If you are retired and need to fill a gap in your monthly income stream, save for other medium- to long-term goals or supplement your existing investment mix, Certificates of Deposit (CDs)– including Discover’s CDs and tax-advantaged Individual Retirement Account (IRA) CDs — can provide a safe and practical solution.
A simple way to reach your goals.
Watch your savings grow with a CD.
Lock in Your Rate
Certificate of Deposit
Discover Bank, Member FDIC
Supplement cash flow. Â CDs can provide a steady source of income that also has the potential for growth. Discoverâs CDs, for example, offer guaranteed returns on terms ranging from 3 months to 10 years. The longer the term, the higher the interest rate. And since your rate of return is fixed, you know exactly how much income to expectâ and when to expect it (when your CD matures your principal plus interest accrued and not withdrawn is returned to you) âa major plus for retirees looking to close a gap in their cash flow.
One CD strategy for generating cash flow is called a CD ladder. Open a series of CDs that mature at different times. When the first CD matures, harvest the interest income, but reinvest the principal in another CD at the top of your âladder.â This approach can create a consistent and ongoing income stream to last throughout your retirement years. With Discover CDs, you always have convenient renewal options at maturity, making it easy to put this income-management practice into effect.
Fund medium- and longer-term goals. Open separate CDs with an eye toward funding different financial goals. Will you need to purchase a new car in the next three years? Are you planning an extended trip abroad to celebrate a special anniversary? Do you hope to help a grandchild with college costs? Time the CD maturity to match your savings goal. Again, Discover offers CDs with maturities as short as three months or as long as 10 years.
An alternative to bonds. Investors often choose U.S. Treasury bonds when seeking a safe haven for their investment dollars. Yet CDs should be on your list of worthy alternatives. Both Treasuries and CDs offer safety; however, in some cases, CDs offer more attractive yields.
CDs can provide a steady source of income that also has the potential for growth.
A home for excess IRA/401(k) distributions. Current IRS rules require individuals to begin taking distributions from their retirement accounts when they reach the age of 70½ in order to comply with required minimum distribution rules. To the extent that those distributions are more than you’ll need to spend, which may be the case for those who have delayed taking distributions, consider contributing them to a CD until you need to use the funds.
And remember, the safety of Discover’s CDs and IRA CDs being FDIC insured to the maximum allowed by law can be a big comfort when preserving your assets is more important than ever.
Regardless of your time horizon, risk tolerance, or savings goal, you can always find the right savings vehicle for your needs at Discover. Discover offers an Online Savings Account to help you with your short-term savings goals, a full range of CDs and IRA CDs with terms from 3 months to 10 years, and Money Market Accounts that have a competitive rate. Open a Discover account online or call our 24-hour U.S-based Customer Service at 1-800-347-7000.
The article and information provided herein are for informational purposes only and are not intended as a substitute for professional advice.
The post Retiring: Turn to CDs For Cash Flow appeared first on Discover Bank – Banking Topics Blog.
Rakuten cashback can help you save money when shopping online! Most of us shop online anyway; wouldnât it be nice to get some cash back along the way? Currently, Rakuten offers up to 40% cashback on your purchases. Plus, you receive $25 referral bonus and a 10$ bonus when you sign up.
Keep reading to learn how you can earn Rakuten cashback on your purchases.
What is Rakuten and how do you get cashback?
Rakuten (formerly known as Ebates) is a website that gives you a percentage off when you shop online. Rakuten is a legit website with an A rating from the Better Business Bureau (BBB).
To get cashback from Rakuten, you simply go to their website www.rakuten.com, or the Rakuten app. You then create or login to your account. There are over 2,500 stores. All of the major stores are in there. They include the best retailers like Amazon, Macyâs, Walmart, Best Buy, Home Depot, you name it. Besides cash back, you also get discounts special promotions and store deals.
Earn 40% cashback when you shop through Rakuten
When you shop through Rakuten at your favorite store, you have the opportunity to earn up to 40% cashback. Each store will list how much cash back you will earn.
