Credit Union Regulatory Guidance Including: NCUA, CFPB, FDIC, OCC, FFIEC

Samantha: Hello, this is Samantha Shares.

This episode covers N C U A’s
Simplification of Share Insurance Rules

The following is an audio
version of that RULE.

This podcast is educational
and is not legal advice.

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And now the RULE.

NATIONAL CREDIT UNION
ADMINISTRATION 12 CFR Part 745

[N C U A-2023-0082] RIN 3133-AF53

Simplification of Share Insurance Rules

AGENCY: National Credit Union
Administration (N C U A).

ACTION: Final rule.

SUMMARY: The N C U A Board (Board)
is amending its regulations

governing share insurance coverage.

The final rule simplifies the share
insurance regulations by establishing

a “trust accounts” category that will
provide for coverage of funds of both

revocable trusts and irrevocable trusts
deposited at federally insured credit

unions (F I C Us), provides consistent
share insurance treatment for all

mortgage servicing account balances
held to satisfy principal and interest

obligations to a lender, and increases
flexibility for the N C U A to consider

various records in determining share
insurance coverage in liquidations.

The changes also increase consistency
between the FDIC’s federal

deposit insurance rules and the
N C U A’s share insurance rules.

DATES: This rule is effective on December
1, 2026, except for the amendments

to 12 CFR 745.2(c)(2) (instruction
5), 745.3 (instruction 7), and 745.14

(instruction 13), which are effective
[INSERT DATE 30 DAYS AFTER DATE OF

PUBLICATION IN THE FEDERAL REGISTER].

FOR FURTHER INFORMATION CONTACT: Office
of General Counsel: Thomas Zells and

Rachel Ackmann, Senior Staff Attorneys;
or Robert Leonard, Compliance Officer

at (703) 518-6540 or by mail at
National Credit Union Administration,

1775 Duke Street, Alexandria,

Virginia 22314.

Office of Credit Union Resources
and Expansion (CURE): Paul Dibble,

Consumer Access Program Officer; or Rita
Woods, Director of Consumer Access at

(703) 518- 1150 or by mail at National
Credit Union Administration, 1775 Duke

Street, Alexandria, Virginia 22314.

I.

General Background and Legal Authority

A.

General Background

The N C U A is an independent federal
agency that insures funds maintained

in accounts of members or those
otherwise eligible to maintain insured

accounts (member accounts) at F I C
Us, protects the members who own F

I C Us, and charters and regulates
federal credit unions (F C Us).

The N C U A protects the safety and
soundness of the credit union system by

identifying, monitoring, and reducing
risks to the National Credit Union Share

Insurance Fund (Share Insurance Fund).

Backed by the full faith and credit
of the United States, the Share

Insurance Fund provides federal
share insurance to account holders

in all F C Us and the majority of
state- chartered credit unions.

B.

Legal Authority

The Board has issued this
final rule pursuant to its

authority under the F C U Act.

Under the Federal Credit Union Act (F
C U Act), in the event of a F I C U’s

failure the N C U A is responsible for
paying share insurance to any member, or

to any person with funds lawfully held

in a member account,1 up to the standard
maximum share insurance amount (SMSIA),

which is currently set at $250,000.2
The F C U Act provides that the N C U A

Board must determine the amount payable
consistently with actions taken by the

FDIC under its deposit insurance rules.3
The F C U Act also grants the N C U A

express authority to issue regulations
on the determination of the net amount

of share insurance paid.4 The F C U Act
further provides that “in determining

the amount payable to any member, there
shall be added together all accounts

in the credit union maintained by that
member for that member’s own benefit,

either in the member’s own name or in the
names of others.”5 However, the F C U Act

also specifically authorizes the Board
to “define, with such classifications

and exceptions as it may prescribe, the
extent of the share insurance coverage

provided for member accounts, including
member accounts in the name of a

minor, in trust, or in joint tenancy.”6

The N C U A has implemented these
requirements by issuing regulations

recognizing particular categories of
accounts, such as single ownership

accounts, joint ownership accounts,
revocable trust accounts, and irrevocable

trust accounts.7 If an account meets
the requirements for a particular

category, the account is insured, up
to the $250,000 limit, separately from

shares held by the member in a different
account category at the same F I C U.

For example, provided all requirements
are met, shares in the single

ownership category will be separately
insured from shares in the joint

ownership category held by the
same member at the same F I C U.

The N C U A’s share insurance
categories have been defined

through both statute and regulation.

Certain categories, such as the accounts
held by government depositors8 and certain

1See 12 U.S.C.

1752(5).

2 12 U.S.C.

1787(k)(1)(A), (k)(6).

3 12 U.S.C.

1787(k)(1)(A).

4 12 U.S.C.

1787(k)(1)(B).

The F C U Act states that “[d]etermination
of the net amount of share insurance

. . . “shall be in accordance with such
regulations as the Board may prescribe.”

5 12 U.S.C.

1787(k)(1)(B).

6 12 U.S.C.

1787(k)(1)(C).

7 12 CFR part 745.

8 See 12 U.S.C.

1787(k)(2).

retirement accounts, including individual
retirement accounts, have been expressly

defined by Congress.9 Other categories,
such as joint accounts10 and corporate

accounts,11 have been based on statutory
interpretation; these accounts have

been recognized through regulations
issued in 12 CFR part 745 pursuant to

the N C U A’s rulemaking authority.

In addition to defining the insurance
categories, the share insurance

regulations in part 745 provide the
criteria used to determine insurance

coverage for shares in each category.

Notably, the F C U Act also defines
the term “member account.” The N C U

A insures member accounts at all F I
C Us.12 Importantly, this term is not

limited to those persons enumerated
in the credit union’s field of

membership who have become members.

It also includes as member accounts
certain nonmembers, such as other

nonmember credit unions; nonmember public
units and political subdivisions; and,

in the case of credit unions serving
predominantly low-income members,

deposits of nonmembers generally.

In other words, the N C U A provides
share insurance coverage to members

and those otherwise eligible to
maintain insured accounts at F I C Us.

Finally, in addition to specific authority
to draft share insurance regulations

under § 1787 of the F C U Act, the N C U
A also has general rulemaking authority.

Under the F C U Act, the N C U A is the
chartering and supervisory authority for F

C Us and the federal supervisory authority
for F I C Us.13 The F C U Act grants the N

C U A a broad mandate to issue regulations
governing both F C Us and F I C Us.

Section 120 of the F C U Act is a general
grant of regulatory authority, and it

authorizes the Board to prescribe rules
and regulations for the administration

of the F C U Act.14 Section 207 of
the F C U Act is a specific grant of

authority over share insurance coverage,

9 See 12 U.S.C.

1787(k)(3).

10 12 CFR 745.8.

11 12 CFR 745.6.

12 12 U.S.C.

1752(5).

13 12 U.S.C.

1751 et seq.

14 12 U.S.C.

1766(a).

conservatorships, and liquidations.15
Section 209 of the F C U Act is a plenary

grant of regulatory authority to the
N C U A to issue rules and regulations

necessary or appropriate to carry out its
role as share insurer for all F I C Us.16

Accordingly, the F C U Act grants the
Board broad rulemaking authority to ensure

the credit union industry and the Share
Insurance Fund remain safe and sound.

II.

Simplification of Share
Insurance Trust Rules

A.

Notice of Proposed Rulemaking

At its October 19, 2023, meeting,
the Board issued a proposed rule to

simplify the regulations governing share
insurance coverage (proposed rule).17

The proposed rule primarily sought to
simply share insurance coverage rules

and increase consistency with changes
adopted by the FDIC in January 2022.

The Board’s overall objective
was to facilitate the prompt

payment of share insurance in
accordance with the F C U Act.

As discussed in more detail later in
this preamble, the Board is finalizing

the proposed changes to the share
insurance regulations as proposed.

B.

Policy Objectives

The Board is amending its regulations
governing share insurance coverage for

funds held in member accounts at F I
C Us in connection with trusts.18 Like

the proposed rule, the amendments of the
final rule are primarily intended to do

the following: (1) provide a rule for
trust account coverage that is easier

to understand and apply; (2) provide
parity with changes the FDIC adopted in

January 2022;19 and (3) facilitate the
prompt payment of share insurance in

15 12 U.S.C.

1787.

16 12 U.S.C.

1789(a)(11).

17 88 FR 73249 (Oct.

25, 2023).

18 Trusts include informal revocable
trusts (commonly referred to as

payable-on-death accounts, in-trust-for
accounts, or Totten trusts), formal

revocable trusts, and irrevocable trusts.

19 87 FR 4455 (Jan.

28, 2022).

accordance with the F C U Act.

Accomplishing these objectives will
further the N C U A’s mission in

other respects, as discussed in
greater detail later in this preamble.

Clarifying Insurance
Coverage for Trust Accounts

The share insurance trust rules have
evolved over time, and they can be difF

I C Ult to apply in some circumstances.

The amendments are intended to
clarify the insurance rules and trust-

account limits for F I C Us, their
employees, their accountholders,

and other interested parties.

The amendments reduce the number of rules
governing coverage for trust accounts,

and they establish a straightforward
calculation to determine coverage.

The amendments are also intended to
alleviate some of the confusion that

F I C Us, their employees, and their
accountholders may experience with

respect to insurance coverage and limits.

Under the regulations currently in
effect (current rules), there are

distinct and separate sets of rules
applicable to shares of revocable

trusts as opposed to irrevocable trusts.

Each set of rules has its own
criteria for coverage and methods

by which coverage is calculated.

Despite the N C U A’s efforts to simplify
the revocable trust rules in 2008, the

consistently high volume of complex
inquiries about trust accounts over

an extended period suggests continued
confusion about insurance limits.20

N C U A share insurance specialists
have answered over 17,000 calls with

questions since the fourth quarter of
2019.21 The N C U A estimates that over

50 percent of these inquiries, which do
not include those received through email,

submitted through mycreditunion.gov, or
directed to N C U A staff responsible

for credit union liquidations, pertain
to share insurance coverage for trust

accounts (revocable or irrevocable).

Additionally,

20 73 FR 60616 (Oct.

14, 2008).

21 The N C U A’s Office of Credit
Union Resources and Expansion,

which fields most share insurance
inquiries, only began tracking

calls received on October 31, 2019.

The high volume of trust-related
inquires predates this tracking.

comments received in response
to the proposal also support the

notion that there continues to be
confusion regarding share insurance

coverage of trust accounts.

To better clarify insurance limits,
the amendments will further simplify

insurance coverage of trust accounts
(revocable and irrevocable) by harmonizing

the coverage criteria for revocable
and irrevocable trust accounts and by

establishing a simplified formula for
calculating coverage that would apply

to these funds deposited at F I C Us.

The final rule uses the calculation
the N C U A first adopted in

2008 for revocable trust accounts
with five or fewer beneficiaries.

This formula is straightforward
and familiar to F I C Us and their

members.22 The amendments will also
eliminate formulas in the current

rules for revocable trust accounts
with more than five beneficiaries

and irrevocable trust accounts.

Parity

Adoption of the final rule will also
align with changes the FDIC adopted in

January 2022, which took effect on April
1, 2024.23 As the Board stressed in the

proposed rule, as well as in the 2021
final rule addressing the share insurance

coverage of joint ownership accounts,
the Board believes it is important to

maintain parity, to the extent possible,
between the nation’s two federal deposit

and share insurance programs, which
are backed by the full faith and credit

of the United States.24 The Board
believes it is important that members

of the public who use trust accounts
receive the same protection whether the

accounts are maintained at F I C Us or
other federally insured institutions.

Consistency between the FDIC’s federal
deposit insurance rules and the N C U

A’s share insurance rules promotes public
confidence in the safety of funds at

22 In 2008, the N C U A adopted an
insurance calculation for revocable trusts

that have five or fewer beneficiaries.

Under this rule, 12 CFR 745.4(a),
each trust grantor is insured

up to $250,000 per beneficiary.

23 87 FR 4455 (Jan.

28, 2022).

24 86 FR 11098 (Feb.

24, 2021).

depository institutions regardless
of whether the institution is an

insured bank or insured credit union.

Prompt Payment of Share Insurance

The F C U Act requires the N C U A
to pay accountholders “as soon as

possible” after a F I C U liquidation.25
However, the insurance determination

and subsequent payment for many trust
accounts can be delayed when N C U

A staff must review complex trust
agreements and apply various rules for

determining share insurance coverage.

The final rule’s amendments are intended
to facilitate more timely share insurance

determinations for trust accounts by
reducing the time needed to review

trust agreements and determine coverage.

These amendments should promote the
N C U A’s ability to pay insurance

proceeds to accountholders more quickly
following the liquidation of a F I

C U, enabling accountholders to meet
their financial needs and obligations.

Facilitating Liquidations

The final rule’s amendments
will also facilitate the

liquidation of failed F I C Us.

The N C U A is routinely required to
make share insurance determinations in

connection with F I C U liquidations.

In many of these instances, however,
share insurance coverage for

certain trust accounts is based upon
information that is not maintained

in the F I C U’s account records.

As a result, N C U A staff work
with accountholders to obtain

trust documentation following a
F I C U’s liquidation to complete

share insurance determinations.

The difF I C Ulties associated with
completing such a determination

are exacerbated by the substantial
growth in the use of formal

trusts in recent decades.

These amendments could reduce
the time spent reviewing such

25 12 U.S.C.

1787(d)(1).

information, thereby reducing potential
delays in the completion of share

insurance determinations and payments.

C.

Background and Need for Rulemaking

1.

Evolution of Insurance Coverage
of Funds Held in Trust Accounts

The N C U A first adopted regulations
governing share insurance coverage in

1971.26 Over the years, share insurance
coverage has evolved to reflect

both the N C U A’s experience and
changes in the credit union industry

as well as statutory amendments.27

While the regulations addressing
irrevocable trusts have undergone

minimal change, the regulations
addressing revocable trusts have

seen numerous changes, largely
aimed at providing increased

flexibility and simplifying coverage.

Notably, in 2004 the N C U A amended
the revocable trust rules, pointing to

continued confusion about the coverage for
revocable trust deposits and the need for

parity with then recent FDIC amendments.28
Specifically, the N C U A eliminated

the defeating contingency provisions of
the rules, with the result that coverage

would be based on the interests of
qualifying beneficiaries, irrespective of

any defeating contingencies in the trust
agreement.29 This more closely aligned

coverage for formal revocable trust
accounts with payable-on-death accounts.

Importantly, and of relevance to this
final rule, defeating contingency

provisions were not eliminated for
irrevocable trusts, and these provisions

remain relevant for calculating share
insurance coverage under the current

26 36 FR 2477 (Feb.

