Hoping to prevent a repeat of some of the chaos that followed the federal takeover of failed IndyMac Bank, regulators on Friday eased some rules on FDIC insurance for one type of bank account.
The account, called a revocable trust, is a deposit that can be owned by one or more people and is willed to a predetermined beneficiary or beneficiaries upon the death of the owner.
Under previous rules, the owner of a revocable trust account was insured up to $100,000 for each "qualifying beneficiary." Spouses, children, grandchildren, parents and siblings qualified, but friends and such relatives as in-laws, cousins, nieces and nephews did not.
But on Friday, the Federal Deposit Insurance Corp. said it had eliminated the concept of qualifying beneficiaries so that coverage was based on the naming of basically any beneficiary.
"We believe the interim rule will not only result in faster deposit insurance determinations after bank closings, but will help improve public confidence in the banking system," FDIC Chairwoman Sheila Bair said. "We strongly encourage owners of revocable trust accounts to make certain that the names of their beneficiaries are included in the bank's records."
The new rules apply to all existing and future revocable trust accounts at FDIC-insured institutions. The insurance limit will still be based on $100,000 per named beneficiary.
Revocable trust accounts became a bureaucratic nightmare for many IndyMac depositors after the bank was taken over by the FDIC in July. Many accounts were temporarily frozen while the agency determined that beneficiaries had been properly named.