Simplification of Living Trust Rules

This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations

Federal Register

2825

Vol. 69, No. 13

Wednesday, January 21, 2004

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Part 330

RIN 3064–AC54

Deposit Insurance Regulations; Living

Trust Accounts

AGENCY: Federal Deposit Insurance

Corporation (FDIC).

ACTION: Final rule.

SUMMARY: The FDIC is amending its

regulations to clarify and simplify the

deposit insurance coverage rules for

living trust accounts. The rules are

amended to provide coverage up to

$100,000 per qualifying beneficiary

who, as of the date of an insured

depository institution failure, would

become the owner of the living trust

assets upon the account owner’s death.

EFFECTIVE DATE: April 1, 2004.

FOR FURTHER INFORMATION CONTACT:

Joseph A. DiNuzzo, Counsel, Legal

Division (202) 898–7349; Kathleen G.

Nagle, Supervisory Consumer Affairs

Specialist, Division of Supervision and

Consumer Protection (202) 898–6541; or

Martin W. Becker, Senior Receivership

Management Specialist, Division of

Resolutions and Receiverships (202)

898–6644, Federal Deposit Insurance

Corporation, Washington, DC 20429.

SUPPLEMENTARY INFORMATION:

I. Background

In June 2003 the FDIC published a

proposed rule to simplify the insurance

coverage rules for living trust accounts

(‘‘proposed rule’’). 68 FR 38645, June

30, 2003. The FDIC undertook this

rulemaking because of the confusion

among bankers and the public about the

insurance coverage of these accounts.

A living trust is a formal revocable

trust over which the owner (also known

as the grantor) retains ownership during

his or her lifetime

to simplify the insurance

coverage rules for living trust accounts

(‘‘proposed rule’’). 68 FR 38645, June

30, 2003. The FDIC undertook this

rulemaking because of the confusion

among bankers and the public about the

insurance coverage of these accounts.

A living trust is a formal revocable

trust over which the owner (also known

as the grantor) retains ownership during

his or her lifetime. Upon the owner’s

death, the trust generally becomes

irrevocable. A living trust is an

increasingly popular instrument

designed to achieve specific estate-

planning goals. A living trust account is

subject to the FDIC’s insurance rules on

revocable trust accounts. Section 330.10

of the FDIC’s regulations (12 CFR

330.10) provides that revocable trust

accounts are insured up to $100,000 per

‘‘qualifying’’ beneficiary designated by

the account owner. If there are multiple

owners of a living trust account,

coverage is available separately for each

owner. Qualifying beneficiaries are

defined as the owner’s spouse, children,

grandchildren, parents and siblings. 12

CFR 330.10 (a).

The most common type of revocable

trust account is the ‘‘payable-on-death’’

(‘‘POD’’) account, comprised simply of a

signature card on which the owner

designates the beneficiaries to whom the

funds in the account will pass upon the

owner’s death. The per-beneficiary

coverage available on revocable trust

accounts is separate from the insurance

coverage afforded to any single-

ownership accounts held by the owner

or beneficiary at the same insured

institution. That means, for example, if

an individual has at the same insured

bank or thrift a single-ownership

account with a balance of $100,000 and

a POD account (naming at least one

qualifying beneficiary) with a balance of

$100,000, both accounts would be

insured separately for a combined

amount of $200,000. If the POD account

names more than one qualifying

beneficiary, then that account would be

insured for up to $100,000 per

qualifying beneficiary

insured

bank or thrift a single-ownership

account with a balance of $100,000 and

a POD account (naming at least one

qualifying beneficiary) with a balance of

$100,000, both accounts would be

insured separately for a combined

amount of $200,000. If the POD account

names more than one qualifying

beneficiary, then that account would be

insured for up to $100,000 per

qualifying beneficiary. 12 CFR

330.10(a).

Separate, per-beneficiary insurance

coverage is available for revocable trust

accounts only if the account satisfies

certain requirements. First, the title of

the account must include a term such as

‘‘in trust for’’ or ‘‘payable-on-death to’’

(or corresponding acronym). Second,

each beneficiary must be either the

owner’s spouse, child, grandchild,

parent or sibling. Third, the

beneficiaries must be specifically named

in the deposit account records of the

depository institution. And fourth, the

account must evidence an intent that

the funds shall belong unconditionally

to the designated beneficiaries upon the

owner’s death. 12 CFR 330.10(a) and (b).

As noted, the most common form of

revocable trust account is the POD

account, consisting simply of a

signature card. With POD accounts, the

fourth requirement for per-beneficiary

coverage does not present a problem

because the signature card normally will

not include any conditions upon the

interests of the designated beneficiaries.

In other words, the signature card

provides that the funds shall belong to

the beneficiaries upon the owner’s

death. In contrast, many living trust

agreements provide, in effect, that the

funds might belong to the beneficiaries

depending on various conditions. The

FDIC refers to such conditions as

‘‘defeating contingencies’’ if they create

the possibility that the beneficiaries may

never receive the funds following the

owner’s death.

Living trust accounts started to

emerge in the late 1980s and early

1990s

ntrast, many living trust

agreements provide, in effect, that the

funds might belong to the beneficiaries

depending on various conditions. The

FDIC refers to such conditions as

‘‘defeating contingencies’’ if they create

the possibility that the beneficiaries may

never receive the funds following the

owner’s death.

