My CDs at an insured credit union are titled "My name in trust for Child A and Child B" or "My name in trust for Grandchild A and Grandchild B." Is this enough protection to cover more than $250,000 in each account?
It depends. All your "in trust for" accounts at a single credit union are added together and insured for up to $250,000 for each beneficiary. If you have four beneficiaries, together all your in-trust-for accounts are covered for $1 million. If you have three beneficiaries, together those accounts have only $750,000 of insurance.
Credit unions are insured by the National Credit Union Share Insurance Fund (NCUSIF). Like FDIC, NCUSIF is backed by the full faith and credit of the U.S. government and they have the same coverage limits per institution.
The limit is $250,000 per owner in each of three distinct categories -- individual, joint, and retirement accounts -- and $250,000 per beneficiary in the fourth category, revocable trust (i.e., "in-trust-for") accounts. (You don't get an extra $250,000 of coverage for yourself as the "in trust" account's owner.)
Let's say Joe and Betty have a joint checking account, a joint savings account, and a jointly owned CD. The joint account limit at one institution is $250,000 per owner, so those three accounts have $500,000 of total coverage. If Betty has an individual savings account at the same credit union, it has its own $250,000 of coverage. If Joe has a CD in a retirement account there, it's separately insured for $250,000. But note: NCUSIF and FDIC don't cover mutual funds, stocks, bonds, life insurance or annuities, even if you buy them at a credit union or a bank.
THE BOTTOM LINE Credit union insurance for a revocable trust account is based on how many beneficiaries it has.
TO ASK THE EXPERT Send questions to Ask the Expert /Act 2, Newsday Newsroom, 235 Pinelawn Rd., Melville, NY 11747-4226, or email firstname.lastname@example.org. Include your name, address and phone number. Questions can be answered only in this column. Advice is offered as general guidance. Check with your own advisers for your specific needs.