5, 1971).

27 See, 71 FR 56001 (Sept.

26, 2006)(implementing statutory
changes in the Federal Deposit

Insurance Reform Act of 2005) and 80
FR 27109 (May 12, 2015)(implementing

statutory changes in the Credit Union
Share Insurance Fund Parity Act).

28 69 FR 8798 (Feb.

26, 2004).

29 Prior to the changes adopted in
2004, if the interest of a qualifying

beneficiary in an account established
under the terms of a living trust

agreement was contingent upon
fulfillment of a specified condition,

referred to as a defeating contingency,
separate insurance was not available

for that beneficial interest.

Instead, the beneficial interest
would be added to any individual

account(s) of the grantor and insured
up to the SMSIA, then $100,000.

An example of a defeating contingency
is where an account owner names his

son as a beneficiary but specifies
in the living trust document that his

son’s ability to receive any share
of the trust funds is dependent upon

him successfully completing college.

irrevocable trust provisions.30 At the
same time, the N C U A eliminated the

requirement to name the beneficiaries
of a formal revocable trust in the

F I C U’s account records.31 The
N C U A recognized a grantor may

elect to change the beneficiaries or
the beneficiaries’ interests at any

time before the grantor’s death, and
requiring a F I C U to maintain a current

record of this information would be
impractical and unnecessarily burdensome.

More recently, the N C U A’s experience
and adoption of similar revisions by

the FDIC suggested further changes
to the trust rules were necessary.

In 2008, the N C U A simplified the
rules in several respects.32 First,

it eliminated the kinship requirement
for revocable trust beneficiaries,

instead allowing any natural person,
charitable organization, or nonprofit

to qualify for per-beneficiary coverage.

Second, a simplified calculation was
established if a revocable trust named

five or fewer beneficiaries; in which
case, coverage would be determined

without regard to the allocation of
interests among the beneficiaries.

This simplification eliminated
the need to discern and consider

beneficial interests in many cases.

A different insurance calculation
applied to revocable trusts with

more than five beneficiaries.

At that time, the SMSIA was $100,000;
thus, if more than five beneficiaries

were named in a revocable trust, coverage
would be the greater of: (1) $500,000;

or (2) the aggregate amount of all
beneficiaries’ interests in the trust(s),

limited to $100,000 per beneficiary.

When the SMSIA was increased to
$250,000, a similar adjustment

was made from $100,000 to

$250,000 for the calculation
of per-beneficiary coverage.

2.

Current Rules for Coverage of
Funds Held in Trust Accounts

30 12 CFR 745.2(d).

31 69 FR 8798, 8799 (Feb.

26, 2004).

32 73 FR 60616 (Oct.

14, 2008).

The N C U A’s current rules recognize
two different insurance categories

for funds held in connection with
trusts at F I C Us: (1) revocable

trusts and (2) irrevocable trusts.

The current rules for determining
insurance coverage for shares in each

of these categories are described below.

Additionally, share insurance coverage
is always limited to F I C U members

and those otherwise eligible to maintain
insured accounts at the F I C U.

The N C U A’s longstanding position has
been that, for revocable trust accounts,

all grantors (sometimes described as
settlors) of the trust must be members

of the F I C U or otherwise eligible
to maintain an insured account.33 For

irrevocable trust accounts, the N C
U A has maintained the position that

either all grantors (or settlors) or
all beneficiaries of the trust must

be members of the F I C U or otherwise
eligible to maintain an insured account.34

As described in greater detail
in section II.E., in the 2023

proposal, the N C U A requested
commenters’ feedback as to whether

these positions should be revisited.

This final rule will not alter
these longstanding positions.

However, the N C U A will be
continuing to evaluate commenters’

feedback and whether further
changes are possible and necessary.

Revocable Trust Accounts

The revocable trust category applies
to funds for which the member has

evidenced an intention that the
funds shall belong to one or more

beneficiaries upon the member’s death.

This category includes funds held in
connection with formal revocable trusts

— that is, revocable trusts established
through a written trust agreement.

It also includes funds that are not
subject to a formal trust agreement,

where the F I C U makes payment to the
beneficiaries identified in the F I C U’s

records upon the member’s death, based on
account titling and applicable state law.

The

33 See 12 CFR part 701, app.

A.

Art.

III, sec.

6 (“Shares issued in a revocable trust
— the settlor must be a member of this

credit union in his or her own right.”).

34 See 12 CFR part 701, app.

A.

Art.

III, sec.

6 (“Shares issued in an irrevocable trust
— either the settlor or the beneficiary

must be a member of this credit union.”).

N C U A refers to these types of
accounts, including Totten trust accounts,

payable-on-death accounts, and similar
accounts, as “informal revocable trusts.”

Funds associated with formal and informal
revocable trusts are aggregated for the

purposes of the share insurance rules;
thus, funds that will pass from the same

grantor to beneficiaries are aggregated
and insured up to the SMSIA, currently

$250,000, per beneficiary, regardless
of whether the transfer would be

accomplished through a written revocable
trust or an informal revocable trust.35

Under the current revocable trust
rules, beneficiaries with insurable

interests are limited to natural
persons, charitable organizations,

and non-profit entities recognized as
such under the Internal Revenue Code

of 1986.36 If a named beneficiary does
not satisfy this requirement, funds

held in trust for that beneficiary are
treated as single ownership funds of

the grantor and aggregated with any
other single ownership accounts the

grantor maintains at the same F I C U.37

Certain requirements also must be
satisfied for an account to be insured

in the revocable trust category.

The required intention that the funds
shall belong to the beneficiaries upon

the grantor’s death must either be
manifested in the “title” of the account

or elsewhere in the account records
of the credit union (using commonly

accepted terms such as “in trust for,” “as
trustee for,” “payable-on-death to,” or

any acronym for these terms).38 For the
purposes of this requirement, a F I C U’s

electronic account records are included.

For example, a F I C U’s electronic
account records could identify the

account as a revocable trust account
through coding or a similar mechanism.

In addition, the beneficiaries of informal
trusts (that is, payable-on- death

accounts) must be named in the F I C U’s
account records.39 The requirement to name

beneficiaries in the F I C U’s account
records does not apply to formal revocable

trusts; the N C U A generally obtains
information on beneficiaries of such

trusts from accountholders following a

35 12 CFR 745.4(a).

36 12 CFR 745.4(c).

37 12 CFR 745.4(d).

38 12 CFR 745.4(b).

39 Id.

F I C U’s liquidation.

If a member’s funds at a liquidated
F I C U held in trust accounts exceed

the SMSIA, a hold will be placed on
the portion of such funds in excess of

the SMSIA until the N C U A can fully
review the member’s trust agreement

and related documents to verify the
beneficiary rules are satisfied.

Therefore, this process can
result in delays to some insured

accountholders’ insurance determinations
and full insurance payments.

The calculation of share insurance
coverage for revocable trust

accounts depends upon the number
of unique beneficiaries named

by a member accountholder.

If five or fewer beneficiaries have
been named, the member accountholder

is insured in an amount up to the total
number of named beneficiaries multiplied

by the SMSIA, and the specific allocation
of interests among the beneficiaries

is not considered.40 If more than five
beneficiaries have been named, the

member accountholder is insured up
to the greater of: (1) five times the

SMSIA; or (2) the total of the interests
of each beneficiary, with each such

interest limited to the SMSIA.41 For
the purposes of this calculation, a life

estate interest is valued at the SMSIA.42

Where a revocable trust account is jointly
owned, the interests of each account

owner are separately insured up to the
SMSIA per beneficiary.43 However, if the

co-owners are the only beneficiaries of
the trust, the account is instead insured

under the N C U A’s joint account rule.44

The current revocable trust rule also
contains a provision that was intended

to reduce confusion and the potential for
a decrease in share insurance coverage

in the case of the death of a grantor.

Specifically, if a revocable trust
becomes irrevocable due to the death

of the grantor, the trust account
may continue to be insured under the

revocable trust rules.45 Absent this

40 12 CFR 745.4(a).

41 12 CFR 745.4(e).

42 12 CFR 745.4(g).

For example, if a revocable trust
provides a life estate for the member

accountholder’s spouse and remainder
interests for six other beneficiaries,

the spouse’s life estate interest
would be valued at the lesser of

$250,000 or the amount held in
the trust for the purposes of

the share insurance calculation.

43 12 CFR 745.4(f)(1).

44 12 CFR 745.4(f)(2).

45 12 CFR 745.4(h).

provision, the irrevocable trust rules
would apply following the grantor’s

death, as the revocable trust becomes
irrevocable at that time, which could

result in a reduction in coverage.46

Irrevocable Trust Accounts

Accounts maintaining funds held by
an irrevocable trust that has been

established either by written agreement or
by statute are insured in the irrevocable

trust share insurance category.

Calculating coverage in this category
requires a determination of whether

beneficiaries’ interests in the trust
are contingent or non-contingent.47

Non-contingent interests are interests
that may be determined without evaluation

of any contingencies, except for those
covered by the present worth and life

expectancy tables and the rules for
their use set forth in the Internal

Revenue Service (IRS) Federal Estate
Tax Regulations.48 Funds held for

non-contingent trust interests are
insured up to the SMSIA for each such

beneficiary.49 Funds held for contingent
trust interests are aggregated and

insured up to the SMSIA in total.50

The irrevocable trust rules do not
apply to funds held for a grantor’s

retained interest in an irrevocable
trust.51 Such funds are aggregated

with the grantor’s other single
ownership funds for the purposes of

applying the share insurance limit.

3.

Need for Further Rulemaking

46 The revocable trust rules
tend to provide greater coverage

than the irrevocable trust rules
because contingencies are not

considered for revocable trusts.

In addition, where five or fewer
beneficiaries are named by a revocable

trust, specific allocations to
beneficiaries also are not considered.

47 12 CFR 745.2(d) and 745.9-1.

48 12 CFR 745.2(d)(1).

For example, a life estate interest is
generally non-contingent, as it may be

valued using the life expectancy tables.

However, where a trustee has discretion
to divert funds from one beneficiary

to another to provide for the second
beneficiary’s medical needs, the first

beneficiary’s interest is contingent
upon the trustee’s discretion.

49 12 CFR 745.9-1(b).

50 12 CFR 745.2(d)(2).

51 See 12 CFR 745.2(d)(4) (The term
“trust interest” does not include any

interest retained by the settlor.).

As noted, the rules governing
share insurance coverage for trust

accounts have been simplified and
modified on several occasions.

However, these rules are still
frequently misunderstood and can

present some implementation challenges.

The trust rules can require
overly detailed, time-consuming,

and resource-intensive reviews
of trust documentation to obtain

the information necessary to
calculate share insurance coverage.

This information is often not found in a F
I C U’s records and must be obtained from

members after a F I C U’s liquidation.

Revision of the share insurance coverage
rules for trust accounts will reduce

the amount of information that must be
provided for trust accounts, as well as

the complexity of the N C U A’s review.

This revision should enable the N C U A
to complete share insurance determinations

more rapidly if a F I C U with a large
number of trust accounts is liquidated.

Delays in the payment of share
insurance can be consequential for

accountholders, and the final rule
will help to mitigate those delays.

Several factors contribute
to the challenges of making

insurance determinations for trust
accounts under the current rules.

First, there are two different sets
of rules governing share insurance

coverage for trust accounts.

Understanding the coverage for a
particular account requires a threshold

inquiry to determine which set of
rules to apply — the revocable trust

rules or the irrevocable trust rules.

This requires review of the trust
agreement to determine the type of

trust (revocable or irrevocable),
and the inquiry may be complicated

by innovations in state trust law
that are intended to increase the

flexibility and utility of trusts.

In some cases, this threshold inquiry is
also complicated by the provision of the

revocable trust rules that allows for
continued coverage under the revocable

trust rules where a trust becomes
irrevocable upon the grantor’s death.

The result of an irrevocable trust
deposit being insured under the revocable

trust rules has proven confusing for
both accountholders and F I C Us.

Second, even after determining
which set of rules applies to

a particular account, it may

be challenging to apply the current rules.

For example, the revocable
trust rules include unique

titling requirements and
beneficiary requirements.

These rules also provide for two
separate calculations to determine

insurance coverage, depending
in part upon whether there are

five or fewer trust beneficiaries
or at least six beneficiaries.

In addition, for revocable trusts that
provide benefits to multiple generations

of potential beneficiaries, the N C U
A needs to evaluate the trust agreement

to determine whether a beneficiary is a
primary beneficiary (immediately entitled

to funds when a grantor dies), contingent
beneficiary, or remainder beneficiary.

Only eligible primary beneficiaries
and remainder beneficiaries are

considered when calculating N
C U A share insurance coverage.

The irrevocable trust rules may require
detailed review of trust agreements to

determine whether beneficiaries’ interests
are contingent and may also require

actuarial or present value calculations.

These types of requirements complicate
the determination of insurance coverage

for trust deposits, have proven confusing
for accountholders, and extend the time

needed to complete a share insurance
determination and insurance payment.

Third, the complexity and
variety of account holders’ trust

arrangements adds to the difF I C
Ulty of determining share insurance

coverage under the current rules.

For example, trust interests are
sometimes defined through numerous

conditions and formulas, and a careful
analysis of these provisions may be

necessary to calculate share insurance
coverage under the current rules.

Arrangements involving multiple
trusts where the same beneficiaries

are named by the same grantor(s) in
different trusts add to the difF I

C Ulty of applying the trust rules.

The N C U A believes simplification
of the share insurance rules presents

an opportunity to more closely
align the coverage provided for

different types of trust funds.

For example, the current revocable
trust rules generally provide

for a greater amount of coverage
than the irrevocable trust rules.

This outcome occurs because contingent
interests for irrevocable trusts

are aggregated and insured up to the
SMSIA rather than up to the SMSIA

per beneficiary, while contingencies
are not considered and therefore

do not limit coverage in the
same manner for revocable trusts.

Finally, as previously noted, adoption
of this final rule will align with

changes the FDIC adopted in January
2022, which took effect on April 1, 2024.

The Board believes it is important to
maintain parity between the nation’s

two federal deposit and share insurance
programs.52 It is imperative that

members of the public who use trust
accounts for the transfer of ownership

of assets better understand the rules
governing such accounts and receive

the same protection, whether the
accounts are maintained at F I C Us or

other federally insured institutions.

D.

Final Rule

The final rule adopts the proposed changes
to the trust account rules as proposed.

Specifically, the N C U A is
amending the rules governing share

insurance coverage for funds held
in trust accounts at F I C Us.

