CUNA Regulatory Comment Call

July 1, 2003

NCUA’s Proposed Rule on Share Insurance
(Applies to federally-insured credit unions)


Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Associate General Counsel Mary Dunn at and to Assistant General Counsel Jeff Bloch at; or mail them to Mary and Jeff in c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004-2601. You may also contact us at 800-356-9655, ext. 6732, if you would like a copy of the rule.


NCUA has issued this proposed rule in an effort to update, clarify, and simplify the existing rules regarding share insurance. The rule will also maintain parity with the deposit insurance rules for banks and thrifts that are administered by the Federal Deposit Insurance Corporation (FDIC).


Revocable Trust Accounts

Revocable trust accounts are accounts that evidence the owner’s intent to have funds in the account transferred to named beneficiaries at the time of the owner’s death. Unlike more complicated trusts, revocable trusts can be created at the credit union merely be indicating that intent in the title of the account.

The proposed rule will clarify that the intent must be indicated in the title of the account by using commonly accepted terms such as, but not limited to, "in trust for," "as trustee for," or "payable on death to." Acronyms of these terms may also be used. However, beneficiaries must be specifically named in the share account records of the credit union.

NCUA’s share insurance rules currently provide that an owner’s funds in a revocable trust account are separately insured up to $100,000 for each "qualifying beneficiary," which includes the owner’s spouse, child, grandchild, parent, brother, or sister. All others are considered to be "nonqualifying beneficiaries." The interests of nonqualifying beneficiaries are considered to be the funds of the individual owner, which are aggregated with other funds of the owner, with the total being insured up to $100,000.

The proposed rule will clarify that it will treat the interests of the nonqualifying beneficiaries as funds of the owner even when the owner has not actually opened an individual account at the credit union. This is consistent with the FDIC deposit insurance rules for banks and thrifts.

Insurance Coverage Following the Death of a Member

The death of a member can significantly change the amount of share insurance coverage, especially if that member has an interest in joint accounts, joint revocable trust accounts, or has a spouse that has his or her own individual account. The proposed rule will grant a six-month grace period after the member’s death to allow survivors an opportunity to restructure the accounts in order to maximize insurance coverage. This means the insurance coverage will not change during this six-month period, unless the accounts are restructured during this time by those who are authorized to do so. The grace period will not apply if the result would be less insurance coverage during this time period.

Insurance Coverage After the Merger of Insured Credit Unions

Currently, a member’s share account at a credit union is separately insured from other accounts that the member may own at other credit unions. This coverage may be jeopardized when credit unions merge. For example, if a member has an individual account at two credit unions, he or she would have $100,000 coverage at each credit union, for a total of $200,000. If these credit unions merge, the total coverage would be reduced to $100,000.

Under the proposed rule, members in this situation will have a six-month grace period after a credit union merger. During this time, the member will have the coverage that he or she had prior to the merger. This will provide the member with time to restructure the accounts in order to maximize share insurance coverage.

The following will apply to share certificates during this six-month grace period:

Coverdell Education Savings Accounts

In May 2000, Education Individual Retirement Accounts were specified as insurable as irrevocable trust accounts under NCUA’s share insurance rules. These accounts have now been replaced with Coverdell Education Savings Accounts. The proposed rule will reflect this change.


  1. For revocable trust accounts, do you agree that naming the beneficiaries in the account title is the most effective way of establishing insurance coverage?

  2. Do you agree that for revocable trust accounts, the interests of nonqualifying beneficiaries should be treated as the owner’s funds for insurance coverage purposes even when the owner has not actually opened an individual account at the credit union?

  3. Do you believe that a six-month grace period is sufficient when insurance coverage changes as a result of the death of the owner or when credit unions merge?

  4. Other comments?

Eric Richard • General Counsel • (202) 508-6742 •
Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 •
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 •
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 •