Q: If I have an ITF ('In trust for') bank account, and I name someone who isn't related to me and also my son as the beneficiaries, what would happen with my account when I pass away? -- BN via email
A: 'In trust for' (ITF) accounts are also known as 'Pay on Death' or POD accounts. They automatically go to the named beneficiaries at your death, so this account would be divided between your son and your friend. Each of them could transfer his share into a new account in his own name.
Be sure you've identified both beneficiaries by name on the bank form, and that the account title makes it clear that you want the account to pass to them. You don't have to specify their relationship to you.
If your name is Cindy Jones, for example, the account title should be 'Cindy Jones in trust for Samuel Johnson and Frederick Jones.'
Assets with named beneficiaries -- retirement accounts, life insurance policies, and 'in trust for' bank accounts -- pass to those beneficiaries 'by operation of law'. That's legal jargon for 'automatically.' It means that they don't go through probate, unlike the assets you leave in your will.
You can name anyone you wish as the beneficiary of your bank account; it doesn't have to be a blood relative.
The FDIC covers ITF accounts for up to $250,000 per account owner per qualifying named beneficiary. (In other words, you won't get per beneficiary coverage if you leave an account in trust for 'my children'.)
The $250,000 limit is the new FDIC standard, in effect only through December 31, 2013. On January 1, 2014, the standard FDIC limit will return to $100,000 per depositor for all account categories except IRAs and certain other retirement accounts, which will remain at $250,000 per depositor.
Who is a qualifying beneficiary? Under new FDIC rules adopted in September 2008, any person, non-profit organization, or charity qualifies for per beneficiary coverage. (The old rules pretty much restricted qualifying beneficiaries to a small group of your blood relatives.)
What does 'per owner, per qualifying beneficiary' mean? If you're the sole owner of this account, your two beneficiaries each have up to $250,000 of coverage. In other words, the account is covered for a total of $500,000. You don't get an extra $250,000 of coverage on the ITF account for yourself.
I can hear you wondering, 'But what if I leave the account to a non-qualifying beneficiary, like a partnership or a for-profit corporation? Isn't it covered?'
Yes, it is -- along with your other individual accounts at that bank.
The FDIC provides separate insurance for accounts in each of four distinct categories: individual accounts (those in your sole name); jointly-owned accounts; revocable trust (including 'ITF') accounts; and Individual Retirement accounts and certain other self-directed retirement accounts. Each category except trust accounts gets up to $250,000 of coverage for all the accounts in the category. Trust accounts get up to $250,000 per owner per qualifying named beneficiary.
(Please note that the retirement account category doesn't get per beneficiary coverage! All your retirement accounts at one bank are covered for up to $250,000, period -- no matter how many beneficiaries you have on them.)
Your ITF account is included in the individual account category. Let's say that in addition to this ITF account, you have checking and savings accounts at the same bank. Together, the three accounts are covered for up to $250,000.
For more information about these rules, go to the FDIC's Web site, here.
Please send your questions to Lynn@LynnBrennersFamilyFinance.com. I'm sorry I can't respond personally to every email. Questions are only addressed online.
A: 'In trust for' (ITF) accounts are also known as 'Pay on Death' or POD accounts. They automatically go to the named beneficiaries at your death, so this account would be divided between your son and your friend. Each of them could transfer his share into a new account in his own name.
Be sure you've identified both beneficiaries by name on the bank form, and that the account title makes it clear that you want the account to pass to them. You don't have to specify their relationship to you.
If your name is Cindy Jones, for example, the account title should be 'Cindy Jones in trust for Samuel Johnson and Frederick Jones.'
Assets with named beneficiaries -- retirement accounts, life insurance policies, and 'in trust for' bank accounts -- pass to those beneficiaries 'by operation of law'. That's legal jargon for 'automatically.' It means that they don't go through probate, unlike the assets you leave in your will.
You can name anyone you wish as the beneficiary of your bank account; it doesn't have to be a blood relative.
The FDIC covers ITF accounts for up to $250,000 per account owner per qualifying named beneficiary. (In other words, you won't get per beneficiary coverage if you leave an account in trust for 'my children'.)
The $250,000 limit is the new FDIC standard, in effect only through December 31, 2013. On January 1, 2014, the standard FDIC limit will return to $100,000 per depositor for all account categories except IRAs and certain other retirement accounts, which will remain at $250,000 per depositor.
Who is a qualifying beneficiary? Under new FDIC rules adopted in September 2008, any person, non-profit organization, or charity qualifies for per beneficiary coverage. (The old rules pretty much restricted qualifying beneficiaries to a small group of your blood relatives.)
What does 'per owner, per qualifying beneficiary' mean? If you're the sole owner of this account, your two beneficiaries each have up to $250,000 of coverage. In other words, the account is covered for a total of $500,000. You don't get an extra $250,000 of coverage on the ITF account for yourself.
I can hear you wondering, 'But what if I leave the account to a non-qualifying beneficiary, like a partnership or a for-profit corporation? Isn't it covered?'
Yes, it is -- along with your other individual accounts at that bank.
The FDIC provides separate insurance for accounts in each of four distinct categories: individual accounts (those in your sole name); jointly-owned accounts; revocable trust (including 'ITF') accounts; and Individual Retirement accounts and certain other self-directed retirement accounts. Each category except trust accounts gets up to $250,000 of coverage for all the accounts in the category. Trust accounts get up to $250,000 per owner per qualifying named beneficiary.
(Please note that the retirement account category doesn't get per beneficiary coverage! All your retirement accounts at one bank are covered for up to $250,000, period -- no matter how many beneficiaries you have on them.)
Your ITF account is included in the individual account category. Let's say that in addition to this ITF account, you have checking and savings accounts at the same bank. Together, the three accounts are covered for up to $250,000.
For more information about these rules, go to the FDIC's Web site, here.
Please send your questions to Lynn@LynnBrennersFamilyFinance.com. I'm sorry I can't respond personally to every email. Questions are only addressed online.
(c) Lynn Brenner, All Rights Reserved
pass to those beneficiaries 'by operation of law'. That's legal jargon for 'automatically.' It means that they don't go through probate, unlike the assets you leave in your will.
Posted by: cna training | 09/24/2010 at 03:01 PM