Living trust accounts started to

emerge in the late 1980s and early

1990s. At that time, the FDIC responded

to a significant number of questions

about the insurance coverage of such

accounts, often times reviewing the

actual trust agreements to determine

whether the requirements for per-

beneficiary insurance were satisfied. In

the FDIC’s review of numerous such

trusts, it determined that many of the

trusts included conditions that needed

to be satisfied before the named

beneficiaries would become the owners

of the trust assets. For example, some

trusts required that the trust assets first

be used to satisfy legacies in the

grantor’s will; the remaining assets, if

any, would then be distributed to the

trust beneficiaries. Other trusts provided

that, in order to receive any benefit

under the trust, the beneficiary must

graduate from college. Because of the

prevalence of defeating contingencies

among living trust agreements and the

increasing number of requests to render

opinions on the insurance coverage of

specific living trust accounts, in 1994

the FDIC issued ‘‘Guidelines for

Insurance Coverage of Revocable Trust

Accounts (Including ‘‘Living Trust’’

Accounts).’’ FDIC Advisory Opinion 94–

32 (May 18, 1994). As part of its overall

simplification of the deposit insurance

regulations, in 1998 the FDIC revised

§ 330.10 to include a provision

explaining the insurance coverage rules

for living trust accounts. 12 CFR

330.10(f). That provision included a

definition of defeating contingencies.

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rt of its overall

simplification of the deposit insurance

regulations, in 1998 the FDIC revised

§ 330.10 to include a provision

explaining the insurance coverage rules

for living trust accounts. 12 CFR

330.10(f). That provision included a

definition of defeating contingencies.

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Federal Register / Vol. 69, No. 13 / Wednesday, January 21, 2004 / Rules and Regulations

Despite the FDIC’s issuance of

guidelines on the insurance coverage of

living trust accounts and its inclusion of

a special provision in the insurance

regulations explaining the coverage of

these accounts, there still is significant

public and industry confusion about

how the insurance rules apply to living

trust accounts. Time has shown that the

basic rules on the coverage of POD

accounts are not fully adaptable to

living trust accounts. The POD rules

were written to apply to signature-card

accounts, not lengthy, detailed trust

documents. Because living trust

accounts and PODs are subject to the

same insurance rules and analysis,

depositors and bankers often mistakenly

believe that living trust accounts are

automatically insured up to $100,000

per qualifying beneficiary without

regard to any terms in the trust that

might prevent the beneficiary from ever

receiving the funds. Our experience

indicates that in a significant number of

cases that is not so under existing rules.

Because of the existence of defeating

contingencies in the trust agreement, a

living trust account often fails to satisfy

the requirements for per-beneficiary

coverage. Thus, the funds in the account

are treated as the owner’s single-

ownership funds and, after being added

to any other single-ownership funds the

owner has at the same institution,

insured to a limit of $100,000

ting rules.

Because of the existence of defeating

contingencies in the trust agreement, a

living trust account often fails to satisfy

the requirements for per-beneficiary

coverage. Thus, the funds in the account

are treated as the owner’s single-

ownership funds and, after being added

to any other single-ownership funds the

owner has at the same institution,

insured to a limit of $100,000. The

funds in a non-qualifying living trust

account with more than one owner are

deemed the single-ownership funds of

each owner, with the corresponding

attribution of the funds to each owner’s

single-ownership accounts.

The FDIC recognizes that the rules

governing the insurance of living trust

accounts are complex and confusing.

Under the current rules, the amount of

insurance coverage for a living trust

account can only be determined after

the trust document has been reviewed to

determine whether there are any

defeating contingencies. Consequently,

in response to questions about coverage

of living trust accounts, the FDIC can

only advise depositors and bankers that

they should assume that such accounts

will be insured for no more than

$100,000 per grantor, assuming the

grantor has no single-ownership funds

in the same depository institution.

Otherwise, the FDIC suggests that the

owners of living trust accounts seek

advice from the attorney who prepared

the trust document. Depositors who

contact the FDIC about their living trust

insurance coverage are often troubled to

learn that they cannot definitively

determine the amount of their coverage

without a legal analysis of their trust

document. Also, when a depository

institution fails the FDIC must review

each living trust to determine whether

the beneficiaries’ interests are subject to

defeating contingencies. This often is a

time-consuming process, sometimes

resulting in a significant delay in

making deposit insurance payments to

living trust account owners.

II

heir coverage

without a legal analysis of their trust

document. Also, when a depository

institution fails the FDIC must review

each living trust to determine whether

the beneficiaries’ interests are subject to

defeating contingencies. This often is a

time-consuming process, sometimes

resulting in a significant delay in

making deposit insurance payments to

living trust account owners.

II. The Proposed Rule

In the proposed rule issued in June

2003, the FDIC identified and requested

comments on what it believed to be two

viable alternatives to address the

confusion surrounding the insurance

coverage of living trust accounts.

The first alternative provided for

coverage up to $100,000 per qualifying

beneficiary named in the living trust

irrespective of defeating contingencies

(‘‘Alternative One’’).

The FDIC would identify the

beneficiaries and their ascertainable

interests in the trust from the depository

institution’s account records and

provide coverage on the account up to

$100,000 per qualifying beneficiary. As

with POD accounts, under Alternative

One insurance coverage would be

provided up to $100,000 per qualifying

beneficiary limited to each beneficiary’s

ascertainable interest in the trust.

Alternative One expressly required

that the deposit account records of the

institution indicate the ownership

interest of each beneficiary in the living

trust. The information could be in the

form of the dollar amount of each

beneficiary’s interest or on a percentage

basis relative to the total amount of the

trust assets. The FDIC requested specific

comments on how such a recordkeeping

requirement should be satisfied when a

trust provided for different levels of

beneficiaries whose interests in the trust

depend on certain conditions, including

the death of a ‘‘higher-tiered’’

beneficiary

dollar amount of each

beneficiary’s interest or on a percentage

basis relative to the total amount of the

trust assets. The FDIC requested specific

comments on how such a recordkeeping

requirement should be satisfied when a

trust provided for different levels of

beneficiaries whose interests in the trust

depend on certain conditions, including

the death of a ‘‘higher-tiered’’

beneficiary. In the proposed rule the

FDIC noted that Alternative One

generally would result in an increase in

deposit insurance coverage because,

unlike under the current rules,

beneficiaries would not be required to

have an unconditional interest in the

trust in order for the account to qualify

for per-beneficiary coverage.

