What Happens to FDIC Limit When Bank Accounts Merge?

Question: All of our retirement money is in a savings account. We simply cannot afford to lose any of it or have the account “frozen” in any way.

We’d like to know what would happen under these circumstances:

Assume that our total deposits in our account in bank A amount to $100,000 (the limit for federal deposit insurance) and that my total deposits in Bank B are also $100,000.

Later on bank A and bank B are merged into bank C. What if bank C fails? Will the FDIC (Federal Deposit Insurance Corporation) limit my total recovery to $100,000 or will I be able to withdraw the full $200,000?

Because there are so many bank mergers these days, one never knows what might happen.

Answer: You would only be insured up to $100,000. However, you could have deposits in different family members’ names, and each one would be insured up to $100,000.

Although it sounds like huge money that would be out of reach for most people, it’s quite possible, as you say, that money received from a pension or other lump-sum payout could easily top the legal insured limit.

Q: My wife and I have separate accounts with a local savings and loan. The accounts are insured by the FSLIC--a federal agency.

Recently, the S & L went public (sold stock), and I fear it has become an attractive target for a take-over by another banking institution.

Can a savings and loan discontinue its federal insurance coverage for deposits up to $100,000 without notifying its depositors and/or shareholders?

A: According to financial experts at the Federal Savings & Loan Insurance Corp. (FSLIC), the answer is a resounding “No!” Actually, savings institutions around the country are eager to have the federal-insurance logos on their doors.

After the savings-and-loan shake-outs in Ohio and Maryland, precious few depositors want to be in any bank or savings and loan that does not have federal insurance protection. It would be public relations suicide to let this valuable insurance image be dropped.

Q: I have put all my assets into long-term certificates of deposit in trust equally for my two children. I understand that, while they cannot claim this money while I’m living, on my death they just have to properly identify themselves and it is theirs.

I also have a will leaving everything to them on the stipulation that if one predeceases me, that share will go to that child’s children in equal portions. I am told that the CD trust supersedes a will and that the stipulation would not be valid. Is this true?

A: According to estate-planning attorneys, CDs normally remain outside the will’s probate process. Have an attorney check it out to make sure your wishes will be adhered to.