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Over the past several months, a number of our clients have received communications from their banks requesting additional information regarding their trusts.  Specifically, we know of both USAA and Chase sending notices to clients requesting “trust beneficiary information.”

The notices state that the Federal Deposit Insurance Corporation, or FDIC, requires that financial institutions maintain certain information about deposit accounts to enable accurate calculation of FDIC insurance coverage for all account holders in the unlikely event of a bank failure. In certain situations, such as when you name a trust or other entity as a beneficiary for your account, or when a trust is the account holder, the banks may ask you to provide the information necessary to enable the calculation.

The FDIC website says that the beneficiaries must be named in either the deposit account records of the bank or identified in the formal revocable trust document.

For example, if I own a bank account, the FDIC insures my account up to $250,000 in the event of a bank failure. If my trust is the owner, and I have two beneficiaries under my trust, the account is insured up to $500,000.

By giving the information to the bank ahead of time, they will calculate the amount of FDIC insurance available for your account. If you choose not to provide the information in advance, in the unlikely event of a bank failure, you will be responsible for providing any required information to the FDIC. In such a situation, access to your accounts and payment of any deposit insurance are determined by the FDIC and may be delayed until the FDIC has completed its insurance determination.

If you are interested in learning more about FDIC deposit insurance, click HERE.

The big question is this – should you complete the paperwork for the bank? Well, I want to remind you that a trust is a private document. While you are alive and the trust is revocable, there is always the possibility that you may change the beneficiaries in the future. If you’ve completed the paperwork for the bank and disclosed information regarding your beneficiaries, you’ll need to update this paperwork with your banking institutions, as well. Also, be aware that these forms are asking for highly sensitive information for each beneficiary – name, address, phone number, date of birth, social security number, occupation, whether the beneficiary is an individual or some type of entity, and how much the beneficiary will be receiving!

If you decide that you want to complete the paperwork requested by your bank, you may only want to list the grantors of the trust as the beneficiaries, rather than disclosing such sensitive information about the future beneficiaries of your trust.

Another factor to consider is the balance of your account.

For example, Mary Sample has a balance of $100,000 in her account. The account is in the name of her trust, and she receives a request from the bank to provide information on all the beneficiaries of her trust. Mary feels uncomfortable providing information on all her beneficiaries. Since her account is far below the FDIC insurance limit of $250,000, Mary decides NOT to complete the paperwork.

If you decide that you are not comfortable providing this information, you should decline to complete the paperwork. If your bank requires it to maintain the account, I strongly recommend finding a new financial institution – if the bank is giving you this much grief now, just imagine the trouble your successor trustee will have dealing with them in the future!

If you have any questions about paperwork that has been requested or what bank information you should be filling out, please do not hesitate to reach out to Empowered Legacy Planning either by calling us at (480) 855-8383 or using the contact form below.

If you are a member of our trust maintenance program and have received one of these requests, please note any questions you have on your 2023 annual review checklist and provide a copy of the request you received for our review.  Non-members are welcome to contact our office to schedule a 30 minute consultation with Kristel at a discounted rate of $200.

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