Monday, March 30, 2009

Are Your Escrow Deposits Insured?

With the recent drama regarding banks failing or being in trouble. Escrow companies have been answering the question for clients, how safe is the bank where their escrow deposits are being held?

There are some new insurance limits regarding deposits being held in an escrow trust account. These new limits are scheduled to be in place until December 31st of 2009.

Here are some of the details as posted by the FDIC

Basic FDIC Deposit Insurance Coverage Limits*
  • Single Accounts (owned by one person) $250,000 per owner
  • Joint Accounts (two or more persons) $250,000 per co-owner
  • IRAs and certain other retirement accounts $250,000 per owner
  • Trust Accounts $250,000 per owner per beneficiary subject to specific limitations and requirements
  • Corporation, Partnership and Unincorporated Association Accounts $250,000 per corporation, partnership or unincorporated association
  • Employee Benefit Plan Accounts $250,000 for the non-contingent, ascertainable interest of each participant
  • Government Accounts $250,000 per official custodian
  • Non-interest Bearing Transaction Accounts Unlimited coverage – only at participating FDIC-insured banks and savings associations **

You may have known that the insurance limit per account had gone up to $250,000, but what you may not have known is that the limit for funds in a non interest bearing transaction account (i.e. an escrow trust account) has unlimited coverage.

This is important for a real estate professional to know in case you have a client that is wanting to put their funds in to an interest bearing account for the purpose of closing an escrow. Having the funds in an interst bearing account certainly complicates things and you would want to advise your client about making sure they have the coverage they need if they do so. Many of the questions can be answered by reviewing the FDIC's FAQ's.

It may be worthwhile to at least let someone know that the escrow trust account is the safest place for their funds. After I say that I have to let you know there is one exception, banks can opt out of this additional coverage. So you will want to check to make sure that the bank where the deposits are held is participating in these new limits.

Having this new limit in place for escrow trust accounts is very helpful and gives the title companies and escrow companies an easy way to answer the question about how safe someone's funds are, if they are held in the trust account.

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