June 2023
Following the recent bank failures of Silicon Valley Bank, Signature Bank, and First Republic Bank, the Oregon Real Estate Agency has received questions about how to handle clients' trust accounts (CTAs) holding more than the FDIC's insured deposit limit of $250,000.
The FDIC has provided guidance on what they call “fiduciary accounts."
- The deposit insurance coverage of fiduciary accounts (e.g., CTAs, security deposit accounts) is based on the principal or owner of the funds, not on the total held in the account.
- If a principal or owner of funds has other accounts at the same bank as the fiduciary account, the FDIC would cover the funds held on behalf of the owner in the fiduciary account
plus the amounts in any accounts at the same bank
up to $250,000.
- To make sure that deposits in a fiduciary account are insured to the same extent as if the deposits were made directly by the principal, you must meet these requirements:
- You need to document the actual ownership of the deposit funds. Things the FDIC will look at to determine ownership includes the agreement between you and the principal, such as a property management agreement as required by Oregon Administrative Rule (OAR) 863-025-0020.
- The bank records must indicate the agency nature of the account. As required by OAR 863-025-0025, you must name the account using the words “clients' trust account," “client trust account," “clients' trust account – security deposit," or “client trust account SD."
- Your records must indicate both the identities of the principals as well as the ownership interest in the deposit. Documentation may include your record of receipts and disbursement or check register and your owner ledgers.