FDIC Insurance Rules for Trust Accounts

What Is FDIC Insurance?

FDIC insurance protects money in deposit accounts at FDIC-insured banks in the event of a bank failure. The insurance covers up to $250,000 per depositor, per ownership category at each FDIC-insured bank.

The federal government backs the FDIC Deposit Insurance Fund.

Take note that FDIC deposit insurance protects money held at an FDIC-insured bank in traditional deposit accounts like checking accounts, savings accounts, money market accounts and certificates of deposit (CDs). However, FDIC insurance excludes mutual funds, annuities, life insurance policies, stocks and bonds, cryptocurrency, municipal securities and contents of safe deposit boxes.

What Are the Current Rules for FDIC Insurance on Trust Accounts?

Effective April 1, 2024, the FDIC lumped most trust accounts held at the same bank into a single category called "trust accounts." The new rules insured an owner's trust deposits up to $250,000 for each eligible beneficiary, with a $1.25 million cap for five or more beneficiaries.

Affected accounts include revocable trusts, irrevocable trusts, payable-on-death (POD) trusts and in-trust-for (ITF) trusts.

The coverage change applied to existing and new trusts for all deposit accounts, regardless of the purchase or maturity date.

Example: A single owner with three beneficiaries in one trust account would be insured up to $750,000, regardless of whether the trust is revocable or irrevocable or how each beneficiary's interest is structured.

Learn more: Pros and Cons of Payable-on-Death Bank Accounts

The FDIC's Electronic Deposit Insurance Estimator lets accountholders plug in dollar amounts and beneficiaries to learn about their own coverage. The calculator can be especially helpful if there are multiple accounts or owners.

Keep in mind that a depositor with a trust balance exceeding the $1.25 million cap at one FDIC-insured bank can pick up additional coverage by opening accounts at other FDIC-insured banks, since the limit applies to each depositor for each account type at each bank.

How Do Credit Unions Insure Trust Accounts?

Credit union members should know a similar shift is coming to their accounts. The National Credit Union Administration (NCUA), which insures deposits at credit unions the way the FDIC does at banks, finalized nearly identical trust account rules in September 2024. It uses the same $250,000-per-beneficiary calculation, but it doesn't take effect until December 1, 2026.

Learn more: How NCUA Insurance Works

What Were the Old Rules for FDIC Insurance on Trust Accounts?

Before April 1, 2024, FDIC insured revocable and irrevocable trusts under separate categories, with coverage calculated differently depending on the type of trust, number of beneficiaries and each beneficiary's interest.

Revocable Trusts

Under the old rules, FDIC coverage for revocable trusts, including informal trusts, depended primarily on how many primary beneficiaries had been designated.

Example: The owner of a revocable trust account with $2 million that named six eligible primary beneficiaries was insured for $1.5 million (1 x 6 x $250,000 = $1.5 million).

Irrevocable Trusts

FDIC coverage for irrevocable trusts was more complicated under the old rules.

The coverage calculation involved determining whether the beneficiaries' interests were contingent on something other than survival. Therefore, all contingent interests were insured up to $250,000, no matter how many contingent beneficiaries there were. That meant a contingent trust might be insured only up to $250,000, even if there were several beneficiaries.

Learn more: Revocable vs. Irrevocable Trust: What's the Difference?

The Bottom Line

Since April 1, 2024, the FDIC has insured most trust accounts—including revocable and irrevocable trusts—under one combined Trust Accounts category. The FDIC covers up to $250,000 per eligible beneficiary and caps insurance at $1.25 million for five or more beneficiaries per account owner. This simplified system replaced the old rules, which calculated coverage differently for revocable and irrevocable trusts and often left contingent beneficiaries underprotected.