Many of you have heard of Friday’s (March 10, 2023) collapse of the Silicon Valley Bank (SVB). It is now under FDIC control and many people and companies have lost their savings and more. This is the second largest bank failure in our history and the largest since the 2008 financial crisis. There are now approximately $175 Billion in customer deposits under FDIC control.
There are other banks facing a similar fate. The good news is that the big banks such as JP Morgan, Citigroup, and Wells Fargo are more diversified and therefore are currently safe.
So, how can you protect yourself from a bank failure? What can you do to ensure that your hard-earned money is not lost? If you or your business have cash deposits exceeding $250,000, you should take this as an opportunity to consider exploring options to extend your FDIC insurance coverage.
First of all, always bank with an FDIC insured bank! The FDIC insures up to $250,000 per depositor, per insurance bank, for each account “ownership category.” This means that if you have multiple accounts at the same institution in the same ownership category, such as three individual accounts, the $250,000 FDIC insurance coverage limit will apply to all three accounts combined.
One option is to open accounts in various FDIC insured banks. This gives you up to $250,000 at each financial institution.
Another option is to establish revocable and irrevocable trusts.
Under FDIC rules, a trust is insured to $250,000 per trust beneficiary up to $1,250,000 (5 beneficiaries). As it currently stands, the FDIC has to make an evaluation of the trust to determine how it is insured. However, in 2022, the FDIC amended the rules facilitating an easier management of those accounts. Starting in April 2024, both revocable and irrevocable trusts will be treated alike for FDIC insurance purposes.
If you would like support to determine how to protect your assets using trusts and other legal vehicles, contact us. We will review all of your assets, your family dynamics, and your risks and potential losses to structure your affairs in the most optimal and efficient manner possible for yourself and the people you love.