Share insurance coverage, as a general rule, extends National Credit Union Share Insurance Fund coverage to only credit union members. However, within the Federal Credit Union Act, there are some exceptions to the general rule.
Those include interest on lawyer trust accounts, retirement and other benefit accounts and “qualifying joint accounts.”
Several questions have been raised to CUNA’s compliance staff lately about what counts as a qualifying joint account for purposes of the exception.
A qualifying joint account is a joint account in which:
For share insurance purposes, a joint account that does not meet these requirements must be treated as owned by the named persons as individuals. The actual ownership interest of each person will be added to any additional accounts they own individually at the credit union.
One common question is: why doesn’t the exception include joint payable on death (POD) accounts?
The Federal Credit Union Act does not exempt any type of trust account, such as POD accounts, from the general share insurance coverage rule. Joint ownership of a trust account does not qualify it for the joint account exception.
Although, the NCUA’s “Your Insured Funds” booklet provides an example in which a husband and wife establish a POD account naming themselves as the sole beneficiaries of the account. In this example, the NCUA states that the account will be insured as a joint account.
This is because the account does not satisfy the intent requirement of a revocable trust account--that the beneficiaries become owners of the account upon the death of the account owners. In this case, since the beneficiaries are the owners, the account may be titled a “POD account,” but it is actually a joint account meeting the exception.