Business Heaven/Business Heaven.iso/office/lguide1/fdic2.tut

Text File | 1993-01-06 | 14.4 KB | 295 lines

#help.tut EXTRA HELP FOR TUTORIALS
#define.stb ON LINE LEGAL GLOSSARY
/* This is part 2 of the official text of the Federal Deposit Insurance
Corporation's informational booklet on Federal Deposit Insurance.
With banks failing, we thought you'd like to know if you are in
an insured account what your rights are. */


12. If a person has an interest in more than one joint account,
what is the extent of his or her insurance coverage?

All joint accounts owned by the same combination of individuals
are first added together and the total is insurable to $ 100,000.
Then the person's insurable interests in each joint account owned
by different combinations of individuals are added together and
the total is insured up to the $ 100,000 maximum. For example,
assume that H and W own a joint account containing $ 105,000 and
H and C own a joint account containing $ 80,000. The $ 105,000
account owned by H and W is insured only to $ 100,000, leaving $
5,000 uninsured. Since the interests of the co-owners of a joint
account are deemed equal for insurance purposes (except in the
case of a tenancy in common if unequal interests are shown on the
account records of the bank), the $ 100,000 is prorated equally
between H and W, giving each an insurable interest of $ 50,000;
the $80,000 in the other account is prorated equally between H
and C, giving each $ 40,000 insurable interest in that account.
Thus, H has a total insurable interest of $ 9O,000 in the two
accounts, and W and C have insurable interests of $ 50,000 and $
40,000 respectively. Since no person's total insurable interest
exceeds the $ 100,000 limit, the two accounts totaling $ 185,000
are entitled to $ 180,000 in insurance, representing the sum of
the total insurable interests of each co-owner.

13. What is the insurance coverage on a revocable trust account,
a tentative or "Totten" trust account, or a "payable-on-death"
account?

These accounts, or any similar accounts in which the funds are
intended to pass on the death of the owner to a named
beneficiary, are considered testamentary accounts and are insured
as a form of individual account. If the beneficiary is a spouse,
child, or grandchild of the owner, the funds are insured for each
owner up to a total of $ 100,000 separately from any other
individual accounts of the owner. If the beneficiary is other
than a spouse, child or grandchild of the owner, the funds in the
account are added to any other individual accounts of the owner
and insured to a total of $ 100,000. In the case of a revocable
trust account, the person who holds the power of revocation is
considered the owner of the funds in the account.

If such an account is maintained by two or more owners and held
for the benefit of others who are within the qualifying degree of
kinship, the respective interest of each owner held for the
benefit of each beneficiary will be separately insured up to the
total amount of $ 100,000. For example, assume H and W establish
a testamentary account in the amount of $ 400,000 in favor
of their children A and B. During his lifetime H is insured up to
$ 100,000 as to A and up to $ 100,000 as to B separately form his
individually owned account. W is similarly insured for her
interest in the deposit. The maximum insurance coverage for the
deposit is $ 400,000. However, assume H and W establish a
testamentary account of $ 400,000 naming themselves as grantors,
for the benefit of their child A and nephew C. Since C is not
within the qualifying degree of kinship, $ 100,000 of the $
400,000, representing C's beneficial interest derived from H,
will be combined with any individually held funds of H and
insured in the aggregate to $ 100,000. Likewise $ 100,000 of the
$ 400,000 representing C's beneficial interest derived from W
will be combined with any individually held funds of@ and insured
in the aggregate to $ 100,000. In addition, the interests of H
and W held for the benefit of their child A will each be insured
up to the maximum amount of $ 100,000, or a total of $ 200,000.


TRUST ACCOUNTS

14. What is the insurance coverage on a trust account held under
the provisions of an irrevocable express trust?

The trust interest of a beneficiary in a valid irrevocable trust,
if capable of evaluation in accordance with published rules, is
insured up to $100,000 separately from the individual accounts of
the trustee or other beneficiary. However, all trust interests
created by the same settlor (grantor) in the same bank for the
same beneficiary will be added together and insured in the
aggregate to the maximum of $100,000.

15. Where an insured bank acts as trustee, guardian,
administrator, executor, agent, or in some other fiduciary
capacity, are the uninvested funds so held by the insured
bank protected by insurance?

Yes. The uninvested funds of each separate trust estate held  by
an insured bank in a fiduciary capacity are insured to a maximum
of $100,000.

16. Is an interest in a pension or profit sharing account insured
any differently than a depositor's individual account?

Yes. For insurance purposes, pension and profit sharing deposits
are considered to be trust funds. Each participant's interest in
such a fund is insured to $100,000, in addition to the $100,000
allowed on his or her individually owned funds. This is true even
though the funds of several participants in a pension or profit
sharing plan are deposited by the trustee in the same
account.

17. May a person receive separate insurance on each of several
pension or profit sharing plans established by his/her employer
with the same bank?

No. Except provided below with respect to IRA and Keogh funds, if
two or more pension plans, or a profit sharing plan and a pension
plan, are established by an employer for the same individual, the
beneficiary's interest in the two accounts will be added together
in computing deposit insurance.

18. What insurance coverage is provided for IRA and Keogh
deposits?

IRA and Keogh funds, when held by the bank in a trust or
custodial capacity, are insured separately from other deposits.

IRA and Keogh funds held in time or savings deposits are insured
up to the maximum of $100,000 and funds held in demand deposits
are, in most cases, separately insured to the maximum of
$100,000. Alternatively, IRA and Keogh funds held by a nonbank
trustee or custodian and deposited in a time or savings deposit
in an insured bank are separately insured to the maximum of
$100,000.

