more people?
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The standard maximum deposit insurance amount (SMDIA) for accounts held by corporations, whether classified as S Corporations or C Corporations, is $250,000. As a general rule, the number of partners, members or stockholders established by a corporation does not affect insurance coverage, and the personal accounts of a corporation’s partners, members or stockholders are not…