As the financial system reels from one disaster after another, financial planners, estate planners and bank officials say they've been receiving calls from panicked savers concerned about the safety of their deposits.
The Federal Deposit Insurance Corp. guarantees bank deposits up to $100,000 per person, per insured institution. But what if you have a lot more cash than that?
For years, savers have gotten around the FDIC's $100,000 limit by spreading their cash across multiple institutions. It's certainly safe, but it's an onerous process. Now, growing numbers of people are turning to other means that allow them to keep hundreds of thousands of dollars safely stowed away under FDIC protection.
One product that has been attracting attention lately is an informal trust account known as a "payable on death," or POD, account. To set up a POD account, depositors must name a beneficiary or beneficiaries who will receive money if the primary account holder dies. For each qualified beneficiary, the FDIC will boost insurance coverage by up to $100,000.
Other strategies include:
• Brokered CDs. Buying multiple certificates of deposit at once through a brokerage firm provides a fast way to spread out money across different institutions, capturing the full FDIC protection.
• CDARS. This deposit-placement service, short for Certificate of Deposit Account Registry Service, disperses deposits into different individual CDs of up to $100,000 each, up to a maximum covered amount of $50 million. Customers deposit their money with a participating bank, and CDARS which is run by the Promontory Interfinancial Network LLC in Arlington, Va. disperses the deposit in individual CDs up to $100,000 in 2,350 member banks across the country.
• Retirement accounts. Money deposited in IRAs, Roth IRAs and certain other retirement plans is insured up to $250,000.
• Joint accounts. Deposit accounts owned by two or more people are insured up to $100,000 for each account holder listed.
• Credit unions. Deposit insurance for credit unions works in much the same way as FDIC insurance does for banks and thrifts, except that the funds are insured by the National Credit Union Share Insurance Fund.
• Revocable trusts. Under this estate-planning strategy, the owner assigns beneficiaries but retains control of the assets during his lifetime. The FDIC insures the interests of each beneficiary up to $100,000 each. Some are formal trusts, which are typically set up by an estate attorney. Others, such as POD accounts, can be created when the account owners add certain terms and the names of the beneficiaries to the bank's account records.