Q: I have a minor's account for my daughter, Mary. How will the FDIC insurance apply to this account? I'm thinking it will only cover Mary, since the account was opened using her social security number.
A: In this situation, it might be simplest to start by thinking of the deposits themselves as what are covered. In short, however those deposits are accessed in the future, whether by your daughter or by you on behalf of your daughter, the FDIC insurance would make sure those deposits are available in event of a bank failure.
Ownership of the account comes into play when it comes to determining the limit of FDIC insurance coverage. This coverage is $250,000 per account owner, per institution. One advantage of opening the account in your daughter's name is that her insurance coverage limit will be determined separately from yours. So, if you happened to have a $250,000 account in your name at the same bank, your daughter's account should still be covered. In contrast, if both accounts were in your name, even if they were separate accounts, the deposit limit for you at that bank would be $250,000.
In other words, if your combined deposits at the bank exceed $250,000, it is to your benefit that the insurance coverage on Mary's account applies to her, rather than to you.
Ultimately, the best thing to do is confirm with the bank how FDIC insurance would apply to your daughter's account. This will make sure there aren't any unexpected wrinkles, and would also confirm that the bank has officially recorded the ownership of the account the way you had intended.
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