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Author: oldfool50 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Temporary cache of cash Date: 3/17/2000 2:18 PM
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Hello everyone. I've been lurking for a while on this board but really do enjoy the posts and information.
My situation is that I will be receiving a settlement of several hundred thousand dollars from a lawsuit in the next few days. I am concerned about where to put the money until I have decided how to Foolishly invest for retirement. I understand that bank accounts are insured by FDIC but only up to 100K. Do I have to visit several banks in my area and open up several accounts or is there an easier way?
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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 20190 of 74759
Subject: Re: Temporary cache of cash Date: 3/17/2000 2:24 PM
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Probably you have to visit several banks. However, note that the limit is per account. If you have a spouse or a child that you trust, you could have one account for yourself, one for you and spouse, one for you and child, etc. Or, you can have a savings account and a checking account. Then you can go to a different bank and play the same thing.
Of course you could use a money market fund; these are not insured by FDIC at all, but those mutual fund companies would turn themselves inside out if necessary to avoid the stigma of having "broken the buck"--had a share price other than $1 a share!
Congratulations on your windfall! Chris

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 20191 of 74759
Subject: Re: Temporary cache of cash Date: 3/17/2000 2:39 PM
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That's a, um, NICE problem to have.

There is a service that will take your money and spread it out among five affiliate banks; in this way you can have up to $500,000 FDIC-insured. It's listed at www.bankcd.com but you have to pay $10 for the contact info. I have no idea if it's legitimate or not.

Online brokers are insured to $100,000 cash by the SIPC, but most of them carry insurance above and beyond that. So you'd only have to worry about the case where both the broker and insurer fail.

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 20192 of 74759
Subject: Re: Temporary cache of cash Date: 3/17/2000 2:43 PM
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However, note that the limit is per account.

Crosenfield, where did you hear this? Every source I've heard states that the limit was per bank. So a savings & checking account wouldn't work.

However, the individual and joint accounts method would work. You also might be able to set up trust accounts: a trust for your wife with you as trustee, a trust for you with your wife as trustee. So you could have 5 accounts at 1 bank. (You, Wife, Joint, and 2 trusts)

But be *VERY* careful about transferring ownership of the funds to another person; there are bound to be tax issues involved.

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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 20193 of 74759
Subject: Re: Temporary cache of cash Date: 3/17/2000 2:55 PM
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My parents had multiple accounts in the same bank:
my father alone, my mother alone, joint account, father with me, mother with my sister. Their attorney and the bank president (friend of my father) said this kept all the accounts FDIC insured.
Personally, I'd go to the mutual fund money markets and not worry about FDIC insurance. No way is Fidelity going to let their money market fund "break the buck". Or Vanguard, T.Rowe Price, or on and on.
Chris

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 20194 of 74759
Subject: Re: Temporary cache of cash Date: 3/17/2000 3:28 PM
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Crosenfield: "Probably you have to visit several banks. However, note that the limit is per account. If you have a spouse or a child that you trust, you could have one account for yourself, one for you and spouse, one for you and child, etc. Or, you can have a savings account and a checking account. Then you can go to a different bank and play the same thing.
Of course you could use a money market fund; these are not insured by FDIC at all, but those mutual fund companies would turn themselves inside out if necessary to avoid the stigma of having "broken the buck"--had a share price other than $1 a share!

jrr7: "Crosenfield, where did you hear this? Every source I've heard states that the limit was per bank. So a savings & checking account wouldn't work.

However, the individual and joint accounts method would work. You also might be able to set up trust accounts: a trust for your wife with you as trustee, a trust for you with your wife as trustee. So you could have 5 accounts at 1 bank. (You, Wife, Joint, and 2 trusts)

But be *VERY* careful about transferring ownership of the funds to another person; there are bound to be tax issues involved."



Crosenfield: "My parents had multiple accounts in the same bank: my father alone, my mother alone, joint account, father with me, mother with my sister. Their attorney and the bank president (friend of my father) said this kept all the accounts FDIC insured."

The aggregation rules for FDIC insurance purposes are more than a little involved, and are not intuitive. It is most definitely not per account!!!! IOW, savings and checking account in same name are insured to 100k, not 200k.

I had occassion to learn in some level of detail the rules during the 1980's S&L crisis. I was fortunate to never have to explain to someone that they were not fully insured, but I had colleagues who had this "pleasure." Often the person had tried to follow the rules, and misunderstood, or had done what a bank employee suggested, but unfortunately, the bank employee was incorrect. That was years ago, so I do not remember the details, and the rules may have changed since then, but it merits some due diligence.

I also reiterate jrr7's alert about tax issues, both gift tax and icome tax. "criser" has posted several posts on the Tax board about potential problems and pitfalls with JTWROS accounts with anyone other than one's spouse. If you are interested, read tax posts numbered:

25880
26191
26235 (summary)
26624
28448.

To Crosenfield. In my mind, even the advice of the bank's president (while probably more knowledgeable than many tellers) would merit independent verification, but you also noted that your parents had also discussed the structure with your their attorney; if there were later a problem, they would at least have a malpractice claim against the attorney.

Just my $0.02. Regards, JAFO



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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 20195 of 74759
Subject: Re: Temporary cache of cash Date: 3/17/2000 3:38 PM
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Thanks for the information!
Fortunately, nothing bad happened to the bank my parents had their accounts in.
One of the nice features of the Fool is that whenever we have a misperception, somebody will make the correction real quick and we learn.
Chris

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Author: cutt Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 20210 of 74759
Subject: Re: Temporary cache of cash Date: 3/17/2000 7:56 PM
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You've got it right. 100,000 per account is insured,beyond that spread it about amoung your favorite banking institutions or other investments

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Author: oldfool50 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 20297 of 74759
Subject: Re: Temporary cache of cash Date: 3/20/2000 3:34 PM
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Quite a few good suggestions. Thank you all for your responses. I think I will place some of the money in the bank (a large one) and the rest in a moneymarket account since I plan on investing it anyway.
jmpII

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