Protecting estate assets

What to do when amount exceeds FDIC insurance protection

Q: I recently inherited more than $250,000 in cash. Do you recommend leaving funds for the short term in a regular bank account that only has the usual $250,000 of FDIC insurance?

A: Bank failures have been rare in the past few years. When the FDIC closed the Enloe State Bank of Cooper, Texas, in May, it marked the first bank failure since December 2017.

If your money is in a large bank, it’s extremely unlikely that it will go under, and your risk is even lower if you don’t plan to leave the excess deposits in the bank for long.

But if you want the peace of mind that this important federal protection provides, there are several steps you can take to make sure the amount of the estate that exceeds the limit is insured.

The FDIC insures up to $250,000 per person, per bank, per ownership category. (Credit union deposits are insured under the same terms by the National Credit Union Share Insurance Fund.) Coverage is automatic whenever you open an account at an FDICinsured bank (you can check an institution’s eligibility at https://research.fdic.gov/bankfind).

Checking accounts, savings accounts, money market deposit accounts and certificates of deposit are covered by insurance. Annuities, mutual funds, stocks and bonds aren’t covered, even if you buy them from a bank.

If a bank closes, the FDIC usually pays insurance within two business days, either by providing depositors with a new account at another insured bank or by issuing a check for the insured balance of the account at the failed bank.

Customers with uninsured deposits won’t be reimbursed until the bank is liquidated, and they may receive only a portion of their savings.

One of the easiest ways to increase the amount of insured deposits is to open accounts under different ownership categories. If you and your spouse or significant other have a joint account (or accounts) at an FDIC-insured institution, you’ll each receive $250,000 in coverage for your joint-account balances, plus $250,000 per person for any individual accounts you have, for a total of up to $1 million.

Another way to increase coverage is by spreading your money around to multiple FDIC-insured banks. If you’re looking for competitive rates, MaxMyInterest.com will spread your cash among high-yield savings accounts at insured banks for a quarterly fee of 0.02% of your cash balance.

If you want to invest in CDs at multiple insured institutions, go to the Certificate of Deposit Registry Service (www.cdars.com).

Sandra Block is a senior editor at Kiplinger’s Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com. And for more information on this topic, visit Kiplinger.com.