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The Mathematics of FDIC Insurance
I was told if I am an account holder I am insured in the amount of holder x beneficiaries for FDIC - is this correct?
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 That's basically correct. There's a little more to it, though.
The FDIC does provide separate deposit insurance for what it calls "revocable trust accounts." These are accounts on which you have made clear your intention, reflected on the bank's records,that you intend the funds in the accounts to become the property of named qualified beneficiaries upon your death. Your bank may require that you open a separate account for each named beneficiary, or may permit you to name multiple beneficiaries on one account. The account has to include in its title some indication of that intent. For example, depending on state laws, your account might use the words "in trust for" or "as trustee for" or "payable on death." Abbreviations, such as ITF, TTEE, POD convey the same meaning.
Any individual (no kinship required), or any charity or non-profit recognized under the Internal Revenue Code qualifies as a beneficiary for this purpose.
The FDIC coverage amount is $250,000 for each named, qualified beneficiary (a pet would not be qualified). For example, if you have $2.5 million on deposit in the bank in revocable trust accounts naming your spouse, three children and six grandchildren as beneficiaries, there are ten qualified beneficiaries, and all $2.5 million will be insured.
Note:These amounts reflect deposit insurance limits that were increased in October 2008. That increase was made permanent with the signing of the Dodd-Frank Wall Street Reform and Consumer Protection Act on 7/21/2010.
The former restriction of coverage to "qualified beneficiaries" (immediate family members) was lifted in a 9/26/2008 change. Coverage is now capped at $250,000 per beneficiary per depositor. For depositors with more than $1,250,000 in revocable trust accounts and more than five beneficiaries, the coverage is the greater of either $1,250,000 or the sum of all the named beneficiaries' proportional interests in the trusts, limited to $250,000 per different beneficiary.
Published on BankingQuestions.com 7/31/08
Updated 10/8/08; 6/16/09; 7/21/10
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