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Federal Register / Vol. 86, No. 146 / Tuesday, August 3, 2021 / Proposed Rules
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this calculation has proven beneficial in resolutions, as it leads to more prompt deposit insurance determinations and quicker access to insured deposits for depositors. Accordingly, the FDIC
proposes to calculate deposit insurance coverage for trust deposits based on the simpler calculation currently used for revocable trusts with five or fewer beneficiaries.
The streamlined calculation that would be used to determine coverage for revocable trust deposits and irrevocable trust deposits includes a limit on the total amount of deposit insurance coverage for all of a depositors funds in the trust category at the same IDI. The proposed rule would provide coverage for trust deposits at each IDI up to a total of $1,250,000 per grantor; in other words, each grantors insurance limit would be $250,000 per beneficiary up to a maximum of five beneficiaries. The level of five beneficiaries is an important threshold in the current revocable trust rules, as it defines whether a grantors coverage is determined using the simpler calculation of the number of beneficiaries multiplied by the SMDIA, rather than the more complex calculation involving the consideration of the amount of each beneficiarys specific interest which applies when there are six or more beneficiaries. The trust rules currently limit coverage by tying coverage to the specific interests of each beneficiary of an irrevocable trust or of each beneficiary of a revocable trust with more than five beneficiaries.
The proposed rules $1,250,000 pergrantor, per-IDI limit is more straightforward and balances the objectives of simplifying the trust rules, promoting timely payment of deposit insurance, facilitating resolutions, ensuring consistency with the FDI Act, and limiting risk to the DIF.
The FDIC anticipates that limiting coverage to $1,250,000 per grantor, per IDI, for trust deposits would affect very few depositors, as most trust deposits in past IDI failures have had balances well below this level. For example, data obtained from a sample of IDI failures from 20102020 suggests that only about 0.085 percent of depositors maintaining trust deposits might be affected by the proposed $1,250,000
limit.50 The FDIC does not possess 50 Data from 2,550,001 depositors, including 249,257 trust account depositors, at 246 failed banks from September 17, 2010April 3, 2020. A
total of 212 out of 249,257 .085 percent trust account depositors had more than $1.25 million in deposits across all of their trust accounts. Of these depositors, only 24 had more than five beneficiaries named in the banks records. However, not all trust accounts in the sample maintained beneficiary
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sufficient information, however, to enable it to project the effects of the proposed limit on current depositors, and requests that commenters provide information that might be helpful in this regard.
Under the proposed rule, to determine the level of insurance coverage that would apply to trust deposits, depositors would still need to identify the grantors and the eligible beneficiaries of the trust. The level of coverage that applies to trust deposits would no longer be affected by the specific allocation of trust funds to each of the beneficiaries of the trust or by contingencies outlined in the trust agreement. Instead, the proposed rule would provide that a grantors trust deposits are insured up to a total of $1,250,000 per grantor, or an amount up to the SMDIA multiplied by the number of eligible beneficiaries, with a limit of no more than five beneficiaries.
Aggregation The proposed rule also provides for the aggregation of revocable and irrevocable trust deposits for purposes of applying the deposit insurance limit.
Under the current rules, deposits of informal revocable trusts and formal revocable trusts are aggregated for this purpose.51 The proposed rule would aggregate a grantors informal and formal revocable trust deposits, as well as irrevocable trust deposits. For example, all informal revocable trusts, formal revocable trusts and irrevocable trusts held for the same grantor, at the same IDI would be aggregated and the grantors insurance limit would be determined by how many eligible and unique beneficiaries were identified between all of their trust accounts.52
The deposit insurance coverage provided in the trust accounts category would continue to remain separate from the coverage provided for other deposits held in a different right and capacity at the same IDI. However, records at the bank, so this likely underestimates the number of affected depositors.
51 See 12 CFR 330.10a all funds that a depositor holds in both living trust accounts and payable-on-death accounts, at the same FDICinsured institution and naming the same beneficiaries, are aggregated for insurance purposes.
52 For example, if a grantor maintained both an informal revocable trust account with three beneficiaries and a formal revocable trust account with three separate and unique beneficiaries, the two accounts would be aggregated and the maximum deposit insurance available would be $1.25 million 1 grantor SMDIA number of unique beneficiaries, limited to 5. However, if the same three people were the beneficiaries of both accounts, the maximum deposit insurance available would be $750,000 1 grantor SMDIA 3 unique beneficiaries.

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a small number of depositors that currently maintain both revocable trust and irrevocable trust deposits at the same IDI may have deposits in excess of the insurance limit if these separate categories are combined. The FDIC does not have data on depositors trust arrangements that would allow it to estimate the number of depositors that might be affected in this manner, and requests that commenters provide information that might be helpful in this regard.
Eligible Beneficiaries Currently, the revocable trust rules provide that beneficiaries include natural persons, charitable organizations, and non-profit entities recognized as such under the Internal Revenue Code of 1986,53 while the irrevocable trust rules do not establish criteria for beneficiaries. The FDIC
believes that a single definition should be used to determine whether an entity is an eligible beneficiary for all trust deposits, and proposes to use the current revocable trust rules definition.
The FDIC believes that this will result in a change in deposit insurance coverage only in very rare cases.
The proposed rule also would exclude from the calculation of deposit insurance coverage beneficiaries that only would obtain an interest in a trust if one or more named beneficiaries are deceased often referred to as contingent beneficiaries. In this respect, the proposed rule would codify existing practice to include only primary, unique beneficiaries in the deposit insurance calculation.54 This would not represent a substantive change in coverage.
Consistent with treatment under the current trust rules, naming a chain of contingent beneficiaries that would obtain trust interests only in event of a beneficiarys death would not increase deposit insurance coverage.
Finally, the proposed rule would codify a longstanding interpretation of the trust rules where an informal 53 12

CFR 330.10c.
FDIC Financial Institution Employees Guide to Deposit Insurance at 51 Sometimes the trust agreement will provide that if a primary beneficiary predeceases the owner, the deceased beneficiarys share will pass to an alternative or contingent beneficiary. Regardless of such language, if the primary beneficiary is alive at the time of an IDIs failure, only the primary beneficiary, and not the alternative or contingent beneficiary, is taken into account in calculating deposit insurance coverage.. Including only unique beneficiaries means that when an owner names the same beneficiary on multiple trust accounts, the beneficiary will only be counted once in calculating trust coverage. For example, if a grantor has two trust deposit accounts and names the same beneficiary in both trust documents, the total deposit insurance coverage associated with that beneficiary is limited to $250,000 in total.
54 See
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