Is Money in a Property Manager’s Trust Account Covered By FDIC Insurance?

As a property owner, it's important to have confidence that your funds are protected when you entrust them to a property management company. One critical consideration is whether your funds are covered by FDIC insurance in case the bank fails. In this blog post, we will explain in detail how FDIC insurance coverage works for property management trust accounts and what you can do to ensure that your funds are fully protected.

What is a Property Management Trust Account?

A property management trust account is a bank account that property management companies use to hold funds for their clients. The account is used to manage rental properties, collect rent, and pay expenses on behalf of property owners and tenants.

How FDIC Insurance Coverage Works for Property Management Trust Accounts

The Federal Deposit Insurance Corporation (FDIC) provides deposit insurance coverage up to $250,000 per depositor, per FDIC-insured bank. However, since property management trust accounts hold funds for multiple clients, the FDIC insurance coverage limit applies to each depositor separately.

For instance, suppose a property management company holds rental income and security deposits in a trust account, and the total balance is $300,000. In that case, each client's funds would be insured up to $250,000 separately. The remaining $50,000 would not be insured by the FDIC.

It's essential to note that the FDIC insurance coverage limit applies to all deposits that an individual or entity holds at a particular bank, including any deposits in checking accounts, savings accounts, money market deposit accounts, and certificates of deposit (CDs). Therefore, it's crucial to stay within the FDIC insurance coverage limit to protect your funds fully.

How to Ensure Your Funds are Protected

To ensure that your funds are protected, you must verify that your property management company's trust account meets the FDIC's requirements. The account must be held at an FDIC-insured institution, and the account title must clearly identify it as a trust account.

Conclusion

In conclusion, property owners who use property management companies must be aware of FDIC insurance coverage for property management trust accounts. It's essential to understand that each depositor is insured up to $250,000 per FDIC-insured bank, but property management trust accounts hold funds for multiple clients. To ensure that your funds are fully protected, you must verify that your property management company's trust account meets the FDIC's requirements and consider additional insurance coverage.