There are no fees, no forms to fill out. You simply click on the store of your choice and start earning cash back on your purchases.
How to earn $10 bonus from Rakuten?
Not only will you get cash back on your purchases through Rakuten, you will also receive a $10 bonus just to sign up. But in order for you to get cash bonus, youâll have to spend at least $25 dollars shopping at your store through Rakuten shopping portal. Join Rakuten for free and get a $10 bonus money today just for signing up.
How do you get your free money from Rakuten?
You get your free money by getting a check or via PayPal payment. Rakuten will send you your free money every quarter.
The bottom line is if youâre going to shop online, why donât you get cashback on your purchases. As long as you are buying things you need, it makes sense to sign up for Rakuten which offers cashback from retailers on clothing, beauty supplies, groceries, ect. This free money can go towards your bills and pay down your debt.
CIT Savings Builder – Earn 0.85% APY. Here’s how it works: Make at least a $100 minimum deposit every month. Or Maintain a minimum balance of $25k. Member FDIC. Click Here to Learn More.
The post Rakuten: Earn Up To 40% Cashback + $10 Sign Up Bonus appeared first on GrowthRapidly.
CIT Bank is an online only-bank, so, unfortunately, they do not have any physical locations.
However, if you’re looking to know how to open a CIT Bank account beyond wondering if they have a location what are their current products and offers, then you have come to the right place.
*TOP CIT BANK PROMOTIONS*
PROMOTIONAL LINK
OFFER
REVIEW
CIT Bank Money Market
1.00% APY
Review
CIT Bank Savings Builder
0.95% APY
Review
CIT Bank CDs
0.75% APY 1 Year CD Term
Review
CIT Bank No Penalty CD
0.75% APY
Review
CIT Bank Locations
CIT Bank has one office. It’s their headquarters located in southern California in Pasadena.
The address is: 75 North Fair Oaks Ave, Pasadena, California 91103. However, you cannot just walk in there to do business, opening an account, etc.
There is also no ATMs. Everything is done online.
With their “echecking” account, CIT Bank will provide you with a card where you can use it at another bank’s ATM.
However, CIT bank does not charge you any ATM fee. And if the bank charges you a fee, CIT Bank will reimburse you up to $15 every month.
CIT Bank’s Products & Current Promotions
While CIT Bank has no physical locations, it’s a great bank for those who are willing to have their savings online.
So, if you’re looking to have access to branches, then CIT Bank is not for you.
CIT Bank offers high yield savings accounts, money market accounts and CD accounts. They also have an “echecking” account.Â
CIT Savings Builder – Earn 0.85% APY. Here’s how it works: Make at least a $100 minimum deposit every month. Or Maintain a minimum balance of $25k. Member FDIC. Click Here to Learn More.
They offer competitive APYs, especially on their Savings Builder account, which is almost 20 times more than what a typical savings account would offer.
The money market account is also very competitive, but it does not offer checking-writing privileges or a debit card.
Their CDs also provide higher yields, offering both a fixed and variable-rate, including a no-penalty CD.
CIT Bank Savings Builder
Because CIT Bank has no locations, CIT Bank Savings Builder accounts are offered online, where you can earn a competitively high yield.
The CIT Bank Savings Builder will allow you to earn 0.85% APY, but only if you make at least one monthly deposit of $100 or more.
Or, if you keep a balance of at least $25,000. Interest in this high-yield savings account compounds daily to boost your earning.
Click here to learn more about CIT Bankâs Savings Builder.
CIT Bank Money Market Account
The CIT Bank money market account is one of the best ones out there. Currently, the money market account offers a 1.0% APY.
This is very competitive comparing to other MMAs. Moreover, CIT Bankâs MMA has a required account minimum of only $100.
Open a CIT Bank Money Market Account.
CIT Bank Certificate of Deposits (CDs)
CIT Bank has several terms CDs, which range from 6 months to 5 years.
