As described in our previous client memo in May 2022, the FDIC is amending its regulations governing deposit insurance to merge the revocable and irrevocable trust deposit insurance categories into one “trust accounts” category.

This change may reduce the deposit insurance coverage available to some depositors. For example, “POD” and “TOD” accounts are currently treated as revocable trust accounts under FDIC regulations, while written trust agreements with a trustee are generally treated as irrevocable trust accounts. Under the amended regulation, a person who is the beneficiary of both a revocable and irrevocable trust established by the same person (i.e., “grantor”) would have deposits at the same bank aggregated for FDIC insurance purposes.

Many brokered certificate of deposit disclosure statements and broker-dealer sweep program disclosure statements currently describe two separate categories of trust account insurable capacities. These disclosures need to be amended and depositors will need to be informed of the possibility of diminished deposit insurance coverage prior to April 1, 2024.