A FDIC CHEAT SHEET - Leonetti & Associates LLC

PRIVATE WEALTH MANAGEMENT
www.leonettiassoc.com
LLC
Winter 2012
A FDIC CHEAT SHEET By Michael E. Leonetti, CFP ® , CFS, AIF ®
Michael Leonetti
CEO and Founder
Leonetti & Associates, LLC
FDIC insurance can be confusing.
Clients often ask about it,
especially since the financial
crisis of 2008. Here is a quick
breakdown of the current rules
affecting common types of
deposit accounts.
The Basics
The Federal Deposit Insurance
Corporation (FDIC) is an
independent agency of the U.S.
government.
The FDIC insures deposit accounts at most- but not all-banks
and savings associations. Account holders unsure whether
their financial institution is covered can find out by calling
1-877-ASK-FDIC. FDIC insurance covers checking accounts,
savings accounts, money market deposit accounts, certificates
of deposits and NOW accounts. It does not cover investments
such as mutual funds, annuities, stocks, bonds, and life
insurance policies.
Coverage Amounts
The default rule is that a depositor can have up to $250,000 in
fully insured funds at an insured bank; different branches of
one financial institution are considered the same bank for
FDIC purposes. However, a depositor may qualify for more
than the default amount of FDIC coverage at the same bank if
the depositor owns accounts in different ownership categories.
Single Ownership
An account owned by one person and with no beneficiaries is
insured for up to $250,000. If the same person owns multiple
accounts in the same manner at the same institution, the same
$250,000 maximum applies. Per the FDIC’s Your Insured
Deposits brochure, “[t]he FDIC adds together all single
accounts owned by the same person at the same bank and
insures the total up to $250,000.”
Joint Ownership
An account with more than one owner and no beneficiaries
is insured for up to $250,000 per owner. Per the FDIC’s
Your Insured Deposits brochure notes, “[e]ach co-owner’s
shares of every joint account that he or she owns at the
same insured bank are added together with his or her other
joint account shares at the same bank, and the total is
insured up to $250,000.
Revocable Trust
The FDIC recognizes two categories of revocable trust
accounts. Informal trust accounts are generally established
via bank signature cards, and include payable on death
(POD), in trust for, Totten trust, and as trustee for accounts.
Formal trust accounts are those established pursuant to
written trust agreements, such as living trust or family trust
documents. Coverage for both categories of revocable trust
accounts depends not only on the number of account owners,
but also on the number of trust beneficiaries. For revocable
trust accounts with five or fewer unique beneficiaries, each
trust owner’s share of the account is insured up to $250,000
for each trust beneficiary, regardless of the beneficiary’s
interest under the trust agreement.
For trust accounts with six or more unique beneficiaries, each
having an equal interest under the trust, each trust owner’s
share of the account is insured up to $250,000 for each trust
beneficiary. For trust accounts with six or more unique
beneficiaries, the beneficiaries not having equal interests under
the trust, each trust owner’s share of the account is generally
insured for the total of the beneficiaries’ actual interests in the
trust account (not to exceed $250,000 per beneficiary) or
$1,500,000, whichever is greater.
Irrevocable Trust
For irrevocable trust accounts, FDIC insurance mainly looks to
the trust’s beneficiary. In general, the FDIC adds together a
beneficiary’s shares of all the irrevocable trust funds on deposit
by the same settlor at a single bank and insures the beneficiary’s
portion of the deposited funds for up to $250,000. Ultimately
however, the exact amount of coverage depends heavily on the
terms and conditions of the trust document.
I hope you find the above insured deposit information useful.
As always, feel free to contact our office if you have any type
of question regarding a financial matter. We will do our best
to help.
W E B U I L D F I N A N C I A L S E C U R I T Y

REVIEW & OUTLOOK
By Craig T. Johnson, Portfolio Manager
As 2012 gets underway, there is little regret by
many in the financial markets that 2011 is
behind us. The past year offered an extremely
difficult environment for the financial markets.
Not only did the traditional institutional
investor struggle with the market’s volatility,
but the hedge fund industry could not find a lifeline either.
The rapid up and down movements of the market continually
left one trader after another on the wrong side of the market
as the next market direction got underway. Commodity
traders also experienced rapid turnaround, as areas of strength
quickly became areas of weakness. The fixed income market
was attractive, but the rapid decline in yields provided fixed
income buyers with more risk and less reward.
An abundance of reasons exist for the market’s extreme
volatility, but none stands out more than the financial debt
crisis that gripped the European Union throughout the year.