There is also a no penalty 11-month term, where customers can withdraw money with no penalty.
CIT Bank also offers jumbo CDs, ranging from two to five years. You can open a term CD, including the no-penalty CD, with a minimum of $1,000.
The Jumbo CDs require a minimum of $100,000.
Click here to learn more about CIT Bank CDs.
Contacting CIT Bank
Given that CIT Bank has no locations, the best way to speak with a representative is by telephone or online.
For online, simply go through their homepage.
By telephone, call 1) 855-462-2652 (within U.S.) and 626-535-8964 (outside U.S.).
Customer service is available from Monday through Friday from 9:00 a.m. to 9:00 p.m. ET; on Saturday from 10:00 a.m. to 6:00 pm ET.
They closed on Sunday.
Advantages and disadvantages of CIT Bank Savings Accounts
Advantages:
No monthly fees on deposit accounts;
a minimum deposit requirement of $100;
Refunds ATM fees â because the bank does not have ATMs, it does not charge customers who use another bankâs ATMs. And if there is a fee, CIT will refund you up to $15 per month.
Disadvantages:
No CIT Bank physical locations or ATM;
No 24/7 customer support â as with all high yield savings accounts, most inquiries are handled online. While live telephone is available, hours are limited.
How to open a CIT Bank Savings account?
As mentioned above, CIT Bank has no physical locations. So to open an account, simply go online through the CIT Bank homepage, and create the account there.
Youâll need to provide your name, address, phone number, and ID. Youâll also need to provide your social security number.
Note that CIT does not have any branches. Everything must be done online.
If youâre opening a CIT Bank Builder Savings account, you will need to make an initial minimum deposit of $100.
Bottom Line
CIT Bank has no locations. So, everything is done online. CIT Bank offers competitive rates on its products. Its Saving Builder account is one of the most popular accounts out there, offering a 0.85% APY. This yield is 15 to 20 times higher than what a regular savings account offer.
Speak with the Right Financial Advisor
If you have questions beyond CIT Bank locations, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
*TOP CIT BANK PROMOTIONS*
PROMOTIONAL LINK
OFFER
REVIEW
CIT Bank Money Market
1.00% APY
Review
CIT Bank Savings Builder
0.95% APY
Review
CIT Bank CDs
0.75% APY 1 Year CD Term
Review
CIT Bank No Penalty CD
0.75% APY
Review
The post CIT Bank Locations? Where Are They? appeared first on GrowthRapidly.
Short term investments are those investments that can yield their returns within a short period of time — usually within 1 to 3 years. (contrary to a long term investment such as saving for retirement).
In other words, short term investing are typically used to meet short-term financial goals (such as buying a house or go on a vacation).
A bank checking account is one of the best known and popular ways to save for such a goal.
But your traditional checking account only pays a meager return, if at all.
If you can’t find an alternative to a checking account, no need to fret.
There are plenty of shortterm investments that will help keep your money safe and earn a good return at the same time.
Below, we’ve curated the best short term investments to help reach your investment goals.
Get Matched With 3 Fiduciary Financial Advisors
Answer a quick question to start your matching process with advisors in your area.
When would you like to retire?
Select an answer
Things to consider:
First thing first, before you make any short term investments, you should know about the risk, return and investing time frame of short term investments.
Average return to expect: 1 to 4% per year;
Risk: very low to low risk of losing money;
Time frame: 0 to 3 years
Best short term investments:
If you’re saving and investing money for the short term, i.e., to use it as a down payment on a house, you will not invest that money in stocks or mutual funds, right?
That’s because, stocks are high risk investments. And if you need the money for a certain time, it might not be available due stock market volatility.
Instead, a smart choice is to save that money in a low-risk investment where you can protect the capital invested and earn interest/income at the same time.
If you have a different investing goal, such as saving for retirement, it’s best to look at stocks or mutual funds. Investing in stocks or mutual funds is considered a long term investment as opposed to short term investing.
If you’re interested in investing for the long term, here’s how the stock market works.
