FDIC Provides Guidance on New Trust Account Regulations

The FDIC provided guidance to help small trust entities (entities with an average of less than $250,000 total trust deposits per beneficiary, up to five beneficiaries) comply with recently amended deposit insurance regulations for trust accounts and mortgage servicing accounts.

In a Financial Institution Letter, the FDIC stated that the new rules will (i) merge the revocable and irrevocable trust deposit insurance categories into a new "trust accounts" category, (ii) establish a simple formula for calculating deposit insurance coverage for all trust accounts and (iii) insure for up to $250,000 per beneficiary (not to exceed five beneficiaries) a trust account and, in the case of mortgage servicing accounts, $250,000 per mortgagor. (See previous coverage.)

The FDIC asserted that for the majority of accounts, no action will be required once the new rule goes into effect on April 1, 2024, but suggested that institutions reach out to affected depositors who may want to review their coverage and make changes to either their trust agreements or accounts given the new coverage limits. The FDIC noted that institutions are not required to conduct outreach to their depositors, but that some may choose to do so.