FDIC insurance per account limit

SVB crash in 2023 triggered me to research how FDIC insurance works. 

Federal Deposit Insurance Corporation (FDIC), a body that underwrites most private bank deposits. Federal deposit insurance goes to the heart of the FDIC’s mission: to promote confidence and stability in the nation’s financial system. FDIC deposit insurance enables consumers to confidently place their money at thousands of FDIC-insured banks across the country, and is backed by the full faith and credit of the United States government. Since the founding of the Federal Deposit Insurance Corporation in 1933 no depositor has lost a penny of FDIC-insured funds.

The standard deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.

The following ownership categories are covered by the FDIC:

1. Single accounts
2. Joint accounts
3. Certain retirement accounts, including IRAs
4. Revocable trust accounts
5. Irrevocable trust accounts
6. Corporation, partnership, and unincorporated association accounts
7. Employee benefit plan accounts
8. Government accounts

FDIC insurance allows account holders to designate up to six beneficiaries who will each receive equal shares upon the account holder's passing. Each beneficiary is eligible for up to $250,000 in FDIC coverage per account owner. By setting up beneficiaries on an account, the account holder can increase their FDIC coverage. Qualifying beneficiaries for FDIC coverage include the account owner’s spouse, children, grandchildren, parents, and siblings. (This requirement might have changed)

The owner names five unique eligible beneficiaries and the total deposit(s) allocated to all beneficiaries combined is $1,250,000.

Two ways to do this:

1) Instead of equally dividing the money between beneficiaries in that bank account, you can choose a custom allocation. For example, you can leave 99.6% to one beneficiary and 0.1% to each of four beneficiaries. Those other four beneficiaries could be friends or charities.

2) Sets up 5 accounts (CDs for example) at the bank. The first CD has a balance of $1,249,600 with his wife as a beneficiary. The other 4 CDs have balances of only $100 each, and each has a separate beneficiary. The output of the EDIE calculator which shows that all $1.25 million is insured.