Generally, the amendments will do the
following: (1) merge the revocable

and irrevocable trust categories into
one category; (2) apply a simpler,

common calculation method to determine
insurance coverage for funds held by

revocable and irrevocable trusts; and
(3) eliminate certain requirements

found in the current rules for
revocable and irrevocable trusts.

Merger of Revocable and
Irrevocable Trust Categories

As discussed above, the N C U A
historically has insured revocable

trust funds and irrevocable trust
funds held at F I C Us under two

separate insurance categories.

The N C U A’s experience has been this
bifurcation often confuses F I C Us’

staff and their members, as it requires
a threshold inquiry to determine which

set of rules to apply to a trust account.

Moreover, all trust funds deposited at
a F I C U must be categorized before

the aggregation of trust funds deposited
within each category can be completed.

The N C U A believes funds held in

52 12 U.S.C.

1787(k)(1)(A).

connection with revocable and irrevocable
trusts are sufficiently similar,

for the purposes of share insurance
coverage, to warrant the merger of

these two categories into one category.

Under the N C U A’s current rules,
share insurance coverage is provided

because the trustee maintains the funds
for the benefit of the beneficiaries.

This fact is true regardless of whether
the trust is revocable or irrevocable.

Merging the revocable and irrevocable
trust categories will better conform

share insurance coverage to the
substance — rather than the legal

form — of the trust arrangement.

This underlying principle of the
share insurance rules is particularly

important in the context of trusts, as
state law often provides flexibility

to structure arrangements in different
ways to accomplish a given purpose.53

F I C U members may have various
reasons for selecting a particular

legal arrangement, but that
decision should not significantly

affect share insurance coverage.

Importantly, the merger of the
revocable trust and irrevocable trust

categories into one category for share
insurance purposes will not affect

the application or operation of state
trust law; it will only affect the

determination of share insurance coverage
for these types of trust funds in

the event of a F I C U’s liquidation.

Accordingly, the N C U A is amending
§ 745.4 of its regulations, which

currently applies only to revocable
trust accounts, to establish a

new “trust accounts” category that
includes both revocable and irrevocable

trust funds deposited at a F I C U.

The final rule defines the funds that
will be included in this category as

follows: (1) informal revocable trust
funds, such as payable- on-death accounts,

in-trust-for accounts, and Totten
trust accounts; (2) formal revocable

trust funds, defined to mean funds held
pursuant to a written revocable trust

agreement under which funds pass to one
or more beneficiaries upon the grantor’s

death; and (3) irrevocable trust funds,

53 For example, the N C U A currently
aggregates funds in payable-on-death

accounts and funds of written revocable
trusts for the purposes of share

insurance coverage, despite their
separate and distinct legal mechanisms.

Also, where the co-owners of a revocable
trust are also that trust’s sole

beneficiaries, the N C U A instead
insures the trust’s funds as joint

funds, reflecting the arrangement’s
substance rather than its legal form.

meaning funds held pursuant to an
irrevocable trust established by

written agreement or by statute.

In addition, the merger of the revocable
trust and irrevocable trust categories

eliminates the need for § 745.4(h)
through (i) of the current revocable trust

rules, which provide that the revocable
trust rules may continue to apply to an

account where a formal revocable trust
becomes irrevocable due to the death

of one or more of the trust’s grantors.

These provisions were intended to benefit
accountholders, who sometimes were unaware

that a trust owner’s death could trigger a
significant decrease in insurance coverage

as a revocable trust becomes irrevocable.

However, in the N C U A’s experience, this
rule has proven complex in part because

it results in some irrevocable trusts
being insured per the revocable trust

rules, while other irrevocable trusts
are insured under the irrevocable trust

rules.54 As a result, an accountholder
could know a trust was irrevocable but not

know which share insurance rules to apply.

The final rule will insure funds of
formal and informal revocable trusts

and irrevocable trusts according to a
common set of rules, eliminating the

need for these provisions (§ 745.4(h)
through (i)) and simplifying

coverage for accountholders.

Accordingly, the death of a formal
revocable trust owner will not

result in a decrease in share
insurance coverage for the trust.

Coverage for irrevocable and formal
revocable trusts will fall under the same

category and share insurance coverage
will remain the same, even after the

expiration of the six-month grace period
following the death of an account owner.55

54 As noted above, if a revocable trust
becomes irrevocable due to the death of

the grantor, the account continues to be
insured under the revocable trust rules.

12 CFR 745.4(h).

55 The death of an account owner
can affect share insurance coverage,

often reducing the amount of coverage
that applies to a family’s accounts.

To ensure that families dealing with
the death of a family member have

adequate time to review and restructure
accounts if necessary, the N C U A

insures a deceased owner’s accounts as if
he/she/they were still alive for a period

of 6 months after his/her/their death.

12 CFR 745.2(e).

Informal revocable trust accounts
will also be insured under this

same trust account category but are
unlikely to result in the creation

of an irrevocable trust account
upon an owner or co-owner’s death.

As is the case under the existing share
insurance regulations, when a co- owner

of an informal revocable trust account
dies, share insurance coverage for

the deceased owner’s interest in the
account will cease after the expiration

of the six-month grace period allowed
for the death of share account owners.

After the expiration of the six-month
grace period, share insurance

coverage will be calculated as
if the deceased co-owner did not

exist and the deceased co-owner’s
name did not remain on the account.

This treatment of the account will be
based on the fact that all funds in

the account will be owned by one person
(that is, the surviving co-owner).

Calculation of Coverage

As was proposed, the final rule
uses one streamlined calculation

to determine the amount of share
insurance coverage for funds of both

revocable and irrevocable trusts.

This method is already used by the
N C U A to calculate coverage for

revocable trusts that have five or
fewer beneficiaries, and it is an aspect

of the rules that is generally well
understood by F I C Us and their members.

The final rule will provide that a
grantor’s trust funds are insured

in an amount up to the SMSIA
(currently $250,000) multiplied by

the number of trust beneficiaries,
not to exceed five beneficiaries.

The N C U A will presume that, for share
insurance purposes, the trust provides

for equal treatment of beneficiaries such
that specific allocation of the funds

to the respective beneficiaries will
not be relevant, consistent with the N

C U A’s current treatment of revocable
trusts with five or fewer beneficiaries.

This will, in effect, limit coverage
for a grantor’s trust funds at each

F I C U to a total of $1,250,000;
in other words, maximum coverage

will be equivalent to $250,000 per
beneficiary for up to five beneficiaries.

In determining share insurance coverage,
the N C U A will continue to consider

only beneficiaries who are expected to

receive the funds held by the trust in
a member account at the F I C U; the N

C U A will not consider beneficiaries
who are expected to receive only

non-deposit assets of the trust.

The N C U A is deciding to calculate
coverage in this manner, in part, based

on its experience with the revocable
trust rules after the modifications to

these rules in 2008.56 The N C U A has
found the share insurance calculation

method for revocable trusts with five
or fewer beneficiaries has been the most

straightforward and is easier for F I C
Us’ staff and the public to understand.

This calculation provides for insurance
in an amount up to the total number

of unique grantor-beneficiary trust
relationships (that is, the number

of grantors, multiplied by the total
number of beneficiaries, multiplied

by the SMSIA).57 In addition to being
simpler, this calculation has proven

beneficial in liquidations, as it
leads to more prompt share insurance

determinations and quicker access
to insured funds for accountholders.

As discussed in section II.E., commenters
also supported using this calculation.

Accordingly, the N C U A will calculate
share insurance coverage for trust

accounts based on the simpler calculation
currently used for revocable trusts

with five or fewer beneficiaries.

The streamlined calculation that will
be used to determine coverage for

revocable trust funds and irrevocable
trust funds includes a limit on the

total amount of share insurance coverage
for all of an accountholder’s funds in

the trust category at the same F I C U.

As was proposed, the final rule will
provide coverage for trust funds

at each F I C U up to a total of
$1,250,000 per grantor; in other

words, each grantor’s insurance limit
will be $250,000 per beneficiary up

to a maximum of five beneficiaries.

The level of five beneficiaries is
an important threshold in the current

revocable trust rules, as it defines
whether a grantor’s coverage is determined

using the simpler calculation of the
number of beneficiaries multiplied by

the SMSIA or the more complex calculation
involving the consideration of the amount

of each beneficiary’s specific interest

56 73 FR 60616 (Oct.

14, 2008).

57 For example, two co-grantors that
designate five beneficiaries are insured

for up to $2,500,000 (2 x 5 x $250,000).

(which applies when there are
six or more beneficiaries).

The current trust rules limit coverage
by tying coverage to the specific

interests of each beneficiary of
an irrevocable trust or of each

beneficiary of a revocable trust
with more than five beneficiaries.

The final rule’s $1,250,000 per-grantor,
per-F I C U limit is more straightforward

and balances the objectives of
simplifying the trust rules, promoting

timely payment of share insurance,
facilitating liquidations, ensuring

consistency with the F C U Act, and
limiting risk to the Share Insurance Fund.

The final rule will also provide parity
between the N C U A’s regulations and

those adopted by the FDIC in early 2022.58

The N C U A anticipates that limiting
coverage to $1,250,000 per grantor,

per F I C U, for trust funds will
not have a substantial effect on

accountholders, as most trust accounts
in past F I C U liquidations have

had balances well below this level.

However, because the N C U A lacks
sufficient information to project

the exact effects of the new limit
on current accountholders, the agency

requested in the proposed rule that
commenters provide information that

might be helpful in this regard.

As discussed in greater detail in section
II.E., the comments received did not

indicate that the limit will have a
substantial effect on accountholders.

Under the final rule, to determine
the level of insurance coverage that

will apply to funds held in trust
accounts, accountholders will still

need to identify the grantors and the
eligible beneficiaries of the trust.

The level of coverage that applies
to trust accounts will no longer be

affected by the specific allocation of
trust funds to each of the beneficiaries

of the trust or by contingencies
outlined in the trust agreement.

Instead, the final rule will provide that
a grantor’s trust funds are insured up to

a total of $1,250,000 per grantor, or an
amount up to the SMSIA multiplied by the

number of eligible beneficiaries, with a
limit of no more than five beneficiaries.

58 87 FR 4455 (Jan.

28, 2022).

Aggregation

As was proposed, the final rule also
provides for the aggregation of funds

held in revocable and irrevocable
trust accounts for the purposes of

applying the share insurance limit.

Under the current rules, funds held in
informal revocable trust accounts and

formal revocable trust accounts are
aggregated for this purpose.59 The final

rule will aggregate a grantor’s informal
and formal revocable trust accounts,

as well as irrevocable trust accounts.

For example, all informal revocable
trusts, formal revocable trusts, and

irrevocable trusts held for the same
grantor at the same F I C U will

be aggregated, and the grantor’s
insurance limit will be determined

by how many eligible and unique
beneficiaries are identified among all

of their trust accounts.60 The share
insurance coverage provided in the

“trust accounts” category will remain
separate from the coverage provided

for other funds held in a different
right and capacity at the same F I C U.

However, some accountholders who
currently maintain both revocable

trust and irrevocable trust deposits
at the same F I C U may have funds

in excess of the insurance limit when
these separate categories are combined.

As noted in the proposed rule, the N
C U A lacks data on accountholders’

trust arrangements that allow it to
estimate the number of accountholders

who might be affected in this manner.

As such, the N C U A requested that
commenters provide information that

might be helpful in this regard.

As discussed in greater detail in
section II.E., the comments received

did not indicate that the aggregate
limit will have a substantial effect on

59 See 12 CFR 745.4(a) (“All funds that an
owner holds in both living trust accounts

and payable-on-death accounts, at the same
N C U A-insured credit union and naming

the same beneficiaries, are aggregated
for insurance purposes and insured to

the applicable coverage limits….”).

60 For example, if a grantor maintained
both an informal revocable trust account

with three beneficiaries and a formal
revocable trust account with three

separate and unique beneficiaries, the
two accounts would be aggregated and

the maximum share insurance available
would be $1.25 million (one grantor

times the SMSIA times the number of
unique beneficiaries, limited to five).

However, if the same three people were
the beneficiaries of both accounts, the

maximum share insurance available would
be $750,000 (one grantor times the SMSIA

times the three unique beneficiaries).

accountholders.

The agency does not believe this
change will impact a substantial

number of accountholders and
is finalizing it as proposed.

Eligible Beneficiaries

Currently, the revocable trust rules
provide that eligible beneficiaries

include natural persons, charitable
organizations, and non-profit entities

recognized as such under the Internal
Revenue Code of 1986,61 while the

irrevocable trust rules do not
establish criteria for beneficiaries.

As stated in the proposed rule, the N C
U A believes a single definition should

be used to determine whether an entity
is an eligible beneficiary for all trust

funds and proposes to use the current
revocable trust rule’s definition.

The N C U A believes this
single definition will result

in a change in share insurance
coverage only in very rare cases.

As was proposed, the final rule will
exclude from the calculation of share

insurance coverage beneficiaries
who would obtain an interest in

a trust only if one or more named
beneficiaries are deceased (often

referred to as contingent beneficiaries).

This exclusion codifies existing
practice to include only primary,

unique beneficiaries in the share
insurance calculation.62 This

codification does not represent
a substantive change in coverage.

Consistent with treatment under the
current trust rules, naming a chain

of contingent beneficiaries that would
obtain trust interests only in the

event of a beneficiary’s death will
not increase share insurance coverage.

Finally, as in the proposed rule, the
final rule will codify an interpretation

of the trust rules where an informal
revocable trust designates the depositor’s

formal trust as its beneficiary.

A formal trust generally does
not meet the definition of an

eligible beneficiary for share

61 12 CFR 754.4(c).

62 See N C U A Your Insured Funds
at page 42 (“The beneficiaries are

the people or entities entitled
to an interest in the trust.

Contingent or alternative trust
beneficiaries are not considered to

have an interest in the trust funds and
other assets as long as the primary or

initial beneficiaries are still living,
with the exception of revocable living

trusts with a life estate interest.”).

insurance purposes, but the N C U A
has treated such accounts as revocable

trust accounts under the trust rules,
insuring the account as if it were

titled in the name of the formal trust.63
Additionally, the Board wishes to clarify

that if an irrevocable trust is named
as beneficiary of an informal revocable

trust account, the informal revocable
trust account will also be treated as if

titled in the name of that formal trust.

Retained Interests and Ineligible
Beneficiaries’ Interests

The current trust rules provide that,
in some instances, funds corresponding

to specific beneficiaries are aggregated
with a grantor’s single ownership deposits

at the same F I C U for the purposes
of the share insurance calculation.

