FDIC Insurance Coverage: Using CDARS to Protect Your Money

These days many people are investing their money in simple bank accounts and CDs because of the volatility of the US and overseas financial markets. But beware: FDIC insurance is limited when you invest all of your money with one bank. This has become a big problem with one of my estates where we have a $1,000,000+ estate tax bill that's due in September 2009, and so the Personal Representative only wants to invest the cash to pay the tax bill in short term CDs.

If you want to figure out exactly how much FDIC insurance you have on your individual, trust, and/or business bank accounts, use the FDIC's "Edie the Estimator" to do the calculations for you.

If you find that your money isn't 100% protected, then you have two choices: (1) Spread your money over multiple banks until you've insured 100%; or, (2) Invest your money with a bank that participates in the CDARS ("Certificate of Deposit Account Registry Service") program and the bank will do all of the work for you. Aside from banks, many brokerage firms also offer the CDARS program to their clients.

If you go with option (1), you'll be stuck with monitoring multiple accounts at multiple institutions by reviewing multiple monthly statements. If you go with option (2), you'll receive one monthly statement and the program will do all of the monitoring for you. CDARS has made my Personal Representative mentioned above very happy.

To learn more about the CDARS program and what banks in your area participate in the program, visit the CDARS website.

• Revocable Trust Accounts and FDIC Insurance: Interim New Rule
• FDIC Insurance, Revocable Trusts and Estates: Are Your Accounts Protected?
• Revocable Trust Accounts, FDIC Insurance and the Economic Bailout
• FDIC Insurance and Estates: Different Rule From Trusts
• Deposit Insurance Coverage Frequently Asked Questions
• CDARS, safety in numbers for big bank customers