How to Calculate FDIC Guaranteed Deposit Limits

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Most people believe all the money they deposit in the bank is protected by the U.S. government, even if the bank collapses. Unfortunately, as some depositors have discovered, this is not always the case. The Federal Deposit Insurance Corporation (FDIC) has a $53-billion reserve backed by the U.S. Treasury, and it guarantees money deposited in U.S. banks only to certain limits. Knowing these limits can mean the difference between having safe deposits and taking the chance of losing some of your hard earned cash.

Understand the types of legal ownership of bank accounts. The FDIC treats each type of ownership differently, and the amount guaranteed for some types are different. See the Resource Section for the FDIC's explanations on all types of accounts.

Recognize that individual deposits are limited to $100,000.00 per depositor in each FDIC insured bank. This limit includes all checking, savings and Certificate of Deposit (CD) accounts at any one insured bank. For example, if an individual has $10,000.00 in checking, $40,000.00 in savings and a CD of $50,000.00, the total deposits equal $100,000. All the deposits are guaranteed. If two or more individuals hold joint accounts, the limit is $100,000 for each joint holder of the accounts.

Realize some business accounts are treated separately. If a business is a corporation, partnership, LLC or an unincorporated association "engaged in an independent activity," the business account is insured separately at the $100,000.00 limit. An "independent activity" means the account is set up for a legitimate business purpose, and not just an additional account to get around the individual insurance limit. The exception to this separate guaranteed business account for a sole proprietorship. Sole proprietor business accounts are treated as individual accounts and are subject to the aggregate individual limits explained in Step 1.

Consider the FDIC limits on trust accounts. The limit is up to $100,000.00 for each qualified beneficiary of the trust. The trust must be documented, either with a formal legal trust agreement or with a document on file with the bank that shows it is one of the following: A Totten trust, that the funds are "payable-upon-the-death" of the trust grantor, or that it is an "in-trust-for" account. For example, if a trust has five qualified beneficiaries, the account is insured up to $500,000.00. This is a separate amount from any individual accounts the beneficiaries also have at the same bank. See the Resource Section for the definition of "qualified beneficiaries."

Know that retirement accounts may have separate and expanded guarantee limits. IRAs, 457 plans, self-directed 401(k) plans and Keough plans all have $250,000.00 guaranteed limits. However, 403(b) teacher retirement accounts do not get this added limit. Again, these retirement accounts are separate from the individual limits of $100,000.00 on total accounts.

Tips & Warnings

  • If personal, business, trust or retirement accounts exceed the FDIC guaranteed limits, consider spreading the deposits among several insured banks to keep within the FDIC guaranteed limits for each bank. There is no limit on the number of banks you can use use to spread your money around.

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