The second alternative in the

proposed rule provided, in essence, for

a separate category of ownership for

living trust accounts, insuring such

accounts up to $100,000 per account

owner (‘‘Alternative Two’’). An

individual grantor would be insured up

to a total of $100,000 for all living trust

accounts he or she had at the same

depository institution, regardless of the

number of beneficiaries named in the

trust, the grantor’s relationship to the

beneficiaries and whether there were

any defeating contingencies in the trust.

The coverage for a living trust account

would be separate from the coverage

afforded to any single-ownership

accounts or qualifying joint accounts the

owner might have at the same

depository institution. Where there were

joint owners of a living trust account,

the account would be insured up to

$100,000 per grantor. Such accounts

also would be separately insured from

any joint accounts either grantor might

have at the same insured depository

institution. In the proposed rule the

FDIC noted that Alternative Two likely

would result in reduced coverage for

owners of living trusts naming more

than one qualifying beneficiary because

per-beneficiary coverage would be

eliminated.

III

$100,000 per grantor. Such accounts

also would be separately insured from

any joint accounts either grantor might

have at the same insured depository

institution. In the proposed rule the

FDIC noted that Alternative Two likely

would result in reduced coverage for

owners of living trusts naming more

than one qualifying beneficiary because

per-beneficiary coverage would be

eliminated.

III. Comments on the Proposed Rule

The FDIC received forty-three

comments on the proposed rule. Thirty-

seven comments were from banks and

savings associations and six were from

state and national depository institution

trade associations. Twenty-five

comments were in favor of Alternative

One or a modified version of that

alternative and sixteen were in favor of

Alternative Two. Two comments

discussed the characteristics of both

alternatives without expressing a

preference for either one. Many of the

comments on the proposed rule praised

the FDIC for attempting to simplify and

clarify the living trust rules. All the

comment letters are available on the

FDIC Web site, http://www.fdic.gov/

regulations/laws/federal/propose.html.

Seventeen comments expressed

support for Alternative One as

proposed. In general, those commenters

said Alternative One would provide

more coverage for depositors than

Alternative Two and would be more in

line with the current coverage available

for POD accounts. As such, depositors

would not have to place their money

with more than one institution or

through deposit brokers to obtain full

insurance coverage on their deposits.

Along these lines, two commenters

mentioned that Alternative One would

assist depositors in estate-planning

efforts by allowing them to place a

sizable portion of their assets at one

insured institution. Several comments

lauded the certainty provided by

Alternative One

ir money

with more than one institution or

through deposit brokers to obtain full

insurance coverage on their deposits.

Along these lines, two commenters

mentioned that Alternative One would

assist depositors in estate-planning

efforts by allowing them to place a

sizable portion of their assets at one

insured institution. Several comments

lauded the certainty provided by

Alternative One. One stated that

‘‘[Alternative One] provides the amount

of coverage and the clarity and

understanding of living trust accounts

that our customers deserve.’’ Another

argued that it would be inequitable to

treat POD accounts and living trust

accounts differently because they both

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Federal Register / Vol. 69, No. 13 / Wednesday, January 21, 2004 / Rules and Regulations

are in the owner’s control during his or

her lifetime and may be modified at any

time prior to the owner’s death.

Eight of the twenty-five commenters

who supported Alternative One,

however, expressed concerns about

certain aspects of the alternative and

asked the FDIC to modify Alternative

One before finalizing it. One state

financial institution trade association

voiced strong opposition to ‘‘any

requirement for financial institutions to:

Obtain any part of a trust document;

provide a certification of trust existence;

and specifically identify a qualifying

beneficiary’s interest in trust assets or

relationship to the grantor(s).’’

A national depository institutions

trade group cautioned that the proposed

recordkeeping requirements might

jeopardize the protections afforded

under certain state laws for financial

institutions in dealing with trusts

st document;

provide a certification of trust existence;

and specifically identify a qualifying

beneficiary’s interest in trust assets or

relationship to the grantor(s).’’

A national depository institutions

trade group cautioned that the proposed

recordkeeping requirements might

jeopardize the protections afforded

under certain state laws for financial

institutions in dealing with trusts. It

cited ‘‘compelling practical reasons’’

against the proposed recordkeeping

requirements in Alternative One, noting

that:

• Unlike POD accounts, for which the

only document is the institution’s

account—opening record, living trusts

can be lengthy, complicated documents

that identify multiple tiers of

beneficiaries.

• It is often difficult for bankers to get

information from accountholders who

may be confused by the complexity and

terminology of their living trust

documents.

• Living trusts can be amended or

revoked at any time and depository

institutions should not be expected to

repeatedly contact their customers to

determine whether their account

information is current.

• Customers might perceive such

recordkeeping requirements as an

invasion of privacy.

Two other trade associations and

several depository institutions echoed

these views.

Many of the commenters in favor of

Alternative One without the proposed

recordkeeping requirements suggested

that the FDIC continue its current

practice of ascertaining the existence of

living trust beneficiaries and kinship

information at the time an institution is

closed. In addition to making the same

points on the recordkeeping

requirements as those noted above,

another national trade association

representing community banks said ‘‘we

do not see how the FDIC can avoid the

time-consuming process of reviewing

trust agreements when a bank failure

occurs.’’

Sixteen comments were in favor of

Alternative Two

information at the time an institution is

closed. In addition to making the same

points on the recordkeeping

requirements as those noted above,

another national trade association

representing community banks said ‘‘we

do not see how the FDIC can avoid the

time-consuming process of reviewing

trust agreements when a bank failure

occurs.’’

