Dear Dr. Don,

I am currently banking with a local bank. I am certain the Federal Deposit Insurance Corp. will take over that bank very soon. I have $200,000 in a personal account held jointly with my wife, as well as two business accounts for a limited liability company that have about $60,000 in each account.

Should I take out that money from the bank or leave it until the FDIC takes over bank? Can you explain how business accounts are protected by the FDIC?

— Perry Pecuniary

Dear Perry,

The FDIC has temporarily increased its deposit limits to $250,000 per depositor through 2013, as described on the “Your Insured Deposit” page on its Web site and presented below:

The standard insurance amount of $250,000 per depositor is in effect through Dec. 31, 2013. On Jan. 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except IRAs and other certain retirement accounts, which will remain at $250,000 per depositor.

A joint account has multiple depositors, and insurance limits are per depositor. For your LLC accounts, corporations, partnerships and unincorporated associations — including for-profit and not-for-profit organizations — are insured under one ownership category. You can calculate the insurance coverage for all your accounts using the FDIC’s online Electronic Deposit Insurance Estimator.

Transaction accounts at participating institutions have unlimited coverage through June 30, 2010, also described on the FDIC site:

The FDIC’s temporary Transaction Account Guarantee Program provides depositors with unlimited coverage for noninterest-bearing transaction accounts at participating FDIC-insured institutions. Noninterest-bearing checking accounts include Demand Deposit Accounts (DDAs) and any transaction account that has unlimited withdrawals and that cannot earn interest. Also included are low-interest NOW accounts (NOW accounts that cannot earn more than 0.5% interest) and IOLTA accounts. This unlimited insurance coverage is temporary and will remain in effect through June 30, 2010.

If your deposits are all insured, the primary concern in keeping the money in the troubled bank is a liquidity crunch if your bank fails. The FDIC does a remarkable job in minimizing this problem when a bank fails, typically closing a bank on a Friday and reopening the bank the following Monday. Here’s how it describes the process on its FAQ page.

How long does the FDIC take to pay insurance on deposits after an insured bank fails?

Federal law requires the FDIC to make payment as soon as possible. Historically, the FDIC pays insurance within a few days after a bank closing either by establishing an account at another insured bank or by providing a check. Deposits purchased through a broker may take longer to be paid because the FDIC may need to obtain the broker’s records to determine insurance coverage.

If you’re worried about short-term liquidity for your personal or business accounts, you have reason enough to move some funds.

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