So, what are your options? Here are some of the best short term investments to consider to earn some interest on your money.
1. Savings account.
A savings account at a bank is an excellent choice. And they usually pay more interest than a regular checking.
They are quite safe. Savings account are insured by the FDIC, but only for up to $250,000.
That means if a bank goes bankrupt, the government will step up and give you your money back.
In addition, they are very liquid. You have access to your money fairly easy.
CIT Savings Builder – Earn 0.85% APY. Here’s how it works: Make at least a $100 minimum deposit every month. Or Maintain a minimum balance of $25k. Member FDIC. Click Here to Learn More.
2. Certificate of deposit (CDs).
If you want a good rate of return on money that you don’t plan on using within the next couple of years, CDs is a safe place to do invest it.
Banks sell certificate of deposit for a specific dollar amount and length of time. As an investor, you agree to leave a certain amount of money with the bank for a specific time.
When the time is up, the CD matures. Then, you get your money back, plus interest.
CDs are also FDIC insured for up to $250,000. They provide a safe and competitive yield. That makes them some of the best short term investments to consider.
The minimum deposit requires to open a CD depends on the bank. But it usually ranges from a few hundred dollars to thousands.
The CIT Bank is paying 1.30% for an 11-month CD. There is an opening minimum of $1,000. With most CDs, if you tap into your money before maturation, you will get hit with an early withdrawal penalty.
However, with this CIT Bank CD, there is no penalty if you withdraw early.
CIT Bank has various types of CDs. If you prefer longer terms CDs, check them out now at the CIT Bank website.
3. Money market fund
While you can keep your cash at a bank in a savings account because they’re safe there, you don’t have to.
You can try a money market fund. They are safe as well.
A money market fund is a type of mutual fund (but thy don’t focus on stocks or bonds).
Mutual funds companies such as Vanguard offer money market funds.
Money market fund is not insured by the government, so there is a possibility you can lose money. However, they are quite safe.
They’re safe, because they have a dollar invested in securities for every dollar you deposit in your fund.
The principal money you invested does not change in value. When you invest in a money market fund, you earn dividends. That’s a good advantage.
Another advantage of a money market fund as a short term investment is that it provides higher yield than bank savings account.
It also allows you to write checks without incurring any charges.
So, if you’re saving money for a home that you’re going to buy soon, a money market fund is a safe place to grow your money.
4. Short-term corporate bond funds.
Bonds, in general, are similar to CDs. An exception is that they, just as stocks, are securities that trade in the market.
So, they may fluctuate in value, but not as much as stocks.
Bond funds are a collection of bonds from companies (large, medium, or small) from different industries. Hence, the name “corporate bond funds.”
Investing in bond funds can be used as a short-term investment. Sometimes, investors consider corporate bond funds to diversify their investment portfolio.
Just like a money market fund, corporate bond funds are not FDIC insured. But they are just as safe as a money market fund.
Plus, you don’t just invest in one bond or two bonds. If one bond in your investment fund takes a hit, it only affects a small amount of your money.
So while they are riskier than money market funds saving accounts, CDs, short term corporate bonds pay you more. That makes them one of the best short-term investments out there.
5. Treasury bonds.
One of the best ways to invest money in the short term is to buy treasury bonds. Treasury bonds are issued by the U.S. government.
There are three types: treasury bills, treasury notes, and treasury bonds. They are like CDs. Once the bond matures, you get the full money invested, plus interest.
Treasury bonds may provide the same or a better interest rate than CDs. But a big advantage is that, while they’re not FDIC insured, they are backed by the U.S. government.
In other words, the government promises to repay your money, which is considered to be very safe.
So if you have more than $250,000, you should consider a treasury bond.
Another advantage is that while interest on a CD is fully taxable, Treasury’s interest is state-tax-free.
In conclusion, short term investments are those in which you make for a certain and short period of time for a specific goal.
Short term investments aren’t the best if you’re seeking high returns.
But if you’re a beginner investor you should consider placing some of your money into these best short term investments.
