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Helping People Age with Dignity

Estate planning and FDIC protection for bank accounts

After years of working hard to build up their assets, an elderly individual may care greatly about keeping their assets safe. Unfortunately, there are a variety of things that could create serious asset depletion risks for seniors.

One is if periods of economic turmoil arise. General economic troubles could put a variety of different types of assets at risk. This includes bank accounts. This is because economic troubles sometimes lead to problems in the banking industry, which could end up triggering bank failures.

Thankfully, here in the U.S., individuals are not without protection when a bank they have an account with fails. This is because bank accounts generally have Federal Deposit Insurance Corporation insurance. FDIC insurance protects bank account holders up to a certain amount in the event of bank failure. The general amount limit for this protection is $250,000 per account.

Seniors and other individuals who have bank accounts with asset amounts that exceed this limit may wish to have a greater level of protection, so if a bank failure did occur they wouldn't end up losing a significant amount of money. One thing worth noting is that estate planning has the potential to help with expanding the amount of FDIC protection on a bank account.

One estate planning device that can help in this regard is a living revocable trust. This is a trust that a person puts into force during their lifetime and that can be modified. Under FDIC rules, when a bank account is held by this type of trust, the protection limit for the account is $250,000 per beneficiary (with further special rules applying when the amount of trust beneficiaries is six or higher) rather than $250,000 overall. Thus, having a bank account in a revocable living trust with multiple beneficiaries can up the FDIC protection level for the account.

As this underscores, estate planning can be used for a variety of different asset protection purposes. Seniors and other individuals who would like to incorporate asset protection goals into their estate plan should consider talking with an elder law attorney about how best to do so given their circumstances.

Source: Bankrate, "6 surprising facts about a living revocable trust," Judy Martel, Accessed Jan. 22, 2016

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