Sixteen comments were in favor of

Alternative Two. Generally, the

consensus among these comments was,

as expressed by one community banker,

‘‘[Alternative Two is] easier [than

Alternative One] to explain to the

depositor and for the bank to keep track

of.’’ Another community banker

described the option as

‘‘straightforward.’’ A common point

made by several commenters was that,

because of the simplicity of Alternative

Two, depositors would be able to make

an informed decision in placing living

trust funds with depository institutions.

Another community banker noted that

Alternative Two would be the

‘‘simplest, easiest and cleanest method’’

of insuring living trust deposits and

added that ‘‘[w]e are not lawyers nor tax

accountants and we should not have to

‘dive’ into someone’s trust papers and

try to decide how many beneficiaries,

the relationships (of the parties) and if

there are contingencies in the trust.’’

Three commenters who favored

Alternative Two suggested that under

Alternative Two the insurance coverage

for living trust accounts be increased to

$200,000 to address the reduction in

coverage some depositors might

experience as a result of the rule change.

(This is not a viable option for the FDIC

because it would take an act of Congress

to increase the basic deposit insurance

amount.)

A large regional bank commented that

Alternative Two ‘‘appears to be the

fairest treatment of these accounts as it

treats them more like individual

accounts

to address the reduction in

coverage some depositors might

experience as a result of the rule change.

(This is not a viable option for the FDIC

because it would take an act of Congress

to increase the basic deposit insurance

amount.)

A large regional bank commented that

Alternative Two ‘‘appears to be the

fairest treatment of these accounts as it

treats them more like individual

accounts. Since revocable accounts are

generally used for the primary benefit of

one, or sometimes two individuals, this

seems more in line with policy of FDIC

insurance than Alternative One.’’

Many comments in support of

Alternative Two acknowledged that

Alternative One also offered advantages

to depositors and would be an

improvement over the current rule, but

noted that Alternative One would place

an added burden on financial

institutions by imposing new

recordkeeping requirements and would

place institutions in the position of

requesting information from depositors

that they likely would be unwilling or

unable to provide for privacy and other

reasons. One medium-sized institution

favored Alternative Two because ‘‘we

wouldn’t have to track the names of the

trust beneficiaries and their various

interests.’’ A community banker voiced

support for Alternative Two, saying it

would be ‘‘easier to understand by the

customer and bank personnel.’’ She

noted that customers would have the

option to open POD accounts to obtain

separate per-beneficiary POD coverage.

IV. The Final Rule

A. General Explanation

Upon considering the comments on

the proposed rule, the FDIC has revised

the current living trust account rules to

provide for insurance coverage of up to

$100,000 per qualifying beneficiary

who, as of the date of an institution

failure, would become entitled to the

living trust assets upon the owner’s

death

eparate per-beneficiary POD coverage.

IV. The Final Rule

A. General Explanation

Upon considering the comments on

the proposed rule, the FDIC has revised

the current living trust account rules to

provide for insurance coverage of up to

$100,000 per qualifying beneficiary

who, as of the date of an institution

failure, would become entitled to the

living trust assets upon the owner’s

death. This is a modified version of

Alternative One in the proposed rule,

based in part on a comment from a

community banker that living trust

coverage be based on beneficiaries

‘‘without death related contingencies.’’

Under the final rule, coverage will be

determined on the interests of

qualifying beneficiaries irrespective of

defeating contingencies. A beneficiary

whose trust interest is dependent on the

death of another trust beneficiary,

however, will not qualify.

For example, an account for a living

trust providing that the trust assets go in

equal shares to the owner’s three

children upon the owner’s death would

be eligible for $300,000 of deposit

insurance coverage. If the trust provides

that the funds would go to the children

only if they each graduate from college

prior to the owner’s death, the coverage

would still be $300,000, because

defeating contingencies will no longer

be relevant for deposit insurance

purposes. Another example is where a

trust provides that the owner’s spouse

becomes the owner of the trust assets

upon the owner’s death but, if the

spouse predeceases the owner, the three

children then become the owners of the

assets. If the spouse is alive when the

institution fails, the account will be

insured up to a maximum of $100,000,

because only the spouse is entitled to

the assets upon the owner’s death. If at

the time of the institution failure,

however, the spouse has predeceased

the owner, then the account would be

eligible for up to $300,000 coverage

because there would be three qualifying

beneficiaries entitled to the trust assets

upon the owner’s death

the account will be

insured up to a maximum of $100,000,

because only the spouse is entitled to

the assets upon the owner’s death. If at

the time of the institution failure,

however, the spouse has predeceased

the owner, then the account would be

eligible for up to $300,000 coverage

because there would be three qualifying

beneficiaries entitled to the trust assets

upon the owner’s death.

In developing the final rule the FDIC

was guided by two interwoven

objectives: To simplify the existing rules

and to provide coverage similar to POD

account coverage. The FDIC believes the

final rule achieves these objectives

because it is reasonably straight-forward

and because, as with POD accounts,

coverage is based on the actual interests

of qualifying beneficiaries. The final

rule is similar to Alternative One but

provides coverage based on qualifying

beneficiaries who have an immediate

interest in the trust assets upon the

grantor’s death. This concept is the

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same as the coverage theory applicable

to POD accounts: To provide coverage

based on the interests of the

beneficiaries who will receive the

account funds when the owner dies,

determined as of the date of the

institution failure. Alternative One

could have allowed for potentially

open-ended coverage in some situations,

particularly where a trust provided for

tiered, or sequential, beneficiaries

whose interests in the trust depend on

whether ‘‘higher-tiered’’ beneficiaries

predecease them.

Moreover, Alternative One would

have required that a depository

institution’s deposit account records

indicate the name and ascertainable

interest of each qualifying beneficiary in

the trust

erage in some situations,

particularly where a trust provided for

tiered, or sequential, beneficiaries

whose interests in the trust depend on

whether ‘‘higher-tiered’’ beneficiaries

predecease them.