These instances include a grantor’s
retained interest in an irrevocable

trust64 and interests of beneficiaries
who do not satisfy the definition

of “beneficiary.”65 This adds
complexity to the share insurance

calculation, as a detailed review of
a trust agreement may be required to

value such interests so they may be
aggregated with a grantor’s other funds.

To implement the streamlined
calculation for funds held in trust

accounts, the N C U A proposed
to eliminate these provisions.

Under the proposed rule, the grantor
and other beneficiaries who do not

satisfy the definition of “eligible
beneficiary” would not be included for

the purposes of the share insurance
calculation.66 Importantly, this

exclusion would not in any way limit
a grantor’s ability to establish

such trust interests under state law.

These interests simply would
not factor into the calculation

of share insurance coverage.

The Board has decided to adopt
these changes as proposed.

63 See 74 FR 55747, 55748 (Oct.

29, 2009).

64 See 12 CFR 745.2(d)(4).

65 12 CFR 745.4(d).

66 In the unlikely event a trust does
not name any eligible beneficiaries,

the N C U A would treat the funds
in the trust account as funds held

in a single ownership account.

Such funds would be aggregated with any
other single ownership funds that the

grantor maintains at the same F I C U
and insured up to the SMSIA of $250,000.

Future Trusts Named as Beneficiaries

Trusts often contain provisions for
the establishment of one or more

new trusts upon the grantor’s death.

The proposed rule sought to clarify share
insurance coverage in these situations.

Under the proposed rule, if a trust
agreement provides that trust funds

will pass into one or more new trusts
upon the death of the grantor (or

grantors), the future trust (or trusts)
would not be treated as beneficiaries

for the purposes of the calculation.

The future trust(s) instead would
be considered mechanisms for

distributing trust funds, and the
natural persons or organizations that

receive the trust funds through the
future trusts would be considered

the beneficiaries for the purposes
of the share insurance calculation.

The Board has decided to adopt
this position as proposed.

This clarification is consistent with
the N C U A’s current interpretations

and would not represent a substantive
change in share insurance coverage.

Naming of Beneficiaries
in Share Account Records

Consistent with the current revocable
trust rules and the proposed rule, the

final rule will continue to require the
beneficiaries of an informal revocable

trust to be expressly named in the account
records of the F I C U.67 The N C U A does

not believe this requirement imposes a
burden on F I C Us, as informal revocable

trusts by their nature require the F I C
U to be able to identify the individuals

or entities to which funds would be
paid upon the accountholder’s death.

Presumption of Ownership

As in the proposed rule, the final
rule also states that, unless otherwise

specified in a F I C U’s account records,
funds held in an account for a trust

established by multiple grantors are

67 See 12 CFR 745.4(b).

presumed to be owned in equal shares.

This presumption is consistent with
the current revocable trust rules.68

Funds Covered Under Other Rules

Under the proposed rule, certain trust
funds that are covered by other sections

of the share insurance regulations would
be excluded from coverage under § 745.4.

For example, employee benefit
plan accounts are insured

pursuant to current § 745.9-2.

In addition, if the co-owners of an
informal or formal revocable trust

are the trust’s sole beneficiaries,
funds held in connection with the

trust would be treated as a joint
ownership account under § 745.8.

The Board has decided to
adopt this as proposed.

In each of the provided cases, the N C
U A is not changing the current rule.

Removal of the Appendix to Part 745

As was proposed, the final rule
will remove the appendix to part

745, which provides examples
of share insurance coverage.

As noted in the proposed rule, the N
C U A plans to update its Your Insured

Funds brochure to reflect the amendments
made to part 745.69 The Board believes

the updated brochure and other updated
resources available on mycreditunion.gov

will provide a more consumer friendly
and easier-to-update avenue for providing

examples of share insurance coverage.

The final rule also removes references to
the appendix in the heading of part 745

and in § 745.0, § 745.2, and § 745.13.

As such, once this portion of the final
rule has gone into effect, providing

the appendix will no longer satisfy the
notification to members/shareholders

68 See 12 CFR 745.4(f).

https://mycreditunion.gov/sites/default/static-files/insured-funds-brochure.pdf.

requirement in § 745.13.

Instead, F I C Us will have to make
available either the rules in part 745

of the N C U A’s regulations or the
updated Your Insured Funds brochure.

Conforming Changes

As discussed in the proposal, the
final rule’s simplification of the

calculation for insurance coverage
for funds held in trust accounts

permits the elimination of current
§ 745.2(d) of the regulations addressing

the valuation of trust interests.

As discussed further below, the
description of non-contingent interests in

§ 745.2(d)(1) and (2) is no longer relevant
to trust accounts under the final rule.

Additionally, § 745.2(d)(3)
regarding the deemed pro rata

contribution of settlors to a trust
is replaced by new § 745.4(b)(4),

which presumes equal allocation.

Current § 745.2(d)(4) defining a “trust
interest” is replaced by the definition of

“irrevocable trust” in new § 745.4(a)(3).

Regarding non-contingent interests, as
was proposed, the final rule moves the

current description of a non-contingent
interest in § 745.2(d)(1) to the

definitions section of part 745.

The new definition of “non-contingent
interest” in § 745.1 remains substantively

the same but will now only be relevant to
evaluating participants’ non-contingent

interests in shares of an employee
benefit plan under § 745.9-2(a).

As was proposed, the new definition of
“non- contingent interest” adds language

to include any present worth or life
expectancy tables that the IRS may adopt

that are similar to those set forth
in § 20.2031-7 of the Federal Estate

Tax Regulations (26 CFR 20.2031-7).

This change is not substantive but is
instead intended to provide flexibility

if the IRS makes any changes.

As part of this change, the final rule
also makes non-substantive changes

to § 745.1 to improve readability.

The final rule also removes the reference
to § 745.2 in current § 745.9-2.

Finally, the final rule redesignates
current § 745.9-2 as § 745.9

to reflect the elimination

of current § 745.9-1 governing
irrevocable trust accounts.

The reference in § 745.9-2(a) to

§

745.2 is also removed to reflect the
elimination of the description of a

non-contingent interest in current
§ 745.2(d) and adoption of a definition of

“non-contingent interest” in new § 745.1.

Effective Date

The effective date of the
trust account changes will be

delayed until December 1, 2026.

This delayed effective date mirrors
the timeline the FDIC used in

adopting its trust account changes.

It is intended to provide F I C Us,
accountholders, and the N C U A time

to prepare for the changes in trust
account share insurance coverage.

F I C Us will have an opportunity
to review the changes in coverage,

train employees, and update
publications if necessary.

Accountholders may review insurance
coverage for their funds and adjust their

share account arrangements if desired.

In addition, the N C U A must update
its share insurance estimator and

share insurance coverage publications,
including publications that provide

guidance to F I C Us and accountholders.

The Board’s rationale for adopting a
delayed effective date as was suggested

in the proposal and not providing
for any continued application of the

current rules to existing accounts
is discussed further in section II.E.

E.

Examples Demonstrating Coverage
Under Current and Final Rules

To assist commenters, the N C U A
is providing examples demonstrating

how the final rule will apply to
determine share insurance coverage

for funds held in trust accounts.

These examples are not intended to
be all-inclusive; they merely address

a few possible scenarios involving
funds held in trust accounts.

The N C U A expects that, for most
accountholders, insurance coverage

will not change under the final rule.

The examples here highlight a few
instances where coverage could be reduced

to ensure the public is aware of them.

The examples mirror those
provided in the proposed rule.

In addition, all examples involve
members or those otherwise entitled to

maintain insured accounts at the F I C U.

Again, share insurance coverage is
only available to F I C U members

and those otherwise entitled
to maintain insured accounts.

For revocable trust accounts, all
grantors must be members of the

F I C U or otherwise eligible to
maintain an insured account to

receive share insurance coverage.

In the case of an irrevocable
trust account, all grantors or all

beneficiaries must be members of
the F I C U or otherwise eligible

to maintain an insured account to
receive share insurance coverage.

Where a revocable trust account has become
irrevocable because of the death of a

grantor, the deceased grantor’s membership
will continue to satisfy their membership

requirement as long as the trust account
continues to be maintained at the F I C U.

Example 1: Payable-on-Death Account

Member A establishes a
payable-on-death account at a F I C U.

Member A has designated three
beneficiaries for this account — B,

C, and D — who will receive the funds
upon member A’s death and listed all

three on a form provided to the F I C U.

The only other share account that
member A maintains at the same

F I C U is a share draft account
with no designated beneficiaries.

What is the maximum amount of
share insurance coverage for

member A’s shares at the F I C U?

Under the final rule, member A’s
payable-on-death account represents an

informal revocable trust and would be
insured in the trust accounts category.

The maximum coverage for this account
would be equal to the SMSIA (currently

$250,000) multiplied by the number of
grantors (in this case one because member

A established the account) multiplied
by the number of beneficiaries, up to a

maximum of five (here three, the number
of beneficiaries is less than five).

Member A’s payable-on-death
account would be insured for

up to ($250,000) x (1) x (3)

=
$750,000.

The coverage for member A’s
payable-on-death account is separate

from the coverage provided for member
A’s share draft account, which would

be insured in the single ownership
category because she has not named

any beneficiaries for that account.

The single ownership share
draft account would be insured

up to the SMSIA, $250,000.

Member A’s total insurance coverage
for shares at the F I C U would be

$750,000 + $250,000 = $1,000,000.

Notably, this level of coverage
is the same as that provided by

the current share insurance rules.

Example 2: Formal Revocable Trust
and Informal Revocable Trust

Members E and F jointly establish a
payable-on-death account at a F I C U.

Members E and F have designated three
beneficiaries for this account — G,

H, and I — who will receive the funds
after both members E and F are deceased.

They list these beneficiaries on
a form provided to the F I C U.

Members E and F also jointly establish
an account titled in the name of the “E

and F Living Trust” at the same F I C U.

Members E and F are the grantors of
the living trust, a formal revocable

trust that includes the same
three beneficiaries, G, H, and I.

The grantors, members E and F,
do not maintain any other share

accounts at this same F I C U.

What is the maximum amount
of share insurance coverage

for members E and F’s shares?

Under the final rule, members E and F’s
payable-on-death account represents an

informal revocable trust and would be
insured in the trust accounts category.

Members E and F’s living trust
account constitutes a formal revocable

trust and would also be insured
in the trust accounts category.

To the extent the funds in these accounts
would pass from the same grantor (E or

F) to beneficiaries (G, H, and I), the
funds would be aggregated for the purpose

of applying the share insurance limit.

As under the current rules, it would
be irrelevant that the grantors’ shares

are divided between the payable-on-death
account and the living trust account.

The maximum coverage for members E and
F’s shares would be equal to the SMSIA

($250,000) multiplied by the
number of grantors (two, because

members E and F are the grantors

with respect to both accounts)
multiplied by the number of unique

beneficiaries, up to a maximum of
five (here three, the number of

beneficiaries, is less than five).

Therefore, the coverage for E
and F’s trust accounts would be

($250,000) x (2) x (3) = $1,500,000.

This level of coverage is the
same as that provided by the

current share insurance rules.

Example 3: Two-Owner Trust
and a One-Owner Trust

Members J and K jointly establish a
payable-on-death account at a F I C U.

Members J and K have designated three
beneficiaries for this account — L,

M, and N — who will receive the funds
after both J and K are deceased.

They list these beneficiaries on
a form provided to the F I C U.

At the same F I C U, Member J
establishes a payable-on-death

account and designates Member K
as the beneficiary upon J’s death.

What is the maximum amount of
coverage for members J and K’s shares?

Under the final rule, both
accounts would be insured under

the trust account category.

To the extent these shares would pass
from the same grantor (J or K) to

beneficiaries (such as L, M, and N),
they would be aggregated for the purpose

of applying the share insurance limit.

For example, member K identified
three beneficiaries (L, M, and N), and

therefore, member K’s insurance limit
is $750,000 (or (1) x (3) x ($250,000)).

Member K would be fully insured as
long as one-half interest of the

co-owned trust account was $750,000
or less, which is the same level of

coverage provided under current rules.

In this example, member J’s situation
differs from member K’s because J

has a second trust account, but the
insurance calculation remains the same.

Specifically, member J has two trust
accounts and identified four unique

beneficiaries (L, M, N, and K);
therefore, member J’s insurance limit is

$1,000,000 (or (1) x (4) x ($250,000)).

Member J would remain fully insured
as long as J’s trust shares — equal

to one-half of the co- owned trust
account plus J’s personal trust

account — total no more than $1,000,000.

This

methodology and level of coverage
is the same as that provided by

the current share insurance rules.

Example 4: Revocable
and Irrevocable Trusts

Member O establishes a share account
at a F I C U titled the “O Living

Trust.” Member O is the grantor
of this living trust, a formal

revocable trust that includes
three beneficiaries — P, Q, and R.

The grantor, member O, also establishes
an irrevocable trust for the benefit

of the same three beneficiaries.

The trustee of the irrevocable trust
maintains a share account at the same F

I C U as the living trust account, titled
in the name of the irrevocable trust.

Neither member O nor the trustee maintains
other share accounts at the same F I C U.

What is the insurance
coverage for these accounts?

Under the final rule, the living
trust account is a formal revocable

trust and would be insured in
the trust accounts category.

The account containing the funds from the
irrevocable trust account would also be

insured in the trust accounts category.

To the extent these shares would pass
from the same grantor (member O) to

beneficiaries (P, Q, or R), they would
be aggregated for the purposes of

applying the share insurance limit.

It would be irrelevant that the shares
are divided between the living trust

account and the irrevocable trust account.

The maximum coverage for these shares
would be equal to the SMSIA ($250,000)

multiplied by the number of grantors
(one, because member O is the grantor

with respect to both accounts) multiplied
by the number of beneficiaries, up to a

maximum of five (here three, the number
of beneficiaries, is less than five).

Therefore, the maximum coverage for
the shares in the trust accounts would

be ($250,000) x (1) x (3) = $750,000.

This example is one of the few instances
where the final rule may provide

a reduced amount of coverage as a
result of the aggregation of revocable

and irrevocable trust accounts,

depending on the structure
of the trust agreement.

Under the current rules, member O would be

insured for up to $750,000 for revocable
trust shares and separately insured

for up to $750,000 for irrevocable
trust shares (assuming non-contingent

beneficial interests), resulting in

$1,500,000 in total coverage.

If that were the case, current
coverage would exceed that

provided by the final rule.

However, the terms of irrevocable
trusts sometimes lead to

less coverage than expected.

It is often the case that irrevocable
trust accounts are only insured up to

$250,000 under the current rules due to
contingencies in the trust agreement,

but determining this with certainty often
requires careful consideration of the

trust agreement’s contingency provisions.

