BackerReport |
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BackerReport is a periodical addressing topics of interest to community associations in South Florida and is provided as a service to the clients and friends of Backer Law Firm, P.A. All articles are written by attorneys of Backer Law Firm, P.A. (unless otherwise indicated) and are protected by copyright. It is important to note that court decisions discussed in this newsletter are sometimes subject to change as the parties pursue further appeals or other remedies. The articles that discuss court cases in this newsletter are based upon the courts' decisions that are released when the newsletter was written.
The banking crisis that is facing the United
States has caused many to consider whether
the money they have deposited in their bank
is safe. Banks with names like Bank of
America, Citibank, Chase and Wells Fargo have
diminished in value roughly 335 billion
dollars since September 30, 2008 alone. Many
condominiums and homeowners associations have
operating accounts and reserves in a bank
which certainly may have been sound when the
money was deposited, but which, today, may be
questionable. The answer to the question of
whether an
Association that has more than $250,000.00 in
any one bank can assume that their money will
be safe if the bank fails is simple:
No. While there may be
some limited exceptions, in nearly all cases,
only
$250,000.00 held by an association in one
bank is insured by the Federal Deposit
Insurance Corporation; any more than the
limit may be lost if the bank fails.
The Federal Deposit Insurance Corporation
(FDIC) is an independent agency of the United
States government that protects against the
loss of insured deposits if an FDIC-insured
bank or savings association fails. FDIC
insurance covers funds in deposit accounts,
including checking and savings accounts,
money market deposit accounts and
certificates of deposit. FDIC insurance does
not cover other financial products and
services that insured banks may offer such as
stocks, bonds, mutual fund shares, life
insurance policies, annuities or municipal
securities. Currently, the maximum amount of
deposits is covered by FDIC Insurance is
$250,000.00. That limit will continue only
until December 31, 2009. On January 1, 2010,
the standard coverage limit will return to
$100,000.00 for all deposit categories except
IRAs and certain retirement accounts which
may continue to be insured up to $250,000.00
per owner. Whether or not the FDIC limits
change