Remember: don’t invest your money in stocks when you plan to use it within the next five years, because a stock market drop can dry out your investment portfolio.
Read more:
The Best Ways to Invest $1000 For Good Return
How to Invest With Little Money (Even With $5)
How to Invest 100k to Build Real Wealth
Speak with the Right Financial Advisor
If you have questions beyond short-term investments, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
*TOP CIT BANK PROMOTIONS*
PROMOTIONAL LINK
OFFER
REVIEW
CIT Bank Money Market
1.00% APY
Review
CIT Bank Savings Builder
0.95% APY
Review
CIT Bank CDs
0.75% APY 1 Year CD Term
Review
CIT Bank No Penalty CD
0.75% APY
Review
The post 5 Best Short Term Investments to Grow Your Money appeared first on GrowthRapidly.
If youâve been keeping your eye on real estate home listings, you mightâve seen more foreclosed properties for sale at a reduced price.
With record levels of unemployment and underemployment, many homeowners are falling further behind on their mortgages. Currently, thereâs a federal moratorium on the most common mortgage programs through December 31, 2020. Unless further homeowner protections are in place, the foreclosure market will see an unfortunate rise.
In fact, according to mortgage and real estate analytics company Black Knight, 2.3 million homeowners are already seriously past-due on their mortgages.
As devastating as it is to have more homes undergoing foreclosure, it also means that prospective home buyers, who were otherwise priced out of buying a home, might have greater access to homeownership. Hereâs what you should know if youâre thinking about buying a foreclosed home.
Buying a foreclosed home can be a win-win situation. You get a good price, and (usually) you can easily fix the property up.
Buying a Foreclosed Home
There are many ways you can buy a foreclosed home, depending on what stage of the process the foreclosure is in:
Pre-foreclosure. Many homeowners are willing to sell before theyâve officially been foreclosed on. Depending on how much equity they have, they might need to do a short sale.
Short sale. Homeowners can seek approval from their lenders to sell you the home for less than they owe on the mortgage. The bank will get less than itâs owed, but it still often approves short sales since they usually cost less than a foreclosure.
Auction. Once a home is foreclosed itâll often be auctioned off by the bank. But youâll need cash on hand for this, and thatâs not an option for most folks who need mortgage financing.
Real-estate owned (REO) properties. Alternatively, banks can simply sell the foreclosed home through more traditional markets, just like a normal home.
Itâs usually easiest to buy the foreclosed home once the bank takes over and it becomes an REO property. Thatâs because you can take your time and go through the mortgage underwriting process. You can also work with a realtor, and â importantly â write contingency clauses in the contract that let you pull out of the deal if a home inspection reveals more repairs than you expected.
Related: How to Add Real Estate to Your Investment Portfolio
7 Caveats to Buying a Foreclosed Home
Buying a foreclosed home isnât exactly the same as buying one directly from the homeowner. Youâre potentially buying a home from a bank who took over after the previous homeowners were unable to afford the home anymore. This introduces a few twists into the home-buying process for you.
1. Youâll Need a Realtor Who Specializes in Foreclosed Homes
The world is full of realtors, even including your Uncle Bob and Cousin Carolyn. But not everyone is equipped to handle the nuances of buying a foreclosed home. There are a lot of issues that can crop up â unplanned property damage, squatters, homeowners who settle the bill and try to reclaim ownership, etc.
If youâre serious about buying a foreclosed home, seek out a realtor with extra experience in this area. There are even special designations that some realtors can get, such as Short Sales and Foreclosure Resource (SFR) or Certified Distressed Property Expert (CDPE).
2. Houses Are Sold âAs-Isâ
With a typical home sale, you have the change to get the property professionally inspected before signing on the dotted line. Itâs not uncommon for new issues to arise, and in a normal home buying transaction, you can often negotiate with the sellers to either fix the damage or discount the price.