Greece seemed to carry much of the blame along with
Portugal, Italy, Ireland and Spain. The real problems came
to light when it was realized how intertwined the other
countries were and their degree of exposure to not just
Greece, but also to the other financially weak members of
the European Union. In addition, due to loans given to
European countries the major (and I am sure minor) banks in
Europe were even more exposed to the financial difficulties
than were the countries making up the European Union. An
unwanted story developed that began to reflect our own
financial crisis in 2007-2009, as it appeared the European
Union was headed for a similar fate. One item that made this
potential similarity very worrisome domestically was that U.S.
money market funds were holding commercial paper from the
exposed European banks, a fact that led to fears of a possible
breakdown of the money market fund industry that we nearly
experienced a couple of years ago. A rapid reduction by the
money market funds in those holdings appears to have
reduced that concern.
The global economy faced other difficulties in 2011. Cracks
began to show in what had previously been viewed as the
invincible Chinese economy: a continual battle throughout
the year with inflation, skyrocketing real estate prices, a
slowing economic growth rate and higher labor costs made
for a difficult year for China. Brazil felt the pinch from the
Chinese economy, as it had been a major exporter of raw
materials to China. India, which had also been on a strong
growth trajectory, experienced significant budget deficits,
high inflation and slowing growth.
On March 11, Japan was plagued by the Tohoku Earthquake
and the tragic impact of the tsunami that followed in its
wake. The disaster, in addition to the human and economic
toll, also caused significant damage to three nuclear reactors
and forced the evacuation of hundreds of thousands of
people from their homes. The overall impact to Japan, which
is the world’s third largest economy, is still being felt. The
World Bank has estimated the cost of the damage to be about
$235 billion, making it the most costly natural disaster in
world history.
In the United States, our economy also experienced slow
growth. Stronger growth is needed to reduce the number of
people that are out of work and to get the overall economy
back on a positive track. Home prices have continued to
decline, as high inventories and a lack of demand have hurt
new and existing home sales. Zero or near zero interest rates
created by the Federal Reserve to stabilize the banking
industry have left depositors in saving accounts, CDs and
money market funds with a miniscule return on their money.
The loss of interest income is similar to losing a breadwinner
in their family. Unfortunately, many of the people being
Continued on page 4...
Keep Up-To-Date With Portfolio Manager
Commentary E-Mails
Each Monday and once or twice during the week, Craig
Johnson publishes his view of the financial markets. The Weekly
Commentary provides market data for the financial markets.
In addition, it offers readers a review of the prior week and
outlines events that may shape stock market action in the
coming week.
A Market Update in the middle of the week by Fixed Income
Portfolio Manager Matt Varner will highlight the taxable and
tax exempt fixed income markets.
If you would like to have your name added to the distribution
list for these timely publications, kindly e-mail us at
info@leonettiassoc.com or call (847) 520-0999 to sign up.
L EONETTI & ASSOCIATES, LLC T OLL-FREE (800) 454-0999
The information in this newsletter is for informational purposes only and obtained from sources deemed reliable. Its accuracy or completeness is
not guaranteed and the giving of the same is not deemed a solicitation on our part with respect to the purchase or sale of any security or advisory
service. Leonetti & Associates, LLC views or opinions are as of a certain date and subject to change at any time without notice. We strongly
encourage readers to consult with legal or tax counsel with respect to any specific questions. Past performance is not a guarantee of future results.
All investments have inherent risks. Investors may experience a loss. Clients should contact us promptly if there are any changes in their financial
situation or investment objectives. Our current disclosure statement as set forth in our Form ADV is available for your review upon request. It
describes our business practices, conflicts of interest, advisory services and fees.
Circular 230 Notice: In accordance with Treasury Regulations which became applicable to all tax practitioners as of June 20, 2005, please note that
any tax advice given herein is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of (i) avoiding tax penalties
or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
W E B U I L D F I N A N C I A L S E C U R I T Y

CONTENTS MAY HAVE
SHIFTED DURING FLIGHT
By Sherwin M. Lesk, CFP ® , J.D., LL.M
I have not flown in many years; that changed recently when,
as did Billy Joel’s old friend in the song My Life, I bought a
ticket to the West Coast. (As an aside, it seems to me that
during my flightless years the airlines created an almost
limitless number of categories of travelers entitled to priority
boarding. I say “almost” in recognition of those few who,
along with yours truly, made up our plane’s Seating Group 4
and boarded last).
