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Dear Dr. Don,
I'm worried sick. I am the only son in my family.
My dad is deceased, and my mom is now 86. She
has a revocable trust invested in liquid funds
with a $500,000 balance. The Federal Deposit Insurance
Corp. told me trusts are only insured at $100,000
per bank, and that the only way to insure all
the money is to have portions insured by five
different banks. Mom is used to her large bank,
only minutes away.
She plans on using her liquid funds for nursing home care when and if she needs it. Due to current market conditions, Mom is nervous some banks could go under.
She has an elder law attorney who drew up the trust several years ago, and her funds are at one of the largest banks in the nation. Should we worry? Should we move money around?
-- Ty Trepidation
 Dear
Ty,
I'm a "belt and suspenders" kind of guy, so I'm never going to suggest that your mom's unnamed bank is too big to fail and that she doesn't need to worry about deposit insurance. The trust's deposits should be insured.
On its Web site, the FDIC allows that computing the deposit insurance on revocable trusts is a bit tricky. The FDIC suggests
that you call it for help figuring out these computations. My understanding is that the tricky part is how many beneficiaries
are named on the trust account. You spoke to someone at the FDIC and were told that your mother's account was only insured
for $100,000. You can get a second opinion by using the FDIC's electronic deposit insurance estimator, known as
EDIE.
An alternative to splitting the money up between financial institutions yourself is to use a bank that participates
in the Certificate of Deposit Account Registry Service, or CDARS. This would allow your mother to deal with one bank, but that
bank would work with others to have all of the deposit insured. CDARS can insure deposits up to $50 million.
This Bankrate feature, "CDARS: An easy way to beat the $100,000 FDIC limit,"
explains the program in greater depth.
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