Under the current rule, if contingencies
existed, current coverage would exceed

that provided by the final rule, as member
O would be insured up to $1,000,000;

$750,000 for the revocable trust and
$250,000 for the irrevocable trust.

In the N C U A’s view, one of the key
benefits of the final rule versus the

current rule will be greater clarity
and predictability in share insurance

coverage because whether contingencies
exist will no longer be a factor

that could affect share insurance.

Example 5: Many Beneficiaries Named

Member S establishes a share account
at a F I C U titled in the name of

the “S Living Trust.” This trust
is a revocable trust naming seven

beneficiaries — T, U, V, W, X, Y, and Z.

The grantor, member S, does not maintain
any other shares at the same F I C U.

What is the coverage for this account?

Under the final rule, the living trust
is a formal revocable trust and would be

insured in the trust accounts category.

The maximum coverage for this account
would be equal to the SMSIA ($250,000)

multiplied by the number of grantors
(one, because member S is the sole

grantor) multiplied by the number of
beneficiaries, up to a maximum of five.

Here the number of named
beneficiaries (seven) exceeds the

maximum (five), so insurance is
calculated using the maximum (five).

Coverage for the account would be
($250,000) x (1) x (5) = $1,250,000.

This example is another instance
where the final rule may provide for

less coverage than the current rule.

Under the current rule, because more
than five beneficiaries are named, the

account is insured up to the greater
of the following: (1) five times

the SMSIA; or (2) the total of the
interests of each beneficiary, with

each such interest limited to the SMSIA.

Determining coverage requires a
review of the trust agreement to

ascertain each beneficiary’s interest.

Each such insurable interest is
limited to the SMSIA, and the total of

all these interests is compared with
$1,250,000 (five times the SMSIA).

The current rule provides coverage
in the greater of these two amounts.

The result would fall into a range from
$1,250,000 to $1,750,000, depending on

the precise allocation of trust interests
among the beneficiaries.70 In the N C

U A’s view, one of the key benefits of
the final rule versus the current rule

is greater clarity and predictability
in share insurance coverage because

a single formula is used to determine
maximum coverage, and this formula

will not depend upon the specific
allocation of funds among beneficiaries.

F.

Discussion of Comments

Overview of the Comments

The N C U A received 13 comments
on the proposed rule, 11 of which

provided relevant substantive feedback.

Comments were received from individuals,
a F I C U, state credit union leagues

and national trade associations,
a law firm, and an association of

state credit union supervisors.

All 11 substantive comments supported
the proposed rule, with a number

providing additional feedback
regarding potential revisions or

other matters to contemplate further.

As

70 For example, if all the beneficiaries’
interests were equal, coverage would

be $250,000 x (7 beneficiaries)

=
$1,750,000.

This amount is the maximum coverage
possible under the current rule.

Conversely, if a few beneficiaries
had a large interest in the trust, the

total of all beneficiaries’ interests
(limited to the SMSIA per beneficiary)

could be less than $1,250,000, in which
case the current rule would provide

a minimum of $1,250,000 in coverage.

Depending upon the precise allocation of
interests, the amount of coverage provided

would fall somewhere within this range.

described below, common issues
commenters spoke to were parity with

FDIC coverage, the merger of the trust
account categories, the proposed trust

calculation, and membership issues.

Parity with FDIC Coverage

Six commenters addressed the importance
of parity with FDIC coverage.

One deemed it crucial for
maintaining consistency and

fairness in the financial system.

Another opined that if FDIC coverage
is easier to understand or provides

additional coverage, it could
result in funds being moved to banks

and could introduce reputational
risk to the credit union system.

A commenter noted that while parity is
not reason enough to adopt a change, they

recognized its importance, particularly
because the public tends to be more

familiar with the FDIC than the N C U A.

As stated in both the proposed rule
and this final rule, ensuring parity

between the share insurance and deposit
insurance regimes is an important

basis for the N C U A making these
changes to the trust account rules.

Effects of the Changes on
Understanding of the Trust Rules

Commenters universally believed
the proposed amendments would

make insurance coverage for trust
accounts easier to understand.

One commenter said trust accounts are
already more complex than individual share

accounts, and the current rules increase
the likelihood of misunderstanding

coverage by adding complexity with
different rules and calculation methods

due to the type of trust, number
of beneficiaries, or other factors.

A national trade association said
its member F I C Us have reported the

current system, with distinct rules for
revocable and irrevocable trusts, has

caused significant confusion and led
to a high volume of complex inquiries.

The association believed the proposal
will offer clear and straightforward

guidance for F I C Us, their
employees, and their accountholders.

One commenter emphasized that
making share insurance coverage

easier to understand is important
because the public is generally less

familiar with the N C U A than the FDIC.

The commenter supported changes to
enhance visibility or, at a minimum,

to make it easier for a consumer
to understand the similarities

between FDIC and N C U A coverage.

The Board appreciates commenters’
confirmation that the changes will

make share insurance for trust
accounts easier to understand.

In the proposal, the Board also stated
it believes that under the proposal

accountholders generally would have
the information necessary to readily

calculate share insurance coverage
for their trust accounts, better

allowing them to understand insurance
coverage for their trust accounts.

However, the Board also asked
if there were instances where an

accountholder would not likely
have the necessary information.

Two commenters cited instances where
accountholders may lack the necessary

information to calculate share
insurance coverage under the proposal.

The first cited an accountholder whose
trust is not readily accessible, such as

if it is old and maintained by a third
party; this commenter suggested the N C U

A apprise accountholders of the rule and
remind them to find necessary documents.

The second said complex trust structures
or changes in beneficiaries could

cause a lack of necessary information,
particularly if the accountholder does not

have immediate access to updated details.

The commenter believed this could
make determining the beneficiaries

challenging, particularly in trusts
involving multiple generations or

those set up for estate planning.

The Board agrees with commenters that
fact-specific circumstances related

to individual accountholders’ trust
accounts may result in individual

situations where an accountholder lacks
the necessary information to readily

calculate their share insurance coverage.

However, the situations described, and
others like them, relate to complexities

in accountholders’ individual trust
arrangements that would be difF I C

Ult or impossible to ameliorate in
regulations governing share insurance.

Instead, it is up to accountholders and
those maintaining these trusts to ensure

their understanding of them,
so they can apply the share

insurance regulations to them in

evaluating their share insurance coverage.

The Board agrees with the commenter
that requested that the N C U A apprise

accountholders of the rule changes and
remind them to locate necessary documents.

The N C U A will be providing
publicly available resources

to notify accountholders of the
rule changes and explain them.

In doing so, the N C U A will
also reiterate the importance of

understanding trust arrangements and
maintaining necessary trust documents.

Merger of the Trust Categories

Seven commenters specifically
supported merging the revocable and

irrevocable trust account categories.

Commenters believed this would
reduce confusion, minimize the

number of questions to the N C U
A, reduce regulatory burden, and

improve operational processes.

One national trade association said
its member F I C Us did not anticipate

the merger would result in reduced
insurance coverage in practice.

However, they asked the N C U
A to track any such outcomes in

liquidations and suggested revisiting
the rule if stakeholder input or

liquidations show reduced coverage.

The Board agrees the merger of the trust
categories should simplify insurance

coverage of trust accounts, reduce
confusion, and alleviate burden on F I

C Us, accountholders, and the N C U A.

While the Board appreciates the
suggestion to track outcomes in

liquidations where the merger of the
trust categories causes a reduction

in insurance coverage, it declines to
create a formal process for doing so.

Simultaneously calculating insurance
coverage under the current and new

trust rules would negate many of the
efficiency and simplification benefits

the changes are intended to provide.

While there will not be a formal mechanism
for tracking such results, should the

agency become aware of the trust account
changes creating an unanticipated level

of decreased share insurance coverage,
either during evaluation of liquidations

or through public input, the Board will
consider whether additional changes

are needed, in consultation with the

FDIC.

Methodology for Calculating Trust Coverage

Six commenters specifically
supported the proposed method for

calculating trust account coverage.

Commenters believed the more
straightforward uniform method would

enhance transparency, as well as F
I C U and member understanding; make

it easier to inform members of their
coverage; provide consistency with FDIC

coverage; and benefit from F I C Us and
members being already familiar with it.

One national trade association said
its member F I C Us did not think the

$1,250,000-per-grantor cap was too
low, as the vast majority of accounts

are well below that level, but did
ask the N C U A to track liquidations

to ensure the cap is not too low.

Additionally, one commenter suggested
clarifying in the final rule that a trust

with more than one grantor — such as a
husband and wife — would have maximum

coverage of $1,250,000 per grantor.

The Board agrees with commenters
that the calculation method should

provide the described benefits.

The Board also agrees the
$1,250,000-per-grantor cap is

unlikely to be too low.71 However,
as the commenter requested, the

agency does plan to continue to track
uninsured amounts in liquidations,

if any, and can explore further
changes should it become warranted.

Finally, the Board believes the
proposed rule was clear that a single

grantor is eligible for a maximum of
$1,250,000 for all their trust interests.

However, it reiterates
that is the case here.

In other words, where a husband and wife
maintained one account at a F I C U, a

co-owned revocable trust account with five
named eligible beneficiaries, the account

would be eligible for up to $1,250,000
per grantor, for a total of $2,500,000.

Examples of Trust Account Coverage

71 See Average Inheritance: How
Much Are Retirees Leaving to Heirs?

| Boldin (stating that the median
size of a trust fund is around

$285,000), citing the U.S.

Federal Reserve’s Survey of
Consumer Finances (SCF),” Nov.

2023.

One commenter encouraged the N C U
A to maintain communications with

F I C Us to ensure its examples
sufficiently cover ownership

structures implemented by members.

The Board agrees the N C U A should
communicate with F I C Us about this

issue and the agency will do so.

Effects on Call Report Filings

One commenter was concerned that
reporting of insured shares on

the Call Report is inaccurate.

The commenter said F I C U computer
systems tend not to code trust

accounts correctly for reporting
insured shares, causing them to

go unreported as insured shares or
to be missing some beneficiaries.

The commenter said many F I C Us do
not include beneficiaries in their

computer systems and only maintain that
data in paper records, which excludes

many beneficiaries that would be
included in reporting insured shares.

The commenter believed it might
be more accurate to take total

outstanding shares and apply a
factor to compute insured shares.

While outside the scope of
this rulemaking, this concern

will be evaluated by staff.

Effects on Other Types of Accounts

In the proposal, the N C U A asked
if there are types of trusts not

described in the proposal whose funds
maintained in F I C U accounts would

be affected by the proposed changes.

One commenter said the proposal might
not fully address trusts like charitable

remainder trusts or special needs trusts,
noting they have unique characteristics

that could affect insurance coverage.

The commenter also said trusts
operating under state-specific laws

or provisions might have aspects
not contemplated in the rule,

necessitating a broader consideration.

As the commenter noted,
many trusts operate under

state-specific laws, which can vary.

As such, the share insurance
regulations could not fully

accommodate each and every type of

trust.

With regard to special needs
trusts and charitable remainder

trusts, coverage will depend

upon the exact details of each trust
arrangement, including whether the

trust names eligible beneficiaries.

Comments Addressing Other
Changes to the Trust Rules

Two commenters supported the proposal
to eliminate certain requirements

in the current trust account rules
as a pragmatic step towards reducing

unnecessary regulatory burdens,
leading to more efficient operations

and improved customer experience.

One commenter supported the proposed
removal of the appendix to part 745 in

favor of updates to N C U A guidance.

The commenter believed this would
make it easier for members to

understand share insurance coverage.

Continued Application of the
Current Rules to Existing Accounts

or a Delayed Effective Date

In the proposal, the Board noted
it prefers a delayed effective date

for the trust account changes over
continuing the coverage under current

rules for accounts existing at the
time the final rule goes into effect.

This situation was referred to as
“grandfathering” accounts under

the current rules in the proposal.

It is referred to as “legacy
coverage” in this final rule.

The proposal reasoned that providing both
legacy coverage for existing accounts and

separate coverage under the new rules for
new accounts would result in significantly

greater complexity for the period when
two sets of rules could apply to accounts

— especially in conducting liquidations.

The Board’s belief was and remains
that a delayed implementation

date allows stakeholders to make
necessary adjustments for the new

rules, without the complications
of two sets of rules coexisting.

In recognition that there could be
instances that may not be easily

restructured without adverse
consequences to the accountholder, such

as trusts holding share certificates
or other account relationships, the

proposal asked whether there are fact
patterns where legacy coverage for

existing accounts may be appropriate.

The proposal also asked if this

approach would be appropriate with
respect to the proposed rule’s

coverage limit of $1,250,000 per
F I C U for an accountholder’s

funds held in trust accounts.

Three commenters supported some form of
legacy coverage for existing accounts.

Two urged providing legacy coverage
at current levels for existing trust

accounts, such as if a member is the
grantor of both a revocable and an

irrevocable trust at the same F I C U.

One of these commenters argued that
consumers with open accounts expect to

maintain their current coverage, providing
legacy coverage for existing accounts

should not increase loss risk to the
Share Insurance Fund relative to current

policy, and a reduction in coverage
represents a reputational risk to N C U A

share insurance that could reduce public
confidence in the credit union system.

The other said that providing legacy
coverage for existing accounts may

increase complexity in liquidations but
believed it may be the best solution to

avoid adverse consequences to members.

A third commenter said this legacy
coverage may be appropriate in

certain scenarios to protect members,
such as in trusts with long-term

investments like share certificates
where restructuring could lead to

financial losses, or in complex estate
planning trusts requiring significant

legal and administrative changes.

Four commenters supported
a delayed effective date.

One said that if the N C U A avoids
providing legacy coverage for existing

accounts, it should adopt an appropriately
delayed implementation that recognizes

the potential hardships and allows
stakeholders to make necessary changes.

Another believed that even with legacy
coverage for existing accounts, a delayed

implementation date would be essential for
F I C Us to review trust relationships and

notify any negatively affected members.

A third opposed providing legacy
coverage for existing accounts,

reasoning the intricacies
involved could present challenges.

The commenter also stated, “concerns
arise regarding the potential limitations

of studying credit unions, as these
may not fully capture the dynamics

of larger credit unions, potentially
leading to adverse effects on

the relationships between
[m]embers and credit unions.”

The Board has strongly considered
the comments received and the

effects the new trust account
rules will have on accountholders.

The Board continues to believe providing
legacy coverage for existing accounts

poses complications and burdens to F
I C Us, accountholders, and the N C U

A that make such a system unworkable.