Thatâs not the case when you buy a foreclosed home. If a home inspection reveals unexpected damage â like the need for a full roof or a septic system replacement â banks often arenât willing to negotiate. Itâs a take-it-or-leave-it sale.
3. Expect to Put In Some Work
The above point is especially important considering that most foreclosed homes do, in fact, need a lot of fixing up.
Think about it: the previous homeowners lost the house because they couldnât afford the mortgage. Thereâs a good chance they also werenât able to keep up with routine maintenance either. From their perspective, even if they did have the cash, whatâs the point of spending money on repairs, if they know theyâll lose the home in a few months?
You can save money by putting in some sweat equity (HGTV, anyone?), but even then youâll need the cash to pay for materials. This also means that the home might not be move-in ready. If you do move in, you might need to put up with construction debris for a little while. On the bright side, though, this does give you a chance to upgrade the home to your own aesthetics.
4. You Might Need Creative Financing
This brings up another issue: how do you pay for those renovations? Generally, you canât just ask for a bigger mortgage to cover the necessary repairs. Most lenders will only lend you as much as the current home appraisal is worth, minus your down payment.
You have a few options, though. You can hold some money back from your savings to pay for it in cash, but this means youâll have a smaller down payment. An alternative is getting a loan from a different lender, like a personal loan, a 0% APR credit card, or even a home equity loan or line of credit if youâre lucky enough to start from a position with equity.
Finally, there are some special ârenovation mortgagesâ available through Fannie Mae and other lenders. These mortgages actually do allow you to take out a bigger mortgage so you can pay for renovations. You might need to provide a higher down payment or have a higher credit score to qualify, however.
5. Watch for Liens on Foreclosed Homes at Auctions
If you have a big pot of cash and can pay for a home on the same day, an auction might be your best bet. But then you have to worry about a new factor: liens.
If the property had any liens attached to it (such as from the previous homeowners not paying their taxes, or a judgement from unpaid debt), youâll inherit that bill, too.
This is usually only the case for auctioned homes. If you buy a foreclosed home as an REO sale, the bank generally pays off any liens attached to the property. Still, it may be worth double-checking if you have interest in a specific property.
6. Be Prepared to Act Fast
Youâre not the only one with the bright idea to get a low-priced, foreclosed home. Chances are good that there are a few other buyers interested in the property, which increases competition. Even though the home is listed at a big discount, this competition can still drive prices up. You might need to be ready to act fast, just the same as in any hot real estate market.
7. Be Prepared to Wait
On the flip side, thereâs a lot of extra bureaucracy involved in buying a foreclosed home once the seller accepts your offer. Thereâs often extra paperwork to fill out or other complications.
For example, the home appraisal might come back lower than expected, which might make it harder to get enough financing for the agreed-on purchase price. If itâs a short sale, it might also take longer for the bank to approve the lower sale price for the home, based on what the homeownerâs mortgage is currently worth.
Pros and Cons of Foreclosed Homes
Buying a foreclosed home isnât necessarily a good or bad idea on its own. It all depends on your own goals â for example, are you willing to figure out financing for repairs to get a deal on the home purchase price? Also consider how important it is for you to have a âmove-in readyâ home with no hassle.
Weigh these pros and cons carefully, and whatâs most important to you when buying a home.
Pros
Cons
Can get a deal thatâs lower than market price
Property is sold âas-isâ and might not be move-in ready
Can customize the home to your specifications with repairs and upgrades
Likely needs a lot of repairs and upgrades
Requires creative financing for repairs and upgrades
Foreclosure process is long and might fall through
The Bottom Line
Buying a foreclosed home can be a win-win situation. You get a home at a good price, and (usually) you can bring the property back to good, working order by fixing it up. As long as you go into the deal knowing that itâs not the same experience as a typical home purchase, buying a foreclosed home is a great way to launch into homeownership or real estate investing.
Keep Reading: How to Buy a Second Home that Pays for Itself
The post What to Know Before Buying a Foreclosed Home appeared first on Good Financial Cents®.
