Chances are, you’ve come across the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA) disclosure explaining that your savings are insured up to “at least $250,000” and supported faithfully by the United States Government. Indeed, saving your hard-earned money in a credit union that is federally insured will give you considerable peace of mind. With that said, have you ever wondered about the fact that you’re only covered up to “at least $250,000?” Moreover, have you ever considered how to structure your ownership to ensure all of your funds are covered?
How Are Your Funds Insured and Protected?
The NCUA is an agency of the U.S. federal government. It was formed to act as a monitoring body for federal credit unions across the country. One of its key responsibilities is to run the National Credit Union Share Insurance Fund (NCUSIF).
The primary purpose of the NCUSIF is to offer protection to its members against losses in the event that a federally insured credit union fails. The fund offers all members protection of at least $250,000 for your savings (the sum of all savings, checking and term accounts). In addition to that, the NCUSIF offers many other options that includes coverage for accounts larger than $250K.
The following is a listing of the various types of accounts that can provide you with additional coverage. [Please note: if you need help determining your insurance coverage, you can call (800) 755-1030 to speak to a NCUA representative. Or, to get an estimator of your shares, you can use the calculators here and here.]
Individuals with Individual Retirement Accounts (IRAs), both Traditional and Roth, and Keogh plans (tax-deferred pension plans often used by self-employed individuals for retirement purposes) have the advantage of additional coverage. NCUSIF insures IRAs and Keogh accounts separately, each for $250,000 in aggregate, at every insured credit union.
For example, say you have a regular savings account, a Keogh and an IRA in one credit union; NCUSIF insures the regular savings account up to $250,000, provides additional insurance of up to $250,000 for the IRA (even if you have a Traditional and a Roth, the accounts would be added together, with the total amount insured up to $250,000), and an additional $250,000 for the Keogh.
Keep in mind, the NCUSIF insures your funds against credit union failure. It does not insure accounts against investment losses.
Joint accounts are checking or savings accounts that are owned by two or more people who each have equal rights to withdraw money. Each joint account member has an NCUSIF insurance coverage amount of $250,000 at each credit union that’s federally insured.
For example, a three-person joint account will have $750,000 in coverage. Here’s another example: a married couple each holds an individual account containing $250,000. They also hold a qualifying joint account with $500,000. Total insurance coverage for the couple is $1 million. Each spouse is insured up to $250,000 in his or her individual account, and each is also insured for $250,000 separately from their joint account.
There are two basic kinds of trust accounts: Revocable (the creator, or owner, of the trust indicates an intention to grant funds to one or more beneficiaries upon his or her death), and Irrevocable (the creator of the trust gives up all power to cancel or change the trust). In most cases, credit unions can establish a common payable-on-death revocable trust without requiring any extra documentation. Credit unions may ask for additional valid documentation to qualify coverage.
With both revocable and irrevocable trusts, insurance coverage is provided to the owner of the trust; however, the amount of coverage is based on the number of beneficiaries named in the trust (subject to limitations and requirements). Examples for structuring in both instances are included here.
To qualify as an eligible beneficiary, you must be a natural person, a non-profit organization, or a charitable organization under the Internal Revenue Code.
*Please note: Members should make a point of consulting with professionals when establishing and documenting trust arrangements.
- NCUA Share Insurance Coverage Overview
- Share Insurance Calculator
- NCUA’s YouTube Video on Share Insurance
- NCUA’s YouTube Video on its Share Insurance Estimator
- NCUA’s YouTube Video on Share Insurance Account Ownership Types