If the beaten-down stock market has got you seeking a haven for your cash, there's some good news.
The financial system bailout legislation enacted last month boosted limits on federal insurance for bank deposits, increasing the amount of cash you can stash in a bank account with every dollar fully insured by the government.
And the Federal Deposit Insurance Corp. has made it easier to structure your accounts in a way that maximizes your total coverage.
Here's a rundown of the changes:
What's different?
Until last month, the FDIC covered deposits of as much as $100,000 per owner per bank. For individual retirement accounts that hold bank deposits, the limit was $250,000 per owner.
The bailout legislation raised the insurance limit on nonretirement accounts to $250,000.
There are tricky but perfectly legal ways to significantly increase that coverage, however, even if you keep all your deposits in a single bank.
How do I raise my coverage?
The FDIC insures accounts based on their ownership status. For instance, you can have an individual account, a joint account, an IRA and a business account. Technically, each account has a different owner. If the accounts are set up properly, each is covered separately under its own insurance cap. Under the old limits, that would mean those four accounts could have as much as $550,000 in coverage (three at $100,000 each and the IRA at $250,000). Under the new limits, that maximum coverage rises to $250,000 per account, or a total of $1 million.
And there's a way to have even more deposits covered -- a whole lot more if you have many people you'd like to leave money to after you die.
What's that about inheritance?
Another form of ownership that the FDIC gives separate coverage to is a trust: an account for which you name one or more beneficiaries who will inherit the money after your death. Under FDIC rules, the account gets an additional $250,000 in coverage for each beneficiary named.
Until recently, the FDIC extended that extra coverage only for beneficiaries who were close relatives, such as a child, grandchild, parent or spouse. Now, the agency says any living person can be a qualified beneficiary.
"So Bill Gates could essentially set up an account, name every person in the country as equal beneficiaries, and his billions would be fully insured," said David Barr, an FDIC spokesman.
What's to stop me from naming all my friends as beneficiaries?