Moreover, Alternative One would

have required that a depository

institution’s deposit account records

indicate the name and ascertainable

interest of each qualifying beneficiary in

the trust. The FDIC was persuaded by a

majority of comments contending that

requiring institutions to maintain

records on the names of living trust

beneficiaries and their interests in the

respective trusts would be unnecessary

and burdensome. The FDIC agrees with

the industry assessment of that

proposed requirement because the

grantor of a living trust might during his

or her lifetime change the trust

beneficiaries and modify the terms of

the trust. Requiring the grantor to

inform a depository institution of these

changes and requiring depository

institutions to maintain records on such

information is impractical and

unnecessarily burdensome. Hence, a key

feature of the final rule is that it requires

no recordkeeping requirement other

than an indication on a depository

institution’s records that the account is

a living trust account. Upon an

institution failure, FDIC claims agents

would identify the beneficiaries and

determine their interests by reviewing

the trust agreement obtained from the

depositor. At that time depositors would

attest to their relationship to the named

beneficiaries.

In the final rule the FDIC has

eliminated an unnecessary

recordkeeping requirement.

Specifically, the names of living trust

beneficiaries will no longer have to be

recorded in the deposit account records

of an insured institution in order for the

account to qualify for the deposit

insurance provided for living trust

accounts

ould

attest to their relationship to the named

beneficiaries.

In the final rule the FDIC has

eliminated an unnecessary

recordkeeping requirement.

Specifically, the names of living trust

beneficiaries will no longer have to be

recorded in the deposit account records

of an insured institution in order for the

account to qualify for the deposit

insurance provided for living trust

accounts. The removal of this

recordkeeping requirement supports the

ongoing efforts of the FDIC and the

other federal banking regulators, under

the Economic Growth and Regulatory

Paperwork Reduction Act (‘‘EGRPRA’’),

to eliminate unnecessary regulatory

requirements. Detailed information

about the EGRPRA project is available at

http://www.egrpra.gov.

The FDIC believes deposit insurance

coverage under the final rule would

match the coverage many depositors

now expect for their living trust

accounts. Generally, depositors believe

that living trust coverage is essentially

the same as POD account coverage. In

other words, insurance is based on the

number of qualifying beneficiaries with

an ownership interest in the account,

regardless of any conditions, or

contingencies, affecting those interests.

The final rule will match those

expectations because it provides

coverage more closely aligned with POD

coverage than the former rules. The

FDIC believes the final rule will provide

bankers and depositors with a better

understanding of the living trust

account deposit insurance rules and

will help to eliminate the present

confusion surrounding the coverage of

living trust accounts.

B. Treatment of Non-Qualifying

Beneficiaries

The treatment of non-qualifying

beneficiaries under the final rule will be

the same as under the current POD

rules. Interests of non-qualifying

beneficiaries in a living trust will be

insured as the owner’s single-ownership

(or individual) funds

nd

will help to eliminate the present

confusion surrounding the coverage of

living trust accounts.

B. Treatment of Non-Qualifying

Beneficiaries

The treatment of non-qualifying

beneficiaries under the final rule will be

the same as under the current POD

rules. Interests of non-qualifying

beneficiaries in a living trust will be

insured as the owner’s single-ownership

(or individual) funds. As such, those

interests will be added to any other

single-ownership funds the owner holds

at the same institution and insured to a

total of $100,000 in that account-

ownership capacity. For example,

assume a living trust provides that the

grantor’s assets shall belong equally to

her husband and nephew upon her

death. A living trust account with a

balance of $200,000 held for that trust

would be insured for at least $100,000

because there is one qualifying

beneficiary (the grantor’s spouse) who,

upon the institution failure, would be

entitled to the funds upon the grantor’s

death. Because the nephew is a non-

qualifying beneficiary, the $100,000

attributable to him would be insured as

the grantor’s single-ownership funds. If

the grantor has no other single-

ownership funds at the institution, the

full $200,000 of the living trust account

would be insured—$100,000 under the

grantor’s revocable trust ownership

capacity and $100,000 under the

grantor’s single-ownership capacity. If,

however, the grantor also has a single-

ownership account with a balance of,

say, $20,000, the $100,000 of the living

trust account attributable to the nephew

would be added to that amount and the

combined amount, in the grantor’s

single-ownership capacity, would be

insured to a limit of $100,000, leaving

$20,000 uninsured. This result and

calculation methodology is the same as

under the current rules for POD

accounts.

C

gle-

ownership account with a balance of,

say, $20,000, the $100,000 of the living

trust account attributable to the nephew

would be added to that amount and the

combined amount, in the grantor’s

single-ownership capacity, would be

insured to a limit of $100,000, leaving

$20,000 uninsured. This result and

calculation methodology is the same as

under the current rules for POD

accounts.

C. Treatment of Life-Estate and

Remainder Interests

Living trusts sometime provide for a

life estate interest for designated

beneficiaries and a remainder interest

for other beneficiaries. The final rule

addresses this situation by deeming

each life-estate holder and each

remainder-man to have an equal interest

in the trust assets. Insurance is then

provided up to $100,000 per qualifying

beneficiary. For example, assume a

grantor creates a living trust providing

for his wife to have a life-estate interest

in the trust assets with the remaining

assets going to their two children upon

the wife’s death. The assets in the trust

are $300,000 and a living trust account

is opened for that full amount. Unless

otherwise indicated in the trust, the

FDIC would deem each of the

beneficiaries (all of whom here are

qualifying beneficiaries) to own an

equal share of the $300,000; hence, the

full amount would be insured. This

result would be the same even if the

wife has the power to invade the

principal of the trust, inasmuch as

under the final rule defeating

contingencies are no longer relevant for

insurance purposes.

