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FDIC Question
Old 04-18-2018, 09:16 AM   #1
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FDIC Question

I recently setup three online savings accounts with Discover bank.

One is a joint account with me and my mom. My wife is designated as the beneficiary.

The second is a joint account for my wife and I. Our daughter is designated as the beneficiary.

The third is also a joint account for my wife and I (kept separate for helping her mom), with our daughter as the beneficiary.

Everything is well except my mom is selling her house and we were planning to put the proceeds into her savings account (the first of the three listed). However, this will make the total of the three accounts above the $250,000 FDIC coverage.

I've been reviewing the FDIC web site: https://www.fdic.gov/deposit/covered/categories.html

For joint accounts it sounds like the coverage is $250K PER OWNER, which would give us at least $500K coverage, more than we need.

However, because we designated a beneficiary for each of the savings accounts they're now considered a "Revocable Trust" by the FDIC. If I'm understanding that correctly, that would drop the coverage back down to the $250K level because there's only one beneficiary. That seems odd to me that coverage would drop just because we designated a beneficiary.

Am I misunderstanding the FDIC rules or do I need to move some money to another bank?
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Old 04-18-2018, 09:19 AM   #2
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My general rule is why try to figure out the rules that most bank employees don't even understand? Just open an account at another bank. It's too easy to do. Get the free insurance without worry!
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Old 04-18-2018, 09:30 AM   #3
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I found an FDIC insurance estimator on the FDIC web site https://www5.fdic.gov/edie/calculator.html

I used the balances I think we'll have in the accounts after the various deposits. I don't fully understand the rules, but it looks like we'll be covered. Granted, the likelihood of Discover bank going under is slim, but best to be prepared.

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Old 04-18-2018, 09:35 AM   #4
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Originally Posted by CaliKid View Post
My general rule is why try to figure out the rules that most bank employees don't even understand? Just open an account at another bank. It's too easy to do. Get the free insurance without worry!
I like the simplicity of having everything in one place. It's easier to move money between accounts and whatnot. We already have funds at various banks, I would prefer not to make things even more complicated.

Also, I don't expect our balances to be above $250K for very long anyway. Mom's assisted living and medical expenses will blow through that cash quickly (which is why I'm not bothering with a CD or anything similar).

Ironically, I asked Discover bank about this and they said to ask FDIC directly.
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Old 04-18-2018, 09:52 AM   #5
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Originally Posted by mountainsoft View Post
I like the simplicity of having everything in one place. It's easier to move money between accounts and whatnot. We already have funds at various banks, I would prefer not to make things even more complicated.
...
Ironically, I asked Discover bank about this and they said to ask FDIC directly.
I completely agree with CaliKid.

If the situation is ambiguous, is the potential risk worth taking so you can enjoy the simplicity? Is the simplicity worth a potential $250,000 loss if you or anyone else interprets the rules/situation incorrectly? If/when the disaster occurs, do you think anyone at Discover, FDIC, or anywhere else will stick up for you about what was said many moons ago?

I wouldn't take the chance, whether I felt sure of my understanding or not. It's simply not worth it. You are able to work around the situation to be certain you are completely covered by staying under the $250K limit...that is quite simple to do.
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Old 04-18-2018, 10:24 AM   #6
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I wouldn't take the chance, whether I felt sure of my understanding or not.
If I avoided everything I didn't understand, I wouldn't get very far.

After studying my FDIC report it's actually fairly easy to understand. The FDIC insures up to $250K PER OWNER of all accounts at the bank (for regular savings anyway). For example, I own half of all three joint accounts. As long as my half is under the $250K limit, I'm insured. My wife is also insured for her half of two accounts. And my mom is insured for her half of her account. In our case, that covers the full $342K I'm expecting to have distributed over the three accounts.
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Old 04-18-2018, 10:45 AM   #7
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Originally Posted by mountainsoft View Post
If I avoided everything I didn't understand, I wouldn't get very far.

After studying my FDIC report it's actually fairly easy to understand. The FDIC insures up to $250K PER OWNER of all accounts at the bank (for regular savings anyway). For example, I own half of all three joint accounts. As long as my half is under the $250K limit, I'm insured. My wife is also insured for her half of two accounts. And my mom is insured for her half of her account. In our case, that covers the full $342K I'm expecting to have distributed over the three accounts.
I agree with your thinking of having these types of accounts at one place. I was told and confirmed that at Ally Bank it is 250k per owner, so the total of all joint accounts are covered up to 500k.
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Old 04-18-2018, 11:16 AM   #8
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Glad you posted this as it made me look again and found I am currently uninsured for some of our $ despite what we were told from the bank. If you go to FDIC.gov there is an estimator (Edie the estimator) you can use to check. Really torques me off that the banks are ignorant to their own business!
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Old 04-18-2018, 12:20 PM   #9
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I had occasion to have over $250,000 in IndyMac Bank a number of years ago, back when the basic FDIC insurance limit was $100K.

Having the same concern as OP, I actually called up the FDIC and asked them about the way I had structured my accounts. I believe I had three accounts, each one with one of my three kids as the beneficiary. They confirmed my understanding, that I was indeed covered.

Shortly thereafter, IndyMac Bank failed and went into FDIC receivership. It was an entirely smooth transition and I got back every penny.
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Old 04-18-2018, 12:22 PM   #10
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Now I'm confused about this "per owner" thing.

I went to the EDIE caluculator, listed a single 250k acct, and a joint 500k, with one of the joint owners being the same as the single. It showed all balances were insured.

So the owner has $500k of insurance?
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Old 04-18-2018, 12:44 PM   #11
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Originally Posted by gcgang View Post
I went to the EDIE caluculator, listed a single 250k acct, and a joint 500k, with one of the joint owners being the same as the single. It showed all balances were insured.
So the owner has $500k of insurance?
I believe that's because you have two different account "types".

Single accounts are insured up to 250K. You're also insured for 250K of Joint accounts. Thus your 500K total. The remaining 250K would be covered for the other joint owner. This page at Ally bank explains it fairly well: https://www.ally.com/bank/fdic/

My accounts are all the same type (Joint) but we're covered because each joint owner gets their own 250K coverage.
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