The Board believes that by providing
a substantially delayed effective date

that is in excess of two years, F I
C Us and their accountholders should

have enough time to make any needed
changes to their accounts to ensure

adequate share insurance coverage.

Further, the Board remains doubtful
the changes will result in reduced

coverage in most instances.72
Providing a delay in effect for the

changes that matches the one the
FDIC provided to insured depository

institutions and their accountholders
should provide both F I C Us and their

accountholders with sufficient time
to complete any necessary adjustments.

Membership

Several commenters addressed
the membership requirements

for trust accounts.

One commenter advocated simplifying
membership requirements to establish

a more straightforward approach with
the goal of redefining the criteria

determining the eligibility of
individuals or entities for share

insurance coverage, especially
in the context of trust accounts.

One commenter said membership should
be satisfied for trust accounts if at

least one member is on the account.

One commenter expressed support for
the N C U A’s efforts to simplify share

insurance coverage but believed that
meeting the agency’s goals of providing

clarity to F I C Us and members and
of providing parity with the FDIC’s

treatment of trust accounts required
clarifying membership requirements for

two types of accounts: (1) revocable
trust accounts where not all settlors

are members; and (2) irrevocable trust
accounts where no settlors are members.

72 See footnote 71.

On revocable trust accounts where
not all settlors are members, the

commenter believed the N C U A
should provide coverage to nonmember

co-owners of a revocable trust account.

The commenter correctly noted the N
C U A’s position has long been that

joint accounts where there is a right
of survivorship, which do not have

beneficiaries, qualify for share insurance
for interests of both depositors even

where there is a nonmember co-owner;
whereas a nonmember co- owner’s

interest in a revocable trust account,
such as a payable-on-death account,

is not eligible for share insurance.

The commenter believed the addition of
a payable-on-death beneficiary should

not defeat the extension of share
insurance to a nonmember co-owner.

The commenter also said this position
is not explicitly contained in the

regulations and is only documented in
the N C U A’s Share Insurance Estimator

FAQ, which is not legally binding.

The commenter emphasized that the
FDIC clearly delineates that all

payable-on-death beneficiaries
are treated the same for insurance

purposes, and the commenter believed
the divergence from FDIC regulations is

contrary to the N C U A’s parity goal.

The commenter concluded the proposed
rule provides an opportunity to provide

clear instructions for calculating
coverage for joint accounts with

payable-on-death beneficiaries or
any other revocable trust account

with one or more nonmember settlors.

To clarify, the N C U A’s longstanding
position is that nonmembers may be

joint owners of a joint account with
a right of survivorship (an account

with no beneficiaries) and have
an insurable interest if one joint

owner of the account is a member.

This position is based on a specific
statutory provision that allows for

nonmembers to be co-owners with a
member if the account is held with

a right of survivorship.73 In other
words, the N C U A provides share

insurance coverage to nonmember owners
of joint accounts (an account with no

beneficiaries) where there is a right
of survivorship based upon a statutory

exception to the normal limitation

that the N C U A only
provides coverage to members.

This coverage for nonmember owners
of joint accounts with a right of

survivorship (an account with no
beneficiaries) is expressly provided

for in the N C U A’s regulations.74

Conversely, the N C U A has not
recognized a statutory exception for

providing share insurance coverage to
nonmember co-owners of revocable trust

accounts, which are different from
joint accounts with no beneficiaries

under the share insurance regulations.

Unlike the coverage for nonmember joint
account owners expressly provided for

in the N C U A’s regulations, the N C
U A’s regulations do not contain any

provision related to nonmember co-
owners of revocable trust accounts that

negates the normal limitation that share
insurance coverage is provided to members.

Instead, the agency’s longstanding
position has been that co- owned

revocable trust accounts are different
from joint accounts held with a

right of survivorship; and as such,
they require co-owners (settlors of

the trust) to be members to receive
insurance coverage for their interests

in the revocable trust account.

It is also worth noting that while
parity with FDIC coverage is an

important aim, the N C U A’s coverage
is generally limited to member accounts.

Because the FDIC coverage is not so
limited, instances will inevitably

occur where coverage is not parallel.

In addressing irrevocable trust accounts
where no settlors are members, the

commenter erroneously concluded the N C U
A’s position as to membership requirements

for irrevocable trust accounts would
pose an issue under the proposal.

The commenter correctly noted that
under the current rules, irrevocable

trust accounts can be established as
long as either all settlors or all

beneficiaries are members of the F I C U.

The commenter concluded that because
the proposal would calculate coverage

for irrevocable and revocable trusts in
aggregate to $1.25 million per grantor,

the N C U A would not provide coverage
to an account where the settlors were not

members, but all
beneficiaries were members.

This conclusion is incorrect.

While coverage would be limited to $1.25
million in aggregate for a grantor,

any interest related to an irrevocable
trust where all the beneficiaries were

members would still be insured based on
the beneficiaries’ membership status.

The limitation would only be related
to interests for one grantor being

limited to $1.25 million, irrespective
of the grantor’s lack of membership.

Other Comments

Two commenters agreed the changes
should help facilitate the prompt

payment of share insurance.

One commenter noted that, while N C U
A Board Members will often accurately

say no member has ever lost one
penny of funds insured by the Share

Insurance Fund, members have lost
funds they thought were insured due to

misunderstanding the coverage rules.

As noted, the Board’s goal with this
rulemaking is to reduce this confusion.

In response to the N C U A’s request
for input regarding empirical

information the agency should consider
to help it understand the effects

of its proposed rule, a commenter
provided an article detailing an

empirical study of the jurisdictional
competition for trust funds.

Of most relevance, the article notes
the difF I C Ulty of empirically

studying inter vivos (living) trusts
due to various factors, including these

trusts’ private nature and complexity.

III.

Amendments to Mortgage
Servicing Account Rule

A.

Policy Objectives

The N C U A’s regulations governing
share insurance coverage include specific

rules on accounts maintained at F I C
Us by mortgage servicers.75 These rules

are intended to be easy to understand
and apply in determining the amount of

share insurance coverage for a mortgage

servicer’s account (MSA).

The N C U A generally strives
to maintain parity with FDIC’s

regulations in furtherance of this aim.

The N C U A proposed an amendment
to its rules governing insurance

coverage for accounts maintained
at F I C Us by mortgage servicers

that consist of mortgagors’
principal and interest payments.

The proposed change would mirror a
change made by the FDIC in early 2022

that became effective in April 2024, and
which was intended to address a servicing

arrangement that is not addressed in
the current rules.76 Specifically, some

servicing arrangements may permit or
require servicers to advance their own

funds to the lenders when mortgagors
are delinquent in making principal and

interest payments, and servicers might
commingle such advances in the MSA

with principal and interest payments
collected directly from mortgagors.

The FDIC reasoned that the factors that
motivated the FDIC to establish its

current rules for MSAs, which the N C U
A also adopted and are further described

below, weigh in favor of treating funds
advanced by a mortgage servicer to

satisfy mortgagors’ principal and interest
obligations to the lender as if such funds

were collected directly from borrowers.

The FDIC also noted it seeks
to avoid uncertainty concerning

the extent of deposit insurance
coverage for such accounts.

The proposed rule noted the N C U A
concurs with the importance of avoiding

uncertainty regarding the extent of
insurance coverage and believes that an

important aspect of avoiding uncertainty
is maintaining parity between the share

insurance and deposit insurance regimes.

After reviewing the comments
received on this proposed

change, the Board has decided to
finalize the change as proposed.

As discussed further below, the
Board has also decided to make

this change effective 30 days after
publication in the Federal Register.

B.

Background and Need for Rulemaking

76 87 FR 4455 (Jan.

28, 2022).

The N C U A’s rules governing coverage
for MSAs were last amended in 2008, which

corresponded to changes made by the FDIC.

More specifically, in 2008 the FDIC
recognized securitization methods and

vehicles for mortgages had become more
complex, exacerbating the difF I C Ulty

of determining the ownership of deposits
consisting of principal and interest

payments by mortgagors and extending
the time required to make a deposit

insurance determination for deposits of
a mortgage servicer in the event of an

insured depository institution’s (IDI’s)
failure.77 The FDIC expressed concern that

a lengthy insurance determination could
lead to continuous withdrawal of deposits

of principal and interest payments
from IDIs and unnecessarily reduce a

funding source for such institutions.

The FDIC therefore amended its rules
to provide coverage to lenders based on

each mortgagor’s payments of principal
and interest into the MSA, up to its

standard maximum deposit insurance amount
per mortgagor (currently $250,000).

The FDIC did not amend the rule for
coverage of tax and insurance payments,

which continued to be insured to each
mortgagor on a pass-through basis and

aggregated with any other deposits
maintained by each mortgagor at the

same IDI in the same right and capacity.

The N C U A agreed that this
treatment of principal and interest

payments provided greater and fairer
coverage for credit union members and

decided to apply the same approach
in its share insurance rules.78

Importantly, the 2008 amendments to the
rules for MSAs did not provide for the

fact that servicers may be required to
advance their own funds to make payments

of principal and interest on behalf of
delinquent borrowers to the lenders.

However, in its recent rulemaking
the FDIC identified that advancing

their own funds is required of
mortgage servicers in some instances.

For example, the FDIC noted
that some IDIs identified

challenges to implementing certain

77 See 73 FR 61658, 61658-59 (Oct.

17, 2008).

78 73 FR 62856, 62857 (Oct.

22, 2008).

recordkeeping requirements with respect
to MSA deposit balances because of

the way in which servicer advances
are accounted for and administered.79

The N C U A’s current rules, which
mirror the FDIC’s rules that were in

effect until April 1, 2024, provide
coverage for principal and interest

funds only to the extent “paid into the
account by the mortgagors”; they do not

provide coverage for funds paid into
the account from other sources, such

as the servicer’s own operating funds,
even if those funds satisfy mortgagors’

principal and interest payments.

As a result, advances are not provided
the same level of coverage as other

deposits in an MSA consisting of
principal and interest payments directly

from the borrower, which are insured
up to the SMSIA for each borrower.

Instead, the advances are aggregated
and insured to the servicer as

corporate funds for a total of $250,000.

In adopting changes to its rule in early
2022, the FDIC expressed concern that this

inconsistent treatment of principal and
interest amounts could result in financial

instability during times of stress, and
could further complicate the insurance

determination process, a result that is
inconsistent with their policy objective.

As noted in the proposal, the N C U A
shares these concerns and believes it

is important that parity is maintained
between the insurance regimes.

C.

Final Rule

The N C U A is finalizing the
rule as proposed with no changes.

The final rule will amend the rules
governing coverage for funds in MSAs

to provide parity with the FDIC’s
regulation and provide consistent share

insurance treatment for all MSA balances
held to satisfy principal and interest

obligations to a lender, regardless
of whether those funds are paid into

the account by borrowers or paid into
the account by another party (such as

the servicer) to satisfy a periodic

79 The FDIC noted that, to fulfill
their contractual obligations with

investors, covered IDIs maintain
mortgage principal and interest balances

at a pool level and remittances,
advances, advance reimbursements,

and excess funds applications that
affect pool-level balances are not

allocated back to individual borrowers.

obligation to remit principal
and interest due to the lender.

Under the final rule, accounts
maintained by a mortgage servicer in

an agency, custodial, or fiduciary
capacity, which consist of payments

of principal and interest, will be
insured for the cumulative balance

paid into the account to satisfy
principal and interest obligations to

the lender, whether paid directly by
the borrower or by another party, up to

the limit of the SMSIA per mortgagor.

Mortgage servicers’ advances of
principal and interest funds on behalf

of delinquent borrowers will therefore
be insured up to the SMSIA per mortgagor,

consistent with the coverage rules
for payments of principal and interest

collected directly from borrowers.

The composition of an MSA attributable
to principal and interest payments will

also include collections by a servicer,
such as foreclosure proceeds, that are

used to satisfy a borrower’s principal
and interest obligation to the lender.

In some cases, foreclosure proceeds may
not be paid directly by a mortgagor.

The current rule does not address whether
foreclosure collections represent payments

of principal and interest by a mortgagor.

Under the final rule, foreclosure proceeds
used to satisfy a borrower’s principal

and interest obligation will be insured up
to the limit of the SMSIA per mortgagor.

The final rule does not make any
changes to the share insurance

coverage provided for MSAs comprised
of payments from mortgagors of

taxes and insurance premiums.

Such aggregate escrow accounts are held
separately from the principal and interest

MSAs, and the funds therein are held for
the mortgagors until such time as tax

and insurance payments are disbursed by
the servicer on the borrower’s behalf.

Under the final rule, such funds
will continue to be insured based

on the ownership interest of each
mortgagor in the account and aggregated

with other funds maintained by
the mortgagor at the same F I C

U in the same capacity and right.

The Board is opting to make this change
effective 30 days after publication in the

Federal Register.

Given the change provides more
expansive coverage and should not impose

additional burden on F I C Us or
accountholders, the Board does not

see a reason to delay its effect.

D.

Discussion of Comments

Six commenters expressly
supported the proposed rule’s

changes to insurance of MSAs.

In terms of the benefits cited,
four commenters noted the importance

of parity with FDIC coverage.

Three cited the benefits of a standardized
approach and fair and equitable treatment.

Five noted the greater clarity
provided for F I C Us and members.

Two said the change represents improved
protection of the interests of all

parties, aligns with best practices,
and offers additional security.

One stressed the change simplifies
the complex landscape and enables

F I C Us to manage MSAs more
confidently and efficiently.

That commenter believed the change was
crucial for maintaining the integrity

and reliability of the MSA system, as
the change recognizes the practical

realities of servicing arrangements and
the various sources of funds that may be

used to satisfy borrowers’ obligations.

The commenter thought the inclusion
of foreclosure collections

particularly important, as the
current rule does not address it.

Two commenters stated the change would
help promote financial stability.

One said the change would reduce
financial institutions’ counterparty risk

exposure, which also reduces liquidity
risk to the F I C U holding the MSAs.

Another said providing insurance
for these advanced funds supports

the mortgage market and broader
financial system’s stability.

One national trade association
reported its F I C U members expressed

initial concerns with increased
Share Insurance Fund costs due to

larger insured balances from covering
funds paid by mortgage servicers.

However, after members reviewed
the potential effect in greater

detail, they concluded any such
increase in cost would be nominal.

The commenter urged the N C U A
to monitor this change to ensure

it does not lead to an excessive
increase in Share Insurance Fund-

related liquidation costs.

The Board concurs that this change
should only nominally increase any

Share-Insurance-Fund
related liquidation costs.

However, the agency will
continue to monitor such costs.

