FDIC Insurance.  Facts: 1.  I have two kids for whom I set up two
irrevocable trusts, Trust A and Trust B.  My brother John is the
Trustee of each Trust.  2. Company XYZ, LLC is owned 49.5% by Trust A
and 49.5% by Trust B, and 1% by me, and it is managed by me.  3.  John
opened a savings account at State Bank Savings & Loan for Trust A, and
another one for Trust B. 4.  I opened an account at the same bank for
XYZ Co.  5.  Each trust has its own federal ID number, and so does
company XYZ.  Question: Does FDIC provide $100,000 protection for each
of the three accounts?  Or is it $100,000 combined for all three
accounts because of the type of relationship between them I described?
 Or is it $100,000 for XYZ and $100,000 combined for the two trusts? 
Essentially, the question is intended to find out if FDIC insurance is
per each tax ID number or what?  I have talked to my bank and even
reviewed the FDIC home page, but can't seem to get a clear answer. 
Thanks.

Dear genesis28-ga; 

Thank you for allowing me an opportunity to answer your interesting question.

Kinship is not a factor in determining coverage of irrevocable trusts.
Coverage of trusts is determined in large part by the number of
beneficiaries and the intent rather than tax ID number of the grantor
or the trusts. Consider these three scenarios:

1)  ?The interest of EACH BENEFICIARY in an account established under
an irrevocable trust is insured up to $100,000, separately from other
accounts held by the grantor, trustee, or beneficiary, if all of the
following requirements are met:

--The deposit account records of the depository institution must
disclose the existence of the trust relationship.
--The interests of the beneficiaries must be ascertainable from the
deposit account records of the depository institution or from the
records of the trustee maintained in good faith and in the regular
course of business.
--The value of each beneficiary's interest must be determinable
according to FDIC regulations.
--The trust must be valid under state law.?

==================================


2)  ?In cases where the beneficiary has an ownership interest in more
than one trust created by the same grantor, the beneficiary's
interests in all accounts established under those trusts are added
together and the sum is insured to a maximum of $100,000.?

==================================


3)  ?When the ownership interests of the beneficiaries cannot be
determined, insurance coverage for the entire trust is limited to a
maximum of $100,000.?

FIRST STATE BANK
http://www.fsbj.com/fdic/irrevoca.htm


Your situation appears to match that of the first scenario I offered.
In this instance FDIC coverage is extended to cover the interest of
EACH person because EACH person has his own trust in which he is sole
beneficiary. That said, if Kid #1 is the sole beneficiary of
Irrevocable Trust A and Kid #2 is the sole beneficiary of a separate
Irrevocable Trust B, then BOTH trusts are EACH covered up to $100,000
by the FDIC. So you see, the FDIC focuses on the beneficiary's
interest, rather than the grantor's contributions. In other words, the
grantor might well have made a number of contributions to a number of
different accounts for the benefit of multiple beneficiaries, but it
is the "individual" beneficiary's interests that are ultimatley
protected up to $100,000.

However, if one person is the beneficiary of more than one Trust from
the same grantor, or multiple people are named as beneficiaries to one
or more trust(s) where funds are commingled, those funds are added
together and insured up to $100,000 in the aggregate pursuant to FDIC
regulation:
 
Title 12--Banks and Banking
CHAPTER III--FEDERAL DEPOSIT INSURANCE CORPORATION
PART 330--DEPOSIT INSURANCE COVERAGE
Sec. 330.13 IRREVOCABLE TRUST ACCOUNTS.
http://a257.g.akamaitech.net/7/257/2422/12feb20041500/edocket.access.gpo.gov/cfr_2004/janqtr/12cfr330.13.htm


Your LLC business account is a separate matter and is also covered up
to $100,000 by the FDIC pursuant to:

Title 12--Banks and Banking
CHAPTER III--FEDERAL DEPOSIT INSURANCE CORPORATION
PART 330--DEPOSIT INSURANCE COVERAGE
Sec. 330.11 Accounts of a corporation, partnership or unincorporated association.
http://a257.g.akamaitech.net/7/257/2422/12feb20041500/edocket.access.gpo.gov/cfr_2004/janqtr/12cfr330.11.htm

You will find your "clear answers" in the CODE OF FEDERAL REGULATIONS
concerning banks, banking, deposits and insurance:

CODE OF FEDERAL REGULATIONS
http://www.gpoaccess.gov/cfr/
[SPECIFICALLY, TITLE 12]
http://www.access.gpo.gov/nara/cfr/waisidx_04/12cfr330_04.html


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Best regards;
Tutuzdad ? Google Answers Researcher


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Request for Answer Clarification by genesis28-ga on 26 Nov 2004 21:44 PST

Thanks for a most informative response.  Please clarify the following
issue: since the LLC is owned 49.5% by Trust A and 49.5% by Trust B,
would not any deposits in the LLC be imputed back to the appropriate
trust?  Thus, for example, if Trust A's account has $100,000 in it,
and Trust B's account has $100,000 in it, and the LLC has, say,
$100,000 in its bank account, would not $49,500 of the LLC's funds be
imputed to Trust A's account, $49,500 be imputed to Trust B's account,
and therefore each trust would have imputed to it a total of $149,500,
of which only $100,000 would be covered by the FDIC insurance?  Should
I therefore not move the LLC account to a different bank?  Thanks so
much.

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Clarification of Answer by tutuzdad-ga on 27 Nov 2004 08:47 PST

From the way the law is worded it appears that it makes little
difference that Trust A & B ownd an LLC. Had it been the other way
around there might have be an issue. In other words, the beneficiaries
to the Trusts are seperate (each has his own trust for which he is
sole benefiricary) and as such their interests are seperate. The law
says that the FDIC protects the interests of EACH benenficiary up to
$100,000 unless the funds are commingled in one account or unless they
are shared beneficiaries in several Trusts.

As I pointed out, it doesn't matter that the contributions of the
grantor (in this case the LLC) to the Trusts come from the same place.
The end result is that the individual beneficiaries' interests are
each protected up to $100,000. From the wording of the law, once the
funds are entrusted to someone the grantor's interests are secondary
and the beneficiary now becomes the protected party. Having said that
each beneficiary is now a seperate issue and as such each
beneficiary's interest is insured to the fullest extent.

Regards;
tutuzdad-ga

Tutuzdad provided a clear and logical analysis.  His research yielded
the correct answers, something that even my bank was not able to
provide.  Thanks.  The service was well worth the price.