Thus, if Jane Smith has a $100,000 certificate of deposit in her name alone and shares another $100,000 account with her husband, $50,000 of her assets would be uninsured.
The reason: The FDIC figures that each individual owns half of a joint account, unless they specify otherwise. In Jane's case, her $50,000 interest in the joint account, added to her $100,000 individual account, puts her $50,000 over the limit.
For The Record
Los Angeles Times Tuesday, July 22, 2008 Home Edition Main News Part A Page 2 National Desk 2 inches; 77 words Type of Material: Correction
FDIC coverage: The Personal Finance column in Business on Sunday erred in how it described insurance of individual and joint accounts. It said that each person's interest in individual and joint accounts is added together to determine that individual's insurance coverage. In fact, individual and joint accounts are insured separately. Therefore, you could have an individual account worth $100,000 and a joint interest in a $100,000 joint account and all of your deposits would be fully insured.
The Smiths could get coverage for the full $200,000 if they took Jane's name off the joint account and left the second account in her husband's ownership alone. They could do the same by merging their two accounts into one joint account.
* Business accounts can win additional and separate coverage if the business is a corporation, partnership or unincorporated association "engaged in an independent activity" -- in other words, if it wasn't just set up for insurance coverage alone.
Sole proprietorships do not get additional coverage. Assets in an account owned by a sole proprietor are added to that owner's other accounts at the bank, much like individual and joint accounts.
* Trust accounts -- even informal trusts -- can land the owners vastly more insurance coverage. That's because the FDIC will cover as much as $100,000 per qualifying beneficiary on these accounts. In other words, if Jane has 10 qualifying beneficiaries -- say, a spouse, three kids and six grandkids -- her trust account can be insured to $1 million.
Who qualifies as a beneficiary for FDIC coverage? The owner's spouse, child, grandchild, parent or sibling. (There's no DNA test. Adopted children and grandchildren count.) But in-laws, cousins, nieces, nephews and friends do not qualify.
There are two important caveats: The trust must be documented, either with a formal legal agreement or with simple paperwork at the bank that shows it's a "payable-on-death" account, a Totten trust or an "in-trust-for" account.
And beneficiaries must be personally named. The FDIC will assume that all beneficiaries have equal interests in the account unless other arrangements are spelled out.
Also, keep in mind that even an informal trust is a legal document. If you die, those beneficiaries are legally entitled to the money that's "in trust for" them, even if your will says something different.
* Many types of retirement accounts -- IRAs, 457 plans, self-directed 401(k)s and Keoghs -- get separate and expanded coverage of as much as $250,000 per owner. Unfortunately, teacher retirement plans, called 403(b) accounts, do not.