Only one commenter addressed the N
C U A’s request regarding whether a

delayed effective date is necessary.

The commenter believed a delayed
effective date appropriate but had

no concern with an earlier date.

As discussed, the Board is opting to
make this change effective 30 days after

publication in the Federal Register.

The comments received do not give
the Board the impression that

commenters were opposed to the change
becoming effective without delay.

Further, given the change only
clarifies and expands share insurance

coverage, the N C U A does not
believe the change should impose any

burden on F I C Us or accountholders.

IV.

Recordkeeping Requirements

A.

Policy Objectives

The N C U A’s regulations governing
share insurance coverage include

general principles applicable in
determining insurance of accounts.80

Among these general principles are
provisions addressing recordkeeping.81

The N C U A intends for these
provisions to clearly articulate

the records the agency will look to
when evaluating insurance coverage.

As discussed in more detail below,
over time it has become apparent that

the recordkeeping provisions do not
clearly address all situations and may

be especially unclear as to accounts
maintained by an agent, custodian,

fiduciary, or other party on behalf of
a member or beneficial owner eligible to

maintain an insured account at a F I C U.

To better address these situations,
the N C U A proposed to amend

the recordkeeping requirements.

80 12 CFR 745.2.

81 12 CFR 745.2(c).

After reviewing the comments
received on this proposed

change, the Board has decided to
finalize the change as proposed.

As discussed further below, the
Board has also decided to make

this change effective 30 days after
publication in the Federal Register.

B.

Background and Need for Rulemaking

Section 745.2(c) of the N C U
A’s regulations addresses general

recordkeeping requirements.

Other recordkeeping requirements
applicable to specific account

types are addressed as needed in
the relevant sections of part 745.

Current § 745.2(c)(1) provides that, as
a general matter, the account records

of the F I C U shall be conclusive as
to the existence of any relationship

pursuant to which the funds in the
account are deposited and on which a

claim for insurance coverage is founded.

Examples would be trustee,
agent, custodian, or executor.

No claim for insurance based on such
a relationship will be recognized

in the absence of such disclosure.

Section 745.2(c)(2) provides that, if
the account records of a F I C U disclose

the existence of a relationship which may
provide a basis for additional insurance,

as required under § 745.2(c)(1), the
details of the relationship and the

interest of other parties in the account
must be ascertainable either from the

records of the F I C U or the records
of the member maintained in good faith

and in the regular course of business.

It is this provision that has raised
questions regarding accounts maintained

by an agent, fiduciary, or similar party.

The N C U A has received several questions
regarding whether records maintained

by an agent, fiduciary, or similar
third party on behalf of the member or

beneficial owner eligible to maintain
an insured account would qualify as

the “records of the member.” Due to
the frequency with which these agent or

fiduciary arrangements will involve a
party other than the F I C U or member

maintaining records on the F I C U’s or
member’s behalf, the N C U A proposed

to add language explicitly clarifying

that such records, when maintained
in good faith and in the regular

course of business, can be

looked to when evaluating the details of
the relationship and the interest of other

parties in the account at the F I C U.

C.

Final Rule

The N C U A is adopting the proposed
rule as proposed with no changes.

Section 745.3(a)(2) of the N C U A’s
current regulations provides that

when an account is held by an agent or
nominee, funds owned by a principal and

deposited in one or more accounts in
the name or names of agents or nominees

shall be added to any individual
account of the principal and insured

up to the SMSIA in the aggregate.

The N C U A will also generally look to
the principal or beneficial owner for

satisfying the membership requirement
or other eligibility to maintain

an insured account at the F I C U.

As such, records maintained by an agent or
nominee on behalf of the member principal

or beneficial owner may not clearly be
considered “records of the member” for the

purpose of ascertaining their interests in
the account under current § 745.2(c)(2).

The N C U A has previously issued a legal
opinion stating that where an agent or

custodian “has an agreement with the
beneficial owner/member to maintain

custody of the beneficial owner/member’s
records, [the] N C U A would consider

those records to be ‘records of the
member’ within the meaning of 12 C.F.R.

745(c)(2).”82 However, as the N C U A
acknowledged in the proposed rule, it

would be beneficial for the regulation
to more clearly address this situation

to allow the details of the relationship
and the interests of other parties in

the account to be ascertainable either
from the account records of the F I C

U or from records maintained, in good
faith and in the regular course of

business, by the member or by some person
who or entity that has undertaken to

maintain such records for the member.

82 N C U A Legal Op.

97-0909 (Feb.

6, 1998), available at https://www.N C
U A.gov/regulation-supervision/legal-

opinions/1997/pass-through-insurance.

Accordingly, the N C U A is
adopting this change as proposed.

This change will provide greater clarity,
particularly in the event of multi-tiered

fiduciary relationships, and would more
closely compare to language previously

adopted by the FDIC.83 Importantly,
the N C U A retains discretion to

determine when records are maintained
on behalf of a member, in good faith

and in the regular course of business.

Ultimately, the N C U A must be able
to establish ownership interests in the

account by following the chain of records
maintained by parties at each level

of the relationship from the account
records maintained at the F I C U.

Additionally, § 745.2(c)(3) of the current
regulations provides that the account

records of a F I C U in connection with a
trust account shall disclose the name of

both the settlor (grantor) and the trustee
of the trust and shall contain an account

signature card executed by the trustee.

This requirement goes beyond
the recordkeeping requirements

of § 745.2(c)(1) through (2)
and poses an unnecessary burden

on F I C Us and their members.

Further, the FDIC previously
eliminated a similar requirement.84

To eliminate unnecessary recordkeeping
complexity and provide parity with

the FDIC, the N C U A is eliminating
current § 745.2(c)(3), as was proposed.

Section 745.2(c)(4) states that
the interests of the co-owners of

a joint account shall be deemed
equal, unless otherwise stated on

the insured credit union’s records
in the case of a tenancy in common.

As proposed, the N C U A is not
making any substantive amendments to

this provision but is moving it to
§ 745.2(c)(3) given the elimination of

the current requirement in that section.

Finally, § 745.14(a)(2) notes that
interest on lawyers’ trust accounts

(IOLTAs) and other similar escrow
accounts are subject to the recordkeeping

requirements of § 745.2(c)(1) and (2).

In doing so, § 745.14(a)(2) provides
an example of how the details of the

relationship between the attorney or
escrow agent and their clients and

principals must be ascertainable from the

83 12 CFR 330.5(b)(2).

84 51 FR 21137 (June 11, 1986).

records of the F I C U or from records
maintained, in good faith and in

the regular course of business, by
the member attorney or member escrow

agent administering the account.

As was proposed, the final rule amends
this description to conform to the change

to § 745.2(c)(2) to explicitly state that
the records detailing the relationship

and the interest of other parties in the
account must be maintained, in good faith

and in the regular course of business,
by: (1) the F I C U; or (2) the member

attorney or member escrow agent, or a
person or entity acting on their behalf.

D.

Discussion of Comments

All seven commenters who addressed
the proposed recordkeeping requirement

changes supported the changes.

Two commenters stated requiring the
details of a relationship and the

interests of other parties in an
account to be ascertainable from

records maintained in good faith is
a sound practice, which should ensure

transparency and accountability.

One said the proposal would provide an
approach consistent with FDIC pass-through

deposit insurance expectations for various
types of “other similar escrow account”

that may exist, including sweep accounts.

One commenter noted many F I C
U members rely on trusted third

parties for recordkeeping as
part of their estate planning.

The commenter also believed this change
should reduce inquiries to the N C U A.

One commenter noted support for the
proposed removal of the requirement

that the account records of a F I C
U in connection with a trust account

shall disclose the name of both
the grantor and the trustee of the

trust and shall contain an account
signature card executed by the trustee.

The commenter agreed the
requirement poses an unnecessary

burden on F I C Us and members.

Four commenters said the change
provides F I C Us adequate

clarity as to the records the

N C U A will look to when evaluating
the details of account relationships

and the interests of other

parties in accounts
maintained at F I C Us.

One urged the Board to finalize
the change as proposed.

Another understood there to be only
limited confusion regarding the issue

but noted support for reduced burden
and enhanced usability of the rules.

In response to the proposal’s questions
on the subject, one commenter said

that, while the proposed change is a
significant step towards clarity and

provides essential guidance in complex
account management scenarios, there

may be alternative or additional steps
that could further align with the N C

U A’s policy objectives, including the
following: (1) adopting a definition of

“account records” similar to the FDIC’s
definition of “deposit account records” to

standardize the documentation framework,
ensure uniformity, and reduce ambiguity

in what constitutes necessary records;
(2) adopting specific detailed provisions

for multi-tiered fiduciary relationships
akin to those adopted by the FDIC, which

would help clarify the responsibilities
and recordkeeping obligations in complex

arrangements involving multiple parties;
and (3) adopting broader definitions and

illustrative examples for various account
relationships, such as joint accounts

or trusts with multiple beneficiaries.

The commenter said it is imperative to
ensure the recordkeeping regulations

remain relevant and effective as
technology advances and banking

evolves into a more digital domain.

The commenter suggested adding a
periodic review and update clause

for the recordkeeping requirements
to ensure regulations stay current

with the evolving banking practices.

The commenter believed this would
be especially pertinent for handling

international accounts or accounts
involved in complex transactions.

The Board will take these additional
recommendations into consideration as it

continues to evaluate ways to improve the
N C U A’s share insurance regulations.

The Board notes that N C U A staff
routinely review rules for effectiveness,

including through its annual review
of one- third of its regulations and

the Economic Growth and Regulatory
Paperwork Reduction Act (also known

as EGRPRA) process that the N C U A
voluntarily undertakes every ten years.

The proposal also requested comment
on whether the N C U A should consider

adoption of heighted recordkeeping
requirements, akin to those the FDIC

adopted in part 370 of its regulations,
to facilitate prompt payment of

insurance when large institutions fail.

Six commenters addressed the possibility.

None of the commenters supported
adoption of such requirements, but some

did provide recommendations if the N
C U A were to adopt a similar regime.

The Board will take this feedback
into consideration as it further

studies the possibility of
proposing similar requirements.

The proposed rule asked about
whether there was any reason

to delay the effective date
of the recordkeeping change.

This question intended to elicit
comments on whether a delayed effective

date for the proposed recordkeeping
requirements changes would allow more

flexibility when evaluating share
insurance coverage by clarifying that the

N C U A can look to records maintained
by a third party on a member’s behalf

if they are maintained in good faith
and in the regular course of business.

One commenter believed a delayed effective
date for those changes appropriate but

had no concern with an earlier date.

Another commenter seemingly interpreted
this question as asking about a delayed

effective date for potential N C U A
adoption of a regime similar to the

FDIC’s, as was asked about in the
previous question in the proposal,

rather than about a delayed effective
date for the proposed changes to

the recordkeeping requirements.

This commenter believed timing pivotal
and suggested the N C U A grant F I C Us

an extended period to comply because of
the intricacies of compliance, especially

in terms of recordkeeping, and need
to effectively adapt F I C U processes

and systems without experiencing undue
burden.85 Given the proposed changes

would not increase burden on F I C
Us or members, but instead clarify

that the N C U A will look to more

85 This commenter specifically
responded to this question.

However, it seems likely the commenter
interpreted the question as asking

whether a delayed effective date
would be appropriate for adopting a

part 370 type regime, which was asked
about in the preceding question.

expansive records to evaluate parties’
interest in insured accounts, the

concerns the commenter raised do not
seem applicable to the changes proposed.

As discussed, the Board is opting to
make this change effective 30 days after

publication in the Federal Register.

The comments received do not give
the Board the impression that

commenters were opposed to the change
becoming effective without delay.

Further, given the change only clarifies
that the N C U A has additional

flexibility to look to additional
records to determine parties’ interests

in an account, the Board does not
believe that it will impose any

burden on F I C Us or their members.

The Board believes that clarifying
that the N C U A has this greater

discretion to look to additional
records will only provide benefit.

V.

Regulatory Procedures

A.

Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA)
generally requires that, in connection

with a final rulemaking, an agency
prepare and make available for public

comment a final regulatory flexibility
analysis that describes the effect

of the final rule on small entities.

A regulatory flexibility analysis is not
required, however, if the agency certifies

that the rule will not have a significant
economic effect on a substantial number of

small entities (defined for the purposes
of the RFA to include credit unions

with assets less than $100 million)86
and publishes its certification and

a short, explanatory statement in the
Federal Register together with the rule.

The Board fully considered the potential
economic effect of the changes made by

this final rule during its development.

As noted in the preamble, the
final rule simplifies the N C U A’s

current share insurance regulations
covering types of trust accounts.

It also provides more flexibility
on the coverage of MSAs.

Finally, it explicitly provides
for additional flexibility in

86 See 80 FR 57512 (Sept.

24, 2015).

what records the N C U A can look
to when determining the details of

account relationships and various
parties’ interests in the accounts.

In short, the Board believes the
principal consequence of the final rule

will be to streamline its administrative
procedures for insurance payouts on

trust accounts when F I C Us fail.

Though the final rule will require F I
C Us and their members to be familiar

with the new trust rules and the coverage
limits imposed on trust accounts, the

N C U A believes this will not impose
any new significant burden on F I C Us,

may ease some existing requirements,
and should reduce the complexity of

questions F I C Us receive from their
members on share insurance coverage.

Additionally, F I C Us and their members
are familiar with the new formula as it

is already applied to revocable trust
accounts with five or fewer beneficiaries.

The formula is also simpler to
understand and implement than the

previous rules governing revocable
trust accounts with six or more

beneficiaries and irrevocable trusts.

Ultimately, the changes to the
rule governing coverage of MSAs and

the changes to the recordkeeping
requirements should only provide greater

flexibility for coverage of these
accounts and should not cause any new

burden on F I C Us or their members.

Accordingly, the N C U A certifies
that this final rule will not have

a significant economic effect on a
substantial number of small F I C Us.

B.

Paperwork Reduction Act

The Paperwork Reduction Act of 1995
(PRA) applies to rulemakings in which an

agency by rule creates a new paperwork
burden on regulated entities or modifies

an existing burden.87 For the purposes
of the PRA, a paperwork burden may take

the form of a reporting, disclosure,

87 44 U.S.C.

3507(d).

or recordkeeping requirement, each
referred to as an information collection.

The N C U A may not conduct or
sponsor, and the respondent is not

required to respond to, an information
collection unless it displays a

currently valid Office of Management
and Budget (OMB) control number.

The final rule does not contain
information collection requirements that

require approval by OMB under the PRA.

The final rule will not create new or
modify any existing paperwork burdens.