For the record, I note that my fellow passengers’ land
rush-like behavior in staking out the plane’s overhead bins
had not changed all that much since I last took to the
friendly skies. I bring up that observation not because I feel
the world needs a new kvetch what with Andy Rooney’s
passing, although I do. In fact, during my recent employee
review, I casually mentioned to our President that one of
my 2012 goals was to assume the mantle once filled by
that venerable 60 Minutes’ closer and become Leonetti’s
resident curmudgeon. Rather, I bring up that observation
because it provides a smooth segue for the rest of this essay.
But I digress.
Having safely arrived at my intended destination (thank you
very much) but with the plane still on the tarmac, one of the
flight attendants urged my fellow passengers and me to use
caution when opening the plane’s overhead bins because –
everybody now – “the bins’ contents may have shifted during
flight.” Good idea. Who would want a rolling carry-on
landing on their head or hitting them in the face, especially if
the projectile is not their luggage? As I sat there watching the
frenzied baggage retrieving and lining up in the aisle activity
in front of me – remember, I was part of Seating Group 4
and was in the plane’s last row – it struck me that what I
was observing was probably not all that dissimilar from the
Israelites hastily grabbing their belongings and making their
way out of Egypt albeit not through TSA checkpoints. But it
also struck me that using caution is a good idea when dealing
with items that may have shifted during life and not just
during flight.
You see, just as the overhead bins’ contents may shift during
flight, so too may the personal items that you literally and
figuratively carry as you make your way through life. Perhaps
your job situation changes for the worse or you sense that it
may soon do so. Maybe your once dual income household
becomes forced to make do on only one salary. Perhaps the
interest income on which you had counted to support part of
your lifestyle proves to be less than you had envisioned.
Maybe your health or that of a loved one deteriorates, leaving
you to face a mountain of unexpected medical bills. Maybe
your health care costs rise faster than you had anticipated, or
your long-term health care insurance premiums skyrocket
without warning. Perhaps you find yourself caring for an
aging parent, or an adult child struggling to make ends meet.
Maybe you long ago bought a prepaid college tuition contract
and, having read recent news accounts, now wonder whether
the contract will be there when needed. Perhaps your child
turns out to have one or more disabilities that leave you
facing years of unplanned-for expenses. Maybe a beloved
family pet becomes infirm, simultaneously tugging at your
heartstrings and your pocketbook in the process. Perhaps you
finally had wills and trusts drawn up and you wonder how
they have been impacted by recent law changes; Illinois
changed its estate tax laws January 2011, and changed them
again – for the better – December 2011. On the flip side,
perhaps good fortune has smiled upon you and you are
considering whether you should take advantage of what to
some appears to be a still weak real estate market, or some
other investment opportunity.
Continuing to blindly follow a financial plan – whether it be
one loosely formed in your head or formally committed to
writing – after experiencing some turbulence in your life is
just as dangerous, if not more so, as pulling the latch on the
bin housing your luggage after throwing caution to the wind.
Yes, having a suitcase land on your head can be painful and
embarrassing, but that pales in comparison to unexpectedly
running out of money on which to live, having to pull your
kids out of college, having to drop long-term care coverage
when you need it most, or being forced to sell the home you
cherish. When you get buffeted by wind currents mid-flight,
the captain turns on the fasten seat belt sign. When you get
buffeted by the unexpected as your life unfolds, steady
yourself. If things have changed for you, take the time
necessary to think carefully about whether and how those
changes may impact you now and in the future. You will not
get any frequent flyer miles for your effort, but you will get a
lot more mileage out of your financial plan.
W E B U I L D F I N A N C I A L S E C U R I T Y

Review & Outlook
continued from page 2
penalized the most are living on fixed incomes and rely on
interest earnings for their retirement.
The foregoing problems will continue as we enter 2012.
Moreover, the November elections for the President,
Senate and House along with local municipal races will have
an impact throughout the year. At this time of year when
so many try to predict the unknown, it is important to
remember that the financial markets are often never as bad
or good as predicted. This year will offer many challenges
and it will also offer many opportunities. It should be a
most interesting year.
NEWS & NOTES
Michael Leonetti was featured in the 2011 Best
Financial Advisers For Doctors supplement that
appeared in the November 2011 issue of Medical
Economics ® magazine.
Pardon our Dust! The Leonetti website has been
recently under construction. Look for the premier
of our new and improved website before the end
of February.
Leonetti & Associates, LLC was selected to be part of the MD Preferred Service Network.
Only select NAPFA-Registered Financial Advisors are chosen as premier providers to the
medical profession. We are proud to have earned the MD Preferred Financial Advisor Medallion,
and look forward to serving physicians and their families in our community.
LEONETTI &
ASSOCIATES, LLC
1130 LAKE COOK ROAD, SUITE 300
BUFFALO GROVE ILLINOIS 60089-1976
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