NEW YORK (
) -- Are credit union deposits FDIC-insured?
No, but it doesn't matter.
For starters, the
Federal Deposit Insurance Corp.
only insures deposits in banks and savings and loan associations. Federal credit unions have their own insurance fund, which is run by the National Credit Union Administration, of NCUA.
When you join a credit union, you don't really make a "deposit." Instead, you become a "member" of the credit union and the dollars you put in are called "shares." If your credit union is insured by the National Credit Union Insurance Fund, or NCUSIF, your shares are insured in a similar way to the way bank deposits are insured by the FDIC.
All federal credit unions are insured by the NCUSIF. State-chartered credit unions may be insured by the NCUSIF, or might have their own state insurance or private insurance.
All credit unions insured by the NCUSIF are required to display the official NCUA insurance sign.
The summary below covers some basic NCUA insurance scenarios, but you should double-check with your credit union if you have multiple accounts in various names, to make sure you understand how much of your shares are insured.
Basic Insurance Limits
For starters, share-insurance limits are per credit union and not per branch. If your shares in one or more account in one credit union total less than $250,000, they are all insured. Insurance limits increase and get more complicated when you consider joint accounts, retirement accounts and trusts.
The basic $250,000 limit applies also to separate ownership interests in joint accounts. So if you have a joint account with a balance of $500,000, each account holder's ownership interest is insured up to $250,000, so the entire joint account is insured. This is separate from any individual accounts you and the other person may have. This means that if you each have individual accounts with balances of $250,000, together with the joint account with $500,000, you and the other person have total insured shares of $1,000,000. As they are for individual accounts, identically-registered accounts have their share balances added together to determine the maximum insured amounts.
The NCUA says that "The trust interest of a beneficiary in a valid irrevocable trust, including Coverdell Education Savings Accounts, formerly Education IRAs, if capable of evaluation in accordance with published rules, is insured" up to the $250,000, separately from the individual accounts of the grantor, the trustee or the beneficiary. This coverage is separate from and in addition to the coverage available for other accounts such as individual accounts and retirement accounts. Of course, if you are opening trust accounts for multiple beneficiaries with a credit union, it's a good idea to review the trust documents with the credit union to make sure you understand exactly which share balances are insured.
For revocable trusts, the NCUA says that the "person who holds the power of revocation is deemed to be the owner of the funds in the account."
Things can get even more complicated for joint revocable trust accounts. The bottom line, is that you should discuss any share balances in trust accounts with credit union staff to make sure you have a clear understanding of what is insured.
If you have an individual retirement, or IRA, account at a credit union, the IRA is separately insured from your non-IRA accounts, for a total of up to $250,000. Traditional IRA, Roth IRA balances in the name of the same individual are added together and insured for a maximum of $250,000. Keogh retirement accounts are insured separately, so if you have $250,000 in traditional IRA and/or Roth IRA shares, plus a $250,000 Keogh account in the same NCUA-insured credit union, the total insured shares are $500,000.
Accounts in the name of a corporation, partnership or association is separately insured to an aggregate limit of $250,00, provided the organization "is engaged in independent activity," which is defined by the NCUA as "an activity other than one directed solely at increasing insurance coverage." So don't get cute
Written by Philip van Doorn in Jupiter, Fla.
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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.