Rather, the final rule will simplify
the share insurance regulations by

merging the revocable and irrevocable
trust account categories into one trust

account category and applying a simpler,
common calculation method to determine

insurance coverage for funds held in
revocable and irrevocable trust accounts.

The final rule will also provide
consistent share insurance treatment

for all MSA balances held to satisfy
principal and interest obligations to

a lender, regardless of whether those
funds are paid into the account by

borrowers or paid into the account by
another party (such as the servicer) to

satisfy a periodic obligation to remit
principal and interest due to the lender.

Finally, the final rule will explicitly
allow the N C U A, when undertaking

share insurance determinations, to
look to records held in the normal

course of business that are maintained
by parties other than a F I C U

and its members on their behalf.

As such, no PRA submissions to OMB will
be made with respect to this final rule.

a.

Executive Order 13132

Executive Order 13132 encourages
independent regulatory agencies

to consider the effect of their
actions on state and local interests.

The N C U A, an independent regulatory
agency as defined in 44 U.S.C.

3502(5), voluntarily complies
with the principles of the

Executive Order to adhere to
fundamental federalism principles.

This final rule will only impact the
N C U A’s regulations related to share

insurance coverage; it will not affect
state law related to trust accounts.

The final rule will also not alter
the N C U A’s relationship or

division of responsibilities with
state regulatory agencies or bodies

because the final rule will affect the

N C U A’s federal share insurance
determinations exclusively.

This final rule will not have a
substantial direct effect on the states,

on the connection between the national
government and the states, or on the

distribution of power and responsibilities
among the various levels of government.

The N C U A has determined that this
final rule does not constitute a policy

that has federalism implications for
the purposes of the Executive Order.

b.

Assessment of Federal Regulations
and Policies on Families

The N C U A has determined that this rule
will not affect family well-being within

the meaning of section 654 of the Treasury
and General Government Appropriations

Act, 1999, Public Law 105-277, 112 Stat.

2681 (1998).

Under this statute, if the agency
determines the final regulation may

negatively affect family well-being,
then the agency must provide an adequate

rationale for its implementation.

The N C U A has determined that the
implementation of this rule will not

negatively affect family well-being.

The N C U A believes that any negative
effect will be limited because the

trust changes may not affect many
accounts, and members or others

maintaining those accounts will have
time and notice to modify the accounts

before the final rule goes into effect.

Further, the MSA and recordkeeping changes
offset negative effects because they

will instead provide the N C U A more
flexibility to provide share insurance

coverage with respect to funds dedicated
to pay loans and other obligations

related to family homes and businesses.

If the N C U A ultimately finds that
the rule does have a negative effect as

the statute describes, it believes the
benefits that the preamble describes

in simplifying coverage and potentially
reducing costs for the N C U A and for F I

C Us would support implementing the rule.

c.

Small Business Regulatory Enforcement
Fairness Act (Congressional Review Act)

The Small Business Regulatory
Enforcement Fairness Act of 1996 (Pub.

L.

104–121) (SBREFA) generally provides
for congressional review of new agency

rules that qualify as “major” under
criteria specified in the Act.88

The N C U A’s analysis indicates
the rule falls short of qualifying

as “major” under SBREFA’s criteria.

As required by SBREFA, the N
C U A is submitting this final

rule and its economic impact
analysis to OMB for concurrence

on the “not major” determination.

The N C U A also will file all other
appropriate congressional reports.

List of Subjects in 12 CFR Part 745

Credit, Credit Unions, Share Insurance.

By the National Credit
Union Administration Board

on September 19, 2024.

Melane Conyers-Ausbrooks,
Secretary of the Board.

For the reasons discussed in the
preamble, the Board is amending

12 CFR part 745 as follows:

PART 745—SHARE INSURANCE COVERAGE

1.

The authority citation for part
745 continues to read as follows:

88 5 U.S.C.

801–804.

Authority: 12 U.S.C.

1752(5), 1757, 1765, 1766, 1781,
1782, 1787, 1789; title V, Pub.

L.

109-

351;120 Stat.

1966.

2.

The heading for part 745 is
revised to read as set forth above.

§ 745.0 [Amended]

3.

Amend § 745.0 by removing
the words “and appendix”.

4.

Revise § 745.1 to read as follows:

§ 745.1 Definitions.

For the purposes of this part:

Account or accounts mean share, share
certificate, or share draft accounts

(or their equivalent under state law, as
determined by the Board in the case of

insured state-chartered credit unions)
of a member (which includes other credit

unions, public units, and nonmembers
where permitted under the Act) in a credit

union of a type approved by the Board
which evidences money or its equivalent

received or held by a credit union in
the usual course of business and for

which it has given or is obligated to
give credit to the account of the member.

Member or members mean those persons
enumerated in the credit union’s

field of membership who have been
elected to membership in accordance

with the Act or state law in the case
of state-chartered credit unions.

It also includes those nonmembers
permitted under the Act to

maintain accounts in an insured
credit union, including nonmember

credit unions and nonmember public
units and political subdivisions.

Non-contingent interest means an
interest capable of determination without

evaluation of contingencies except
for those covered by the present worth

tables and rules of calculation for
their use set forth in § 20.2031-7 of the

Federal Estate Tax Regulations (26 CFR
20.2031-7) or any similar present worth

or life expectancy tables which may be
adopted by the Internal Revenue Service.

Political subdivision includes any
subdivision of a public unit, as defined

in paragraph (c) of this section, or any
principal department of such public unit,

(1) The creation of which subdivision
or department has been expressly

authorized by state statute;

(2) To which some functions of government
have been delegated by state statute; and

(3) To which funds have been
allocated by statute or ordinance

for its exclusive use and control.

It also includes drainage, irrigation,
navigation improvement, levee, sanitary,

school or power districts and bridge
or port authorities, and other special

districts created by state statute
or compacts between the states.

Excluded from the term are subordinate
or nonautonomous divisions, agencies,

or boards within principal departments.

Public unit means the United States,
any state of the United States, the

District of Columbia, the Commonwealth
of Puerto Rico, the Panama Canal Zone,

any territory or possession of the United
States, any county, municipality, or

political subdivision thereof, or any
Indian tribe as defined in section 3(c)

of the Indian Financing Act of 1974.

Standard maximum share insurance
amount referred to as the

“SMSIA” hereafter, means

$250,000 adjusted pursuant to
subparagraph (F) of section

11(a)(1) of the Federal Deposit

Insurance Act (12 U.S.C.

1821(a)(1)(F)).

5.

Effective [INSERT DATE 30 DAYS AFTER
DATE OF PUBLICATION IN THE FEDERAL

REGISTER], amend § 745.2 by revising
paragraph (c)(2) to read as follows:

§ 745.2 General principles applicable
in determining insurance of accounts.

* * * * *

(c)

* * *

(2) If the account records of an insured
credit union disclose the existence

of a relationship which may provide
a basis for additional insurance, the

details of the relationship and the
interest of other parties in the account

must be ascertainable either from the
records of the credit union or the

records of the member, maintained in
good faith and in the regular course of

business by the member or by some person
who or entity that has undertaken to

maintain such records for the member.

* * * * *

6.

Amend § 745.2 by:

a.

Revising paragraph (a);

b.

Removing paragraph (c)(3);

c.

Redesignating paragraph
(c)(4) as paragraph (c)(3);

d.

Removing paragraph (d); and

e.

Redesignating paragraphs (e) and
(f) as paragraphs (d) and (e).

The revision reads as follows:

§ 745.2 General principles applicable
in determining insurance of accounts.

(a) General.

This part provides for determination
by the Board of the amount

of members’ insured accounts.

The rules for determining the insurance
coverage of accounts maintained by

members in the same or different rights
and capacities in the same insured

credit union are set forth in the
following provisions of this part.

While the provisions
of this part govern in

determining share insurance coverage, to
the extent local law enters into a share

insurance determination, the local law
of the jurisdiction in which the insured

credit union’s principal office is located
will control over the local law of other

jurisdictions where the insured credit
union has offices or service facilities.

* * * * *

7.

Effective [INSERT DATE 30 DAYS AFTER
DATE OF PUBLICATION IN THE FEDERAL

REGISTER], amend § 745.3 by revising
paragraph (a)(3) to read as follows:

§ 745.3 Single ownership accounts.

(a)

* * *

(3) Mortgage servicing accounts.

Accounts maintained by a mortgage
servicer, in a custodial or other

fiduciary capacity, which are comprised of
payments of principal and interest, shall

be insured for the cumulative balance
paid into the account by mortgagors, or

in order to satisfy mortgagors’ principal
or interest obligations to the lender, up

to the limit of the SMSIA per mortgagor.

Accounts maintained by a mortgage
servicer, in a custodial or other

fiduciary capacity, which are comprised
of payments by mortgagors of taxes

and insurance premiums shall be added
together and insured in accordance

with paragraph (a)(2) of this
section for the ownership interest

of each mortgagor in such accounts.

* * * * *

8.

Revise § 745.4 to read as follows:

§ 745.4 Trust accounts.

(a) Scope and definitions.

This section governs coverage for
funds held in connection with informal

revocable trusts, formal revocable
trusts, and irrevocable trusts.

For the purposes of this section:

(1) Informal revocable trust means a
trust under which deposited funds pass

directly to one or more beneficiaries
upon the owner’s death without a written

trust agreement, commonly referred to as
a payable-on-death account, in-trust-for

account, or Totten trust account.

(2) Formal revocable trust means
a revocable trust established by a

written trust agreement under which
deposited funds pass to one or more

beneficiaries upon the grantor’s death.

(3) Irrevocable trust means an irrevocable
trust established by statute or a written

trust agreement, except as described
in paragraph (e) of this section.

(b) Calculation of coverage
— (1) General calculation.

Deposited trust funds are insured in
an amount up to the SMSIA multiplied

by the total number of beneficiaries
identified by each grantor, up to

a maximum of five beneficiaries.

(2) Aggregation for
purposes of insurance limit.

Deposited trust funds that pass from
the same grantor to beneficiaries are

aggregated for the purposes of determining
coverage under this section, regardless of

whether those funds are held in connection
with an informal revocable trust, formal

revocable trust, or irrevocable trust.

(3) Separate insurance coverage.

The share insurance coverage provided
under this section is separate from

coverage provided for other funds at
the same federally insured credit union.

(4) Equal allocation presumed.

Unless otherwise specified in the account
records of the federally insured credit

union, deposited funds held in connection
with a trust established by multiple

grantors are presumed to have been owned
or funded by the grantors in equal shares.

(c) Number of beneficiaries.

The total number of beneficiaries
for trust funds deposited under

paragraph (b) of this section
will be determined as follows:

(1) Eligible beneficiaries.

Subject to paragraph (c)(2) of
this section, beneficiaries include

natural persons, as well as charitable
organizations and other non-profit

entities recognized as such under the
Internal Revenue Code of 1986, as amended.

(2) Ineligible beneficiaries.

Beneficiaries do not include:

(i) The grantor of a trust; or

(ii) A person or entity that would
only obtain an interest in the

deposited funds if one or more
named beneficiaries are deceased.

(3) Future trust(s)
named as beneficiaries.

If a trust agreement provides that
trust funds will pass into one or

more new trusts upon the death of
the grantor(s) (“future trusts”), the

future trust(s) are not treated as
beneficiaries of the trust; rather, the

future trust(s) are viewed as mechanisms
for distributing trust funds, and the

beneficiaries are the natural persons
or organizations that shall receive the

trust funds through the future trusts.

(4) Informal trust account
payable to member’s formal trust.

If an informal revocable trust designates
the account owner’s formal trust as

its beneficiary, the informal revocable
trust account will be treated as if

titled in the name of the formal trust.

(d) Account records — (1)
Informal revocable trusts.

The beneficiaries of an informal
revocable trust must be specifically

named in the account records of
the federally insured credit union.

(2) Formal revocable trusts.

The title of a formal trust account
must include terminology sufficient to

identify the account as a trust account,
such as “family trust” or “living trust,”

or must otherwise be identified as a
testamentary trust in the account records

of the federally insured credit union.

If eligible beneficiaries of such
formal revocable trust are specifically

named in the account records of
the federally insured credit union,

the N C U A shall presume the
continued validity of the named

beneficiaries’ interest in the trust.

(e) Deposited funds excluded from
coverage under this section — (1)

Revocable trust co-owners

that are sole beneficiaries of a trust.

If the co-owners of an informal
or formal revocable trust

are the trust’s sole beneficiaries,
deposited funds held in connection

with the trust are treated as joint
ownership funds under § 745.8.

(2) Employee benefit plan deposits.

Deposited funds of employee benefit
plans, even if held in connection

with a trust, are treated as employee
benefit plan funds under § 745.9.

§ 745.9-1 [Removed]

9.

Remove § 745.9-1.

§ 745.9-2 [Redesignated as § 745.9]

10.

Redesignate § 745.9-2 as § 745.9.

§ 745.9 [Amended]

11.

Amend newly designated § 745.9 in
paragraph (a) by removing the phrase “, in

accordance with § 745.2 of this part”.

§ 745.13 [Amended]

12.

Amend § 745.13 by removing
the words “the appendix”.

13.

Effective [INSERT DATE 30 DAYS
AFTER DATE OF PUBLICATION IN THE

FEDERAL REGISTER], amend
§ 745.14 by revising paragraph

(a)(2) to read as follows:

§ 745.14 Interest on lawyers trust accounts
and other similar escrow accounts.

(a)

* * *
(2) Pass-through coverage will only
be available if the recordkeeping

requirements of § 745.2(c)(1) of this
part and the relationship disclosure

requirements of § 745.2(c)(2)
of this part are satisfied.

In the event those requirements
are satisfied, funds

attributable to each client and

principal will be insured on a
pass-through basis in whatever

right and capacity the client
or principal owns the funds.

For example, an IOLTA or other similar
escrow account must be titled as such,

and the underlying account records of the
insured credit union must sufficiently

indicate the existence of the relationship
on which a claim for insurance is founded.

The details of the relationship
between the attorney or escrow agent

and their clients and principals must
be ascertainable from the records

of the insured credit union or from
records maintained, in good faith and

in the regular course of business,
by the attorney or the escrow agent

administering the account, or by
some person who or entity that has

undertaken to maintain such records
for the attorney or escrow agent.

The N C U A will determine, in its
sole discretion, the sufficiency

of these records for an IOLTA
or other similar escrow account.

This concludes the N C U A Letter
to credit unions on Simplification

of Share Insurance Rules

If your Credit union could use assistance
with your exam, reach out to Mark Treichel

on LinkedIn, or at mark Treichel dot com.

This is Samantha Shares and
we Thank you for listening.