|Are your deposits insured?
Editor's Note: On Oct. 3, 2008, Congress raised the FDIC insurance
amount to $250,000. This change will be in effect until Dec. 31,
2009, unless it is renewed.
It's reasonable to assume that if you put money in a bank account,
it's money you don't want to risk losing.
You didn't chance it in some dicey investment, and
you expect it to be there when you need it. In fact, you expect
it to be safe even if the bank fails.
Well, you're safe if your account
has $100,000 or less, or $250,000 in the case of
retirement accounts. The Federal Deposit Insurance
Corporation insures deposits up to $100,000, or
$250,000 for retirement accounts, at most banks
and savings associations. Credit Union deposits
are covered by the National Credit Union Administration.
But you've got a problem if your deposits in non-retirement
accounts add up to more than $100,000, and that
happens more often than you might think. Remember
that savings, checking and certificates of deposit,
and the interest on those deposits, all count toward
that $100,000. If your bank goes under and your
accounts aren't properly structured, you could lose
anything in excess of $100,000.
A matter of trust
Anne MacKay of suburban Chicago says her aunt, Irene Kortas, lost
$109,000 when Superior Bank in Hinsdale, Ill., folded. Kortas, who
is in a nursing home, had $209,000 in 17 certificates of deposit,
according to MacKay.
MacKay says all the CDs were in Kortas' name either as an individual
ownership or in trust for various nieces and nephews. It wasn't
until the bank failed that Kortas and MacKay found out the government
doesn't recognize nieces and nephews as beneficiaries in "payable
upon death" accounts.
MacKay says bank personnel told Kortas the accounts were structured
properly and, therefore, were covered by FDIC insurance. MacKay
and Kortas are furious about the mistake.
"You have no idea. This is her life savings. She trusted these
people. They obviously didn't know what they were doing," MacKay
Kortas and MacKay aren't alone.
Consumers have millions of dollars in uninsured bank accounts.
Depositors had uninsured funds totaling more than $65 million in
Superior Bank. Miami's Hamilton Bank folded with $94 million in
Apparently, many people who find their money is not insured claim
bank personnel told them otherwise.
It doesn't matter. The FDIC says the responsibility rests on the
"Even if someone at the bank says, 'Structure your accounts
this way,' and you do it and the bank fails, you have no recourse.
We try to train bankers, but there are a lot of bankers out there
that deal with deposit accounts and there's a lot of turnover,"
says FDIC spokesman David Barr.
Jim McLaughlin, director of regulatory affairs at the American
Bankers Association, says bank personnel who open accounts should
know how to structure them for insurance, but you shouldn't even
think about asking a teller.
"Tellers aren't trained to give that kind of advice. The account
opening people should have the information, but I would say, 'Show
me in writing where it says this is how to structure it for insurance.'
"These rules are not that simple. When you cross the $100,000
level, individuals need to take it upon themselves to make sure
they comply with the rules."
Michael Rosenblat is a Chicago attorney who is representing Irene
Kortas and other depositors in a lawsuit against various officials
of Superior Bank.
"The bank personnel need to know when they start giving out
legal advice to people to lure their money in that they'll be responsible
when they're not fully insured. These people had over $100,000 in
the bank, and when bank personnel assist them in setting it up,
the bank personnel are trying to lure money in the misrepresentation
of getting it all fully insured by the FDIC."
Generally, if your bank fails, you'll receive your insured funds
and get a receivership certificate for the amount over $100,000.
That certificate entitles you to share in the proceeds as assets
are liquidated. According to David Barr, depositors tend to receive
about 65 cents on the dollar.