Compliments of the McGee Law Firm, Attorney Brandon McGee
Recently, there has been tremendous turmoil in financial markets and financial institutions. This leads many to ask whether their accounts are safe. Now, more than ever, it is important to protect yourself and your loved ones from the uncertainties in the world. You can start with your financial institution assets. There are several different systems of protection in place, depending on the type of asset and institution. Here is a brief summary of each type of protection.
- Brokerage accounts — SIPC
The Securities Investors Protection Corporation (“SIPC”) protects against the loss or theft of brokerage assets by the broker. The SIPC is not a governmental agency, rather it is a nonprofit membership organization of securities brokerages. The protection of SIPC extends to loss of cash or securities (stocks and bonds) in a brokerage account, but not, for example, commodity futures contracts or foreign currency. The return of securities registered in the account owner’s name is guaranteed. In addition, securities registered in “street name” are guaranteed up to $500,000 per customer, and cash is guaranteed up to $100,000 per customer. By holding an account in the name of a Trust and one in your individual name, you can split assets between the accounts, thereby doubling your protection. www.sipc.org.
- Bank and Savings & Loan accounts – FDIC
The Federal Deposit Insurance Corporation (“FDIC”) insures all bank and savings & loan deposits up to a limit of $250,000 per owner. Trusts can be especially useful under the FDIC rules because it can provide expanded insurance coverage based on your beneficiaries. For example, if you have a Trust and are leaving everything to your three children (depending on the Trust terms), you would qualify for $250,000 coverage per beneficiary, or $750,000, rather than the $250,000 protection it would have had in your individual name. Congress temporarily increased the coverage limit for non-retirement bank accounts from $100,000 to $250,000 under the October 2008 Financial Rescue Package and is good through December 31, 2009. Coverage on non-retirement accounts reverts back to $100,000 on January 1, 2010. www.fdic.gov.
- Credit union accounts — NCUSIF
National credit unions are chartered and regulated by the National Credit Union Association (“NCUA”). The National Credit Union Share Insurance Fund (“NCUSIF”) insures all members of the NCUA, and some state-chartered credit unions, with share with insurance parallel to the insurance provided by the FDIC. As with the FDIC, the NCUSIF is a government agency backed by the full faith and credit of the United States government. While technically not covered by the FDIC, the same rules of coverage apply. www.ncua.gov. So, as with FDIC, Trusts may have expanded insurance coverage.
As we have seen, a Trust can help expand insurance protection under FDIC and NCUSIF. In addition, a Trust can help make sure your assets are not only protected now, but continue to be protected for your loved ones in the future. A qualified estate planning attorney can explain how a Trust can help protect your assets and your loved ones from future financial risks.
Written By: The American Academy of Estate Planning Attorneys