Another example would be where the

living trust provides for a life estate

interest for the grantor’s spouse and

remainder interests for two nephews. In

that situation the method for

determining coverage would be the

same as that indicated above: Unless

otherwise indicated, each beneficiary

would be deemed to have an equal

ownership interest in the trust assets

and coverage would be provided

accordingly

ould be where the

living trust provides for a life estate

interest for the grantor’s spouse and

remainder interests for two nephews. In

that situation the method for

determining coverage would be the

same as that indicated above: Unless

otherwise indicated, each beneficiary

would be deemed to have an equal

ownership interest in the trust assets

and coverage would be provided

accordingly. Here the life-estate holder

is a qualifying beneficiary (the grantor’s

spouse) but the remainder-men (the

grantor’s nephews) are not. As such

(assuming an account balance of

$300,000), the living trust account

would be insured for at least $100,000

because there is one qualifying

beneficiary (the grantor’s spouse). The

$200,000 attributable to the grantor’s

nephews would be insured as the

grantor’s single-ownership funds. If the

grantor has no other single-ownership

funds at the same institution, then

$100,000 would be insured as the

grantor’s single-ownership funds. Thus,

the $300,000 in the living trust account

would be insured for a total of $200,000

and $100,000 would be uninsured. The

FDIC believes this is a simple, balanced

approach to insuring living trust

accounts where the living trust provides

for one or more life estate interests.

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Federal Register / Vol. 69, No. 13 / Wednesday, January 21, 2004 / Rules and Regulations

V. Effective Date

The final rule will become effective

on April 1, 2004, the beginning of the

first calendar quarter following the

publication date of the final rule. The

final rule will apply as of that date to

all living trust accounts unless, upon a

depository institution failure, a

depositor who established a living trust

account before April 1, 2004, chooses

coverage under the previous living trust

account rules

le will become effective

on April 1, 2004, the beginning of the

first calendar quarter following the

publication date of the final rule. The

final rule will apply as of that date to

all living trust accounts unless, upon a

depository institution failure, a

depositor who established a living trust

account before April 1, 2004, chooses

coverage under the previous living trust

account rules. For any depository

institution failures occurring between

January 13, 2004, and April 1, 2004, the

FDIC will apply the final rule if doing

so would benefit living trust account

holders of such failed institutions.

VI. Paperwork Reduction Act

The final rule will simplify the FDIC’s

regulations governing the insurance of

living trust accounts. It will not involve

any new collections of information

pursuant to the Paperwork Reduction

Act (44 U.S.C. 3501 et seq.).

Consequently, no information has been

submitted to the Office of Management

and Budget for review.

VII. Regulatory Flexibility Act

The FDIC certifies that the final rule

will not have a significant economic

impact on a substantial number of small

businesses within the meaning of the

Regulatory Flexibility Act (5 U.S.C.

605(b)). The amendments to the deposit

insurance rules will apply to all FDIC-

insured depository institutions,

including those within the definition of

‘‘small businesses’’ under the

Regulatory Flexibility Act. The final

rule eliminates an existing requirement

for all FDIC-insured institutions to

designate living trust beneficiaries in

deposit account records. This change in

recordkeeping will result in a marginal

reduction in time and effort for

depository institution staff which will

not significantly affect compliance

costs. The rule imposes no new

reporting, recordkeeping or other

compliance requirements. Accordingly,

the Act’s requirements relating to an

initial and final regulatory flexibility

analysis are not applicable.

VIII

records. This change in

recordkeeping will result in a marginal

reduction in time and effort for

depository institution staff which will

not significantly affect compliance

costs. The rule imposes no new

reporting, recordkeeping or other

compliance requirements. Accordingly,

the Act’s requirements relating to an

initial and final regulatory flexibility

analysis are not applicable.

VIII. The Treasury and General

Government Appropriations Act,

1999—Assessment of Federal

Regulations and Policies on Families

The FDIC has determined that the

final rule will not affect family well-

being within the meaning of section 654

of the Treasury and General

Government Appropriations Act,

enacted as part of the Omnibus

Consolidated and Emergency

Supplemental Appropriations Act of

1999 (Pub. L. 105–277, 112 Stat. 2681).

IX. Small Business Regulatory

Enforcement Fairness Act

The Office of Management and Budget

has determined that the final rule is not

a ‘‘major rule’’ within the meaning of

the relevant sections of the Small

Business Regulatory Enforcement

Fairness Act of 1996 (‘‘SBREFA’’) (5

U.S.C. 801 et seq.). As required by

SBFERA, the FDIC will file the

appropriate reports with Congress and

the General Accounting Office so that

the final rule may be reviewed.

List of Subjects in 12 CFR Part 330

Bank deposit insurance, Banks,

banking, Reporting and recordkeeping

requirements, Savings and loan

associations, Trusts and trustees.

I For the reasons stated above, the Board

of Directors of the Federal Deposit

Insurance Corporation hereby amends

part 330 of chapter III of title 12 of the

Code of Federal Regulations as follows:

PART 330—DEPOSIT INSURANCE

COVERAGE

I 1. The authority citation for part 330

continues to read as follows:

Authority: 12 U.S.C. 1813(l), 1813(m),

1817(i), 1818(q), 1819 (Tenth), 1820(f),

1821(a), 1822(c).

I 2. Section 330.10(f) is revised to read

as follows:

§ 330.10

Revocable trust accounts.

*

*

*

*

*

ds

part 330 of chapter III of title 12 of the

Code of Federal Regulations as follows:

PART 330—DEPOSIT INSURANCE

COVERAGE

I 1. The authority citation for part 330

continues to read as follows:

Authority: 12 U.S.C. 1813(l), 1813(m),

1817(i), 1818(q), 1819 (Tenth), 1820(f),

1821(a), 1822(c).

I 2. Section 330.10(f) is revised to read

as follows:

§ 330.10

Revocable trust accounts.