SPECIAL TYPES OF ACCOUNTS

19. Are accounts held by a person as executor, administrator,
guardian, custodian, or in some other similar fiduciary capacity
insured separately from his or her individual account?

Yes. If the records of the bank indicate that the person is
depositing the funds in a fiduciary capacity, such funds are
insured separately from the fiduciary's individually owned
account. Funds in an account held by an executor or administrator
are insured as funds of the decedent's estate. Funds in accounts
held by guardians, conservators or custodians (whether court-
appointed or not) are insured as funds owned by the ward and are
added to any individual accounts of the ward in determining the
$100,000 maximum.


OTHER QUESTIONS

20. When an account is held by a person designated as agent for
the true owner of the funds, how is the account insured?

The account is insured as an account of the principal or true
owner. The funds in the account are added to any other accounts
owned by the true owner and the total is insured to the maximum
of $100,000.

21. Is an account held by a corporation, partnership, or
unincorporated association insured separately from the individual
accounts of stockholders, partners, or members?

Yes. If the corporation, partnership, or unincorporated
association is engaged in an independent activity, its account is
separately insured to a total of $100,000.

The term "independent activity" means any activity other than one
directed solely at increasing insurance coverage.

22. Where a corporation, partnership, association or other
organization maintains two or more separate accounts with the
same bank, are the accounts separately insured if the funds in
each are earmarked for different purposes (except funds held
specifically in a trust, agency or similar fiduciary capacity
which may be used for no purpose other than that indicated)?

No. Except as noted below, since all of the funds are owned by
the same organization, the accounts are added together and
insured only to $100,000 in the aggregate.

However, where deposits are held by a corporation, partnership,
association, or other organization, or by an insured bank in a
trust, agency or similar fiduciary capacity, the rules governing
insurance of trust or custodial accounts apply- (See examples in
preceding items 14 through 20.)

23. If a depositor has more then $100,000 on deposit in a closed
insured bank, does he or she retain a claim against the bank for
the amount of the deposits in excess of the $100,000 insurance
paid by the Corporation?

Yes. Owners of deposit claims in excess of $100,000 will share,
pro rata, in any proceeds from the liquidation of the bank's
assets with any other creditors of equal standing, including the
Corporation.

24. Can a bank's membership in the FDIC be terminated?

Yes, but notice is always given to depositors before termination
of insurance. Insurance protection does not stop immediately
after termination, but continues up to two years on deposits
existing at the date of termination, less subsequent withdrawals,
up to the $100,000 maximum. In the event the deposits of a bank
are assumed by another insured bank, the demand and savings
deposits which are assumed continue to be separately insured for
a period of six months. Time deposits are separately insured to
the earliest maturity date after the six-month period.

GLOSSARY OF TERMS *

Beneficial interest - Interest or right of the person who is to
receive benefits under a trust, will, or similar transfer of
property.

Commercial Bank - A financial institution which offers checking
accounts and short-term loans to the general public as well as to
businesses.

Demand Deposit - A Bank deposit which does not earn interest and
can be withdrawn at any time or in less than seven days.

Fiduciary - Someone holding a position of trust or confidence
recognized by the law.

IRA and Keogh Accounts - Accounts allowing individuals to set
aside a certain percentage of income without incurring tax
liability until retirement.

Mutual Savings Bank - A bank in which depositors are the owners
and share in the earnings.

Negotiable Instrument - An unconditional written promise to pay a
specified sum of money at a specified date to the order of a
specified payee or the bearer.

Right and Capacity - The terms "right" and "capacity" refer to
the nature of the ownership deposits, etc.

Savings Deposit - A bank deposit which earns interest on the
balance periodically and on which the bank may require seven days
notice prior to withdrawal.

Settlor or Grantor - Someone who creates a trust.

Tenancy - Possession under right or title.

Testamentary - Relating to disposition of property after death.

Time Certificate of Deposit - A time deposit evidenced by a
certificate issued by the bank specifying the amount deposited
and maturity.

Time Deposit - A bank deposit which is payable in not less than
seven days.

"Totten" Trust Account - A revocable trust created by depositing
money for the benefit of another with the intention that the
deposit pass to the beneficiary upon the depositor's death.

Trust - A transfer of property from one person, called the
settlor or donor, to another person, called the trustee, who is
to hold the property for a specified beneficiary or use.

Right and Capacity - The terms "right" and "capacity" refer to
the nature of the ownership of deposits, such as jointly owned
funds, trust deposits, etc.


* The glossary is provided for the purposes of this booklet only
and is not intended as a supplement or a replacement of any
definitions which pertain to deposit insurance.


NOTICE

This booklet provides examples of insurance under the
Corporation's rules on certain types of accounts commonly held by
depositors in insured banks. The information provided in this
booklet is presented in a non-technical way and is not intended
to be a legal explanation of the FDlC's laws and regulations on
insurance coverage. For greater detail concerning the technical
aspects of insurance coverage, depositors or their counsel may
wish to consult the Federal Deposit Insurance Act (12 U.S.C. 181
1-1832) and the FDlC's regulations relating to insurance coverage
(12 C.F.R. part 330).

Depositors are advised that no person may by any representations
or interpretations affect the extent of insurance coverage
provided by the Federal Deposit Insurance Act, the Rules and
Regulations for Insurance of Deposit Accounts, and the published
interpretative and explanatory material referred to above.


FEDERAL DEPOSIT INSURANCE CORPORATION
550 17th. Street, N.W., Washington. D.C. 20429