Question of the Week: Share Insurance on Trusts Changes

1) Merge the revocable and irrevocable trust categories into one category, creating a new “trust accounts” category. Note: Informal revocable trusts, such as payable-on-death (POD) accounts will still fall under the trust accounts category.   

2) Apply a simpler, common calculation method to determine insurance coverage for funds held by revocable and irrevocable trusts.  

The streamlined calculation that will be used to determine the amount of share insurance coverage for both revocable and irrevocable trusts is the method currently used to calculate coverage for revocable trusts that have five or fewer beneficiaries.  The final rule will provide that each trust grantor (the person that creates and funds the trust) for both revocable and irrevocable trusts, is insured in an amount up to the SMSIA (currently $250,000) multiplied by the number of trust beneficiaries, not to exceed five beneficiaries.  

The NCUA will presume, for share insurance purposes, that the trust provides for equal treatment of beneficiaries such that specific allocation of the funds to the respective beneficiaries will not be relevant. Overall, this will limit coverage for each grantor’s trust funds to a total of $1,250,000 maximum at each FICU for each beneficiary. In other words, maximum coverage will be equivalent to $250,000 per beneficiary, for up to five beneficiaries. The different calculation that is currently being used if there are more than five beneficiaries will be eliminated entirely.   

3) Eliminate certain requirements found in the current rules for revocable and irrevocable trusts, which are no longer necessary since both types of trusts will be in the same category.  

The changes increase consistency between the Federal Deposit Insurance Corporation’s (FDIC) federal deposit insurance rules and the NCUA’s share insurance rules.     

As a reminder, on revocable trust accounts, all grantors must be members of the credit union to receive share insurance coverage (or all owners on a POD account). In the case of an irrevocable trust account, all grantors or all beneficiaries must be members of the credit union to receive share insurance coverage.   

Where a revocable trust account becomes irrevocable because of a grantor's death, the deceased grantor’s membership will continue to satisfy their membership requirement as long as the trust account continues to be maintained at the credit union. The death of a formal revocable trust owner does not result in a decrease in share insurance coverage.   

When a co-owner of an informal revocable trust (i.e., a POD account) dies, share insurance coverage for the deceased owner’s interest in the account will cease after the expiration of a six-month grace period allowed for the death of share account owners.   

Funds associated with formal and informal revocable trusts are aggregated for share insurance purposes. Thus, funds that will pass from the same grantor to the same beneficiary are aggregated and insured up to the SMSIA (currently $250,000) per beneficiary.   

Beneficiaries are limited to natural persons, charitable organizations, and non-profit entities recognized as such under the IRS Code of 1986. If a named beneficiary does not satisfy this requirement, funds held in trust for that beneficiary are treated as single ownership funds of the grantor and are aggregated with any other single ownership accounts the grantor maintains at the same FICU. 

The final rule, effective Dec. 1, 2026, will provide credit unions, accountholders, and the NCUA time to prepare for the changes. Credit unions will have the opportunity to review the changes in coverage, train employees, and update publications, if necessary.   

Cornerstone Compliance will be updating the various share insurance resources we make available to member credit unions.