*

*

*

*

*

(f) Living trust accounts. (1) This

section also applies to revocable trust

accounts held in connection with a

formal revocable trust created by an

owner/grantor and over which the

owner/grantor retains ownership during

his or her lifetime. These trusts are

usually referred to as living trusts. If a

named beneficiary in a living trust is a

qualifying beneficiary under this

section, then the account held in

connection with the living trust is

eligible for the per-qualifying-

beneficiary coverage described in

paragraph (a) of this section. This

coverage will apply only if, at the time

an insured depository institution fails, a

qualifying beneficiary would be entitled

to his or her interest in the trust assets

upon the grantor’s death and that

ownership interest would not depend

on the death of another trust

beneficiary. If there is more than one

grantor, then the beneficiary’s

entitlement to the trust assets must be

upon the death of the last grantor. The

coverage provided in this paragraph (f)

shall be irrespective of any other

conditions in the trust that might

prevent a beneficiary from acquiring an

interest in the deposit account upon the

account owner’s death.

(Example 1: A is the owner of a living trust

account with a deposit balance of $300,000.

The trust provides that, upon A’s death, her

husband shall receive $100,000 and each of

their two children shall receive $100,000, but

only if the children graduate from college by

age twenty-four

t

prevent a beneficiary from acquiring an

interest in the deposit account upon the

account owner’s death.

(Example 1: A is the owner of a living trust

account with a deposit balance of $300,000.

The trust provides that, upon A’s death, her

husband shall receive $100,000 and each of

their two children shall receive $100,000, but

only if the children graduate from college by

age twenty-four. Assuming A has no other

revocable trust accounts at the same

depository institution, the coverage on her

living trust account would be $300,000. The

trust names three qualifying beneficiaries.

Coverage would be provided up to $100,000

per qualifying beneficiary regardless of any

contingencies.)

(Example 2: B is the owner of a living trust

account with a deposit balance of $200,000.

The trust provides that, upon B’s death, his

wife shall receive $200,000 but, if the wife

predeceases B, each of the two children shall

receive $100,000. Assuming B has no other

revocable trust accounts at the same

depository institution and his wife is alive at

the time of the institution failure, the

coverage on his living trust account would be

$100,000. The trust names only one

beneficiary (B’s spouse) who would become

the owner of the trust assets upon B’s death.

If when the institution fails B’s wife has

predeceased him, then the account would be

insured to $200,000 because the two children

would be entitled to the trust assets upon B’s

death.)

time of the institution failure, the

coverage on his living trust account would be

$100,000. The trust names only one

beneficiary (B’s spouse) who would become

the owner of the trust assets upon B’s death.

If when the institution fails B’s wife has

predeceased him, then the account would be

insured to $200,000 because the two children

would be entitled to the trust assets upon B’s

death.)

(2) The rules in paragraph (c) of this

section on the interest of non-qualifying

beneficiaries apply to living trust

accounts. (Example: C is the owner of a

living trust account with a deposit

balance of $200,000. The trust provides

that upon C’s death his son shall receive

$100,000 and his nephew shall receive

$100,000. The account would be

insured for at least $100,000 because

one qualifying beneficiary (C’s son)

would become the owner of trust

interests upon C’s death. Because the

nephew is a non-qualifying beneficiary

entitled to receive an interest in the

trust upon C’s death, that interest would

be considered C’s single-ownership

funds and insured with any other

single-ownership funds C might have at

the same institution. Assuming C has no

other single-ownership funds at the

institution, the full $200,000 in the

living trust account would be insured

($100,000 in C’s revocable trust account

ownership capacity and $100,000 in C’s

single-ownership account capacity).

(3) For living trusts accounts that

provide for a life-estate interest for

designated beneficiaries and a

remainder interest for other

beneficiaries, unless otherwise

indicated in the trust, each life-estate

holder and each remainder-man will be

deemed to have equal interests in the

trust assets for deposit insurance

purposes. Coverage will then be

provided under the rules in this

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emainder interest for other

beneficiaries, unless otherwise

indicated in the trust, each life-estate

holder and each remainder-man will be

deemed to have equal interests in the

trust assets for deposit insurance

purposes. Coverage will then be

provided under the rules in this

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Federal Register / Vol. 69, No. 13 / Wednesday, January 21, 2004 / Rules and Regulations

paragraph (f) up to $100,000 per

qualifying beneficiary.

(Example 1: D creates a living trust providing

for his wife to have a life-estate interest in

the trust assets with the remaining assets

going to their two children upon the wife’s

death. The assets in the trust are $300,000

and a living trust deposit account is opened

for that full amount. Unless otherwise

indicated in the trust, each beneficiary (all of

whom here are qualifying beneficiaries)

would be deemed to own an equal share of

the $300,000; hence, the full amount would

be insured. This result would be the same

even if the wife has the power to invade the

principal of the trust, inasmuch as defeating

contingencies are not relevant for insurance

purposes.)

(Example 2: E creates a living trust providing

for a life estate interest for her spouse and

remainder interests for two nephews. The life

estate holder is a qualifying beneficiary (E’s

spouse) but the remainder-men (E’s nephews)

are not. Assuming a deposit account balance

of $300,000, the living trust account would

be insured for at least $100,000 because there

is one qualifying beneficiary (E’s spouse).

The $200,000 attributable to E’s nephews

would be insured as E’s single-ownership

funds. If E has no other single-ownership

funds at the same institution, then $100,000

would be insured separately as E’s single-

ownership funds. Thus, the $300,000 in the

living trust account would be insured for a

total of $200,000 and $100,000 would be

uninsured.)

one qualifying beneficiary (E’s spouse).

The $200,000 attributable to E’s nephews

would be insured as E’s single-ownership

funds. If E has no other single-ownership

funds at the same institution, then $100,000

would be insured separately as E’s single-

ownership funds. Thus, the $300,000 in the

living trust account would be insured for a

total of $200,000 and $100,000 would be

uninsured.)

