By Jeff Roth
With all of the national concerns, even protection of our funds in a nationally insured banking institution can be at issue. Several years ago the government increased the amount of coverage from $100,000.00 to $250,000.00 per depositor, per insured bank, for each account ownership category. The government devised a very complicated formula to determine exactly how much would be protected. It combines the entire depositor’s like accounts in the calculation. Protection is granted based on ownership and stated beneficiaries.
Single accounts are accounts that are held by one person in their individual name. The total of account protection for each banking institution is $250,000.00. This would include checking, savings, money markets or certificates of deposit or any form of those listed. All of these accounts are added together and considered one for insurance purposes. It has nothing to do with the number of accounts but rather the ownership of the accounts. Included in this category are any business accounts that are held in a “doing business as” nature. The account is separate only if it is a corporation or totally separate entity and has its own identification number, otherwise it is included in the above account totals.
This is an account owned by two or more individuals. This would include joint with rights of survivor or tenants in common. Each person may have a total of $250,000.00 in any one banking institution. Each owner is considered to have an equal ownership interest unless clearly stated otherwise. If there are three owners then each has a one-third ownership. Each co-owner must have signed the signature card and have an equal right of withdrawal. If a person has $200,000.00 in various individual accounts and is a 1/2 owner of an account that has $160,000.00 then he or she will have coverage of a total of $250,000.00 and $30,000.00 will not be covered. All accounts are considered taken together and the use of the social security number is not relevant for insurance protection qualification.
Payable on death accounts
This is an account with a stated beneficiary. One must know the correct rules to guarantee protection. These accounts protect the beneficiary. If there are two beneficiaries and one dies, coverage terminates as to that beneficiary and only half of the account would be covered. Bank input is important to insure proper protection on this type of account.
Individual retirement accounts
This is an account that is owned and directed by you and not the plan administrator. This includes, IRAs, Roth IRAs, 401(k), Keogh plans, simplified Employed Pension Accounts and all 457 accounts. All self-directed funds owned by the same person are added together and protected up to $250,000.00 in each banking institution. It is irrelevant how many beneficiaries are listed. The only determination is $250,000.00 for each owner in each banking institution. Remember, this relates only to money accounts in an insured bank. This has nothing to do with stock. If an individual has seven different accounts ranging from $20,000.00 to $100,000.00 and many beneficiaries listed such as children and grandchildren only a total of $250,000.00 is covered and the balance is uninsured.