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Federal Register / Vol. 86, No. 146 / Tuesday, August 3, 2021 / Proposed Rules
revocable trust designates the depositors formal trust as its beneficiary. A formal trust generally does not meet the definition of an eligible beneficiary for deposit insurance purposes, but the FDIC has treated such accounts as revocable trust accounts under the trust rules, insuring the account as if it were titled in the name of the formal trust.55
Retained Interests and Ineligible Beneficiaries Interests The current trust rules provide that in some instances, funds corresponding to specific beneficiaries are aggregated with a grantors single ownership deposits at the same IDI for purposes of the deposit insurance calculation. These instances include a grantors retained interest in an irrevocable trust 56 and interests of beneficiaries that do not satisfy the definition of beneficiary. 57
This adds complexity to the deposit insurance calculation, as detailed review of a trust agreement may be required to value such interests in order to aggregate them with a grantors other funds. In order to implement the streamlined calculation for trust deposits, the FDIC is proposing to eliminate these provisions. Under the proposed rules, the grantor and other beneficiaries that do not satisfy the definition of eligible beneficiary would not be included for purposes of the deposit insurance calculation.58
Importantly, this would not in any way limit a grantors ability to establish such trust interests under State law. These interests simply would not factor into the calculation of deposit insurance coverage.

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Future Trusts Named as Beneficiaries Trusts often contain provisions for the establishment of one or more new trusts upon the grantors death, and the proposed rule also would clarify deposit insurance coverage in these situations.
Specifically, if a trust agreement provides that trust funds will pass into one or more new trusts upon the death of the grantor or grantors, the future trust or trusts would not be treated as beneficiaries for purposes of the calculation. The future trusts instead would be considered mechanisms for 55 See FDIC Financial Institution Employees Guide to Deposit Insurance at 71.
56 See 12 CFR 330.1r; see also FDIC Financial Institution Employees Guide to Deposit Insurance at 87.
57 12 CFR 330.10d.
58 In the unlikely event a trust does not name any eligible beneficiaries, the FDIC would treat the trusts deposits as single ownership deposits. Such deposits would be aggregated with any other single ownership deposits that the grantor maintains at the same IDI and insured up to the SMDIA of $250,000.

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distributing trust funds, and the natural persons or organizations that receive the trust funds through the future trusts would be considered the beneficiaries for purposes of the deposit insurance calculation. This clarification is consistent with published guidance and would not represent a substantive change in deposit insurance coverage.59
Naming of Beneficiaries in Deposit Account Records Consistent with the current revocable trust rules, the proposed rule would continue to require the beneficiaries of an informal revocable trust to be specifically named in the deposit account records of the IDI.60 The FDIC
does not believe this requirement imposes a burden on IDIs, as informal revocable trusts by their nature require the IDI to be able to identify the individuals or entities to which a deposit would be paid upon the depositors death.
Presumption of Ownership The proposed rule also would state that, unless otherwise specified in an IDIs deposit account records, a deposit of a trust established by multiple grantors is presumed to be owned in equal shares. This presumption is consistent with the current revocable trust rules.61
Bankruptcy Trustee Deposits The proposed rule would continue the current treatment of deposits placed at an IDI by a bankruptcy trustee. If funds of multiple bankruptcy estates were commingled in a single account at the IDI, each estate would be separately insured up to the SMDIA.
Deposits Covered Under Other Rules The proposed rule would exclude from coverage under 330.10 certain trust deposits that are covered by other sections of the deposit insurance regulations. For example, employee benefit plan deposits are insured pursuant to 330.14, and investment company deposits are insured as corporate deposits pursuant to 330.11.
Deposits held by an insured depository institution in its capacity as trustee of an irrevocable trust are insured pursuant to 330.12. In addition, if the co-owners of an informal or formal revocable trust are the trusts sole beneficiaries, deposits held in connection with the trust would be treated as joint deposits under 330.9.
59 See FDIC Financial Institution Employees Guide to Deposit Insurance at 74.
60 See 12 CFR 330.10b2.
61 See 12 CFR 330.10f.

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In each of these cases, the FDIC is not proposing to change the current rule.
Conforming Changes The proposed simplification of the calculation for insurance coverage for trust deposits also would permit the elimination of certain definitions from 330.1 of the regulations. Specifically, 330.1 defines trust interest and non-contingent trust interest, terms that are used in connection with the current irrevocable trust rules. Because the proposed rule would eliminate the evaluation of contingencies in determining coverage for trust deposits, the FDIC is proposing to remove these definitions from the regulation.
Enhancements to Claims Processes The FDIC is also considering enhancements to its claims processes to further promote prompt insurance determinations for trust deposits. For example, the FDIC may be able to establish enhanced processes and systems for reaching out to depositors and obtaining trust documentation following an IDIs failure. The claims process enhancements adopted by the FDIC will likely depend upon the amendments to the deposit insurance rules, if any, that are adopted through this rulemaking.
D. Examples Demonstrating Coverage Under Current and Proposed Rules To assist commenters, the FDIC is providing examples demonstrating how the proposed rule would apply to determine deposit insurance coverage for trust deposits. These examples are not intended to be all-inclusive; they merely address a few possible scenarios involving trust deposits. The FDIC
expects that for the vast majority of depositors, insurance coverage would not change under the proposed rule.
The examples here specifically highlight a few instances where coverage could be reduced to ensure that commenters are aware of them. In addition, in any instances where a trust is established, the examples assume that the trustee is not an IDI.
Example 1: Payable-on-Death Account Depositor A establishes a payable-ondeath account at an FDIC-insured bank.
A has designated three beneficiaries for this depositB, C, and Dwho will receive the funds upon her death, and listed all three on a form provided to the bank. The only other deposit account that A maintains at the same bank is a checking account with no designated beneficiaries. What is the maximum amount of deposit insurance coverage for As deposits at the bank?

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