A fiduciary deposit account is an account thatâs owned by one or more persons but managed by another. The owner is known as the principal, while the manager is known as the fiduciary. These accounts are sometimes used to handle estate or trust assets, among other purposes. Their legal status and their insurance coverage are determined by the Federal Deposit Insurance Corporation (FDIC). Hereâs what you need to know about this type of account.
Fiduciary Deposit Account, Defined
A fiduciary deposit account, also known as a principal account, is a deposit account that a person or other entity, acting as a fiduciary, establishes to benefit one or more persons who own the assets in the account, according to FDIC rules. The individual who opens the account doesnât have ownership of it nor any ownership interest.
Some examples of fiduciaries of these accounts are trustees, agents, nominees, custodians and guardians. Fiduciary accounts are used in various ways:
Uniform Transfers to Minors Act (UTMA) accounts
Uniform Gifts to Minors Act (UGMA) accounts
Decedent estate accounts
Real estate and other escrow accounts
Brokerage deposits
Accounts with a power of attorney
When FDIC Pass-Through Insurance Coverage Applies
All deposits managed by a fiduciary on behalf of the accountâs owner or owners are insured by the FDIC for the full $250,000 on a pass-through basis. This means that all the deposits are considered to be deposits made directly from the principal as long as three requirements are met:
The owner of the funds must be the principal and not the fiduciary who set up the account. The FDIC may review the fiduciary and ownerâs agreement on the account as well as state laws to confirm this.
The record of the insured depository institution (IDI) account must indicate the agency nature of the account. For example, the ownership of the account may read ABC Company as custodian, ABC for the benefit of (FBO) or Sally Rowe UTMA John Rowe, Jr.
The IDI, fiduciary and third-party records must show the ownersâ identities and the ownership interest(s) in the deposit account.
For example, letâs say XYZ Brokerage firm establishes an account for Sally Rowe at ABC Bank. In this example, Sally Rowe is the owner, or the principal, of the money in the account. This account would then be added with any other single accounts she owns at ABC Bank, which would be insured as a single account for up to $250,000.
If we assume Sally has more single ownership accounts at ABC Bank, she will not receive additional coverage because XYZ Brokerage firm opened the account for her. With a fiduciary account, coverage is provided as though the actual owner opened the account at the IDI, assuming all responsibilities are met.
Pass-through coverage is also possible if a guardian retains part of the interest paid by the IDI as a guardian fee.
When FDIC Pass-Through Insurance Coverage Doesnât Apply
If requirements of a fiduciary account are not met, the account will be insured under the fiduciary, not the intended principal. In this case, the fiduciary will own the deposits and the account will be categorized as a single account or corporate account. These deposits will then be combined with other deposits the fiduciary holds in the same ownership at the IDI where funds are held. The total sum will be insured up to $250,000.
For example, letâs say a customer of a deposit broker is assured by the guardian (fiduciary) that he or she will earn 5% on a deposit when the IDI is paying only 3%. The guardian would not be a guardian then; he or she would be a borrower with an independent responsibility to pay 5%. In this case, the deposits are no longer eligible for pass-through coverage for the principal. Instead, the deposits are now considered corporate deposits belonging to the guardian.
The Takeaway
A fiduciary deposit account is an account set up by someone for another person, who actually owns the money. The one who sets up the account and manages it is known as the fiduciary, while the owner of the money is known as a principal. This kind of arrangement is used to handle assets in trusts, escrow accounts, brokerage accounts and decedent estates, among other uses. Itâs important that these arrangements carefully follow all the FDICâs legal requirements, as well as applicable state regulations, to qualify as a fiduciary deposit account.
Estate Planning Tips
Consider talking to a financial advisor about your estate plans. Finding a financial advisor doesnât have to be hard. SmartAssetâs free financial advisor matching service can connect you with several in your area in minutes. If youâre ready, get started now.
If you have an agent, they may make decisions about your 401(k) account. Find out how much money youâll have in your account by the time you retire with our free 401(k) calculator.
Certificate