(4) In order for a depositor to qualify

for the living trust account coverage

provided under this paragraph (f), the

title of the account must reflect that the

funds in the account are held pursuant

to a formal revocable trust. There is no

requirement, however, that the deposit

accounts records of the depository

institution indicate the names of the

beneficiaries of the living trust and their

ownership interests in the trust.

(5) Effective April 1, 2004, this

paragraph (f) shall apply to all living

trust accounts, unless, upon a

depository institution failure, a

depositor who established a living trust

account before April 1, 2004, chooses

coverage under the previous living trust

account rules. For any depository

institution failures occurring between

January 13, 2004 and April 1, 2004, the

FDIC shall apply the living trust account

rules in this revised paragraph (f) if

doing so would benefit living trust

account holders of such failed

institutions.

*

*

*

*

*

Dated at Washington, DC, this 13th day of

January, 2004.

By order of the Board of Directors.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Executive Secretary.

[FR Doc. 04–1198 Filed 1–20–04; 8:45 am]

BILLING CODE 6714–01–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 95

[Docket No. 30402; Amdt. No. 446]

IFR Altitudes; Miscellaneous

Amendments

AGENCY: Federal Aviation

Administration (FAA), DOT.

ACTION: Final rule

r of the Board of Directors.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Executive Secretary.

[FR Doc. 04–1198 Filed 1–20–04; 8:45 am]

BILLING CODE 6714–01–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 95

[Docket No. 30402; Amdt. No. 446]

IFR Altitudes; Miscellaneous

Amendments

AGENCY: Federal Aviation

Administration (FAA), DOT.

ACTION: Final rule.

SUMMARY: This amendment adopts

miscellaneous amendments to the

required IFR (instrument flight rules)

altitudes and changeover points for

certain Federal airways, jet routes, or

direct routes for which a minimum or

maximum en route authorized IFR

altitude is prescribed. This regulatory

action is needed because of changes

occurring in the National Airspace

System. These changes are designed to

provide for the safe and efficient use of

the navigable airspace under instrument

conditions in the affected areas.

EFFECTIVE DATE: 0901 UTC, February 19,

2004.

FOR FURTHER INFORMATION CONTACT:

Donald P. Pate, Flight Procedure

Standards Branch (AMCAFS–420),

Flight Technologies and Programs

Division, Flight Standards Service,

Federal Aviation Administration, Mike

Monroney Aeronautical Center, 6500

South MacArthur Blvd., Oklahoma City,

OK 73169 (Mail Address: P.O. Box

25082, Oklahoma City, OK 73125)

telephone: (405) 954–4164.

SUPPLEMENTARY INFORMATION: This

amendment to part 95 of the Federal

Aviation Regulations (14 CFR part 95)

amends, suspends, or revokes IFR

altitudes governing the operation of all

aircraft in flight over a specified route

or any portion of that route, as well as

the changeover points (COPs) for

Federal airways, jet routes, or direct

routes as prescribed in part 95.

The Rule

The specified IFR altitudes, when

used in conjunction with the prescribed

changeover points for those routes,

ensure navigation aid coverage that is

adequate for safe flight operations and

free of frequency interference

pecified route

or any portion of that route, as well as

the changeover points (COPs) for

Federal airways, jet routes, or direct

routes as prescribed in part 95.

The Rule

The specified IFR altitudes, when

used in conjunction with the prescribed

changeover points for those routes,

ensure navigation aid coverage that is

adequate for safe flight operations and

free of frequency interference. The

reasons and circumstances that create

the need for this amendment involve

matters of flight safety and operational

efficiency in the National Airspace

System, are related to published

aeronautical charts that are essential to

the user, and provide for the safe and

efficient use of the navigable airspace.

In addition, those various reasons or

circumstances require making this

amendment effective before the next

scheduled charting and publication date

of the flight information to assure its

timely availability to the user. The

effective date of this amendment reflects

those considerations. In view of the

close and immediate relationship

between these regulatory changes and

safety in air commerce, I find that notice

and public procedure before adopting

this amendment are impracticable and

contrary to the public interest and that

good cause exists for making the

amendment effective in less than 30

days.

Conclusion

The FAA has determined that this

regulation only involves an established

body of technical regulations for which

frequent and routine amendments are

necessary to keep them operationally

current. It, therefore—(1) is not a

‘‘significant regulatory action’’ under

Executive Order 12866; (2) is not a

‘‘significant rule’’ under DOT

Regulatory Policies and Procedures (44

FR 11034; February 26, 1979); and (3)

does not warrant preparation of a

regulatory evaluation as the anticipated

impact is so minimal

frequent and routine amendments are

necessary to keep them operationally

current. It, therefore—(1) is not a

‘‘significant regulatory action’’ under

Executive Order 12866; (2) is not a

‘‘significant rule’’ under DOT

Regulatory Policies and Procedures (44

FR 11034; February 26, 1979); and (3)

does not warrant preparation of a

regulatory evaluation as the anticipated

impact is so minimal. For the same

reason, the FAA certifies that this

amendment will not have a significant

economic impact on a substantial

number of small entities under the

criteria of the Regulatory Flexibility Act.

List of Subjects in 14 CFR Part 95

Airspace, Navigation (air).

Issued in Washington, DC on January 13,

2004.

James J. Ballough,

Director, Flight Standards Service.

Adoption of the Amendment

I Accordingly, pursuant to the authority

delegated to me by the Administrator,

part 95 of the Federal Aviation

Regulations (14 CFR part 95) is amended

as follows effective at 0901 UTC.

I 1. The authority citation for part 95

continues to read as follows:

Authority: 49 U.S.C. 106(g), 40103, 40106,

40113, 40114, 40120, 44502, 44514, 44719,

44721.

I 2. Part 95 is amended to read as

follows:

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