Fiduciaries (receivers, trustees, custodians,
referees, etc.) are usually required to maintain their deposits in
federally insured accounts, but as of January 1, 2013, the FDIC stopped
insuring bank deposits in excess of $250,000 for any one individual or
corporate entity (usually determined by social security or taxpayer id
number) regardless of whether the accounts are interest bearing or not
(the FDIC web site has all the specifics at
http://www.fdic.gov/deposit/). So, what should a fiduciary do when
holding in excess of $250,000? Well, there are a number of ways to obtain
full FDIC insurance on amounts over $250,000.
The two most common programs are the Insured Cash
Sweep Service, commonly referred to as an ICS account (www.insuredcashsweep.com),
and the Certificate of Deposit Account Registry Service, commonly referred
to as a CDARS account (www.cdars.com).
The interest rate floats and is really low (currently +/- 0.15%), but it
is all FDIC insured. You can also outright purchase bank certificates of
deposit, but the amounts are frequently limited to a few million dollars,
and must be actively managed and rolled over in a brokerage account.
Both the ICS and CDARS programs are a service of
Promontory Interfinancial Network, LLC, and accessed through about 3,000
participating banks. However, many banks do not participate, particularly
the money center banks, but a list of participating banks is available on
the Promontory web sites. Moreover, staff at many banks often do not even
know they have the programs, or if they do, are not familiar with the
The ICS program is the better of the two in my
opinion. The CDARS program requires that deposited funds be committed for
minimum periods of at least 30 days or more, and if funds are withdrawn
before then, they are subject to interest penalties. The ICS program
allows multiple withdrawals each month without penalty, and does not have
to be affirmatively rolled over or committed for a minimum period of time.
Some banks offer only one of the two programs, so you may need to talk
with a number of banks.
*David Wald has been a fiduciary for
nearly 20 years as state & federal court Receiver, custodian and
referee. His experience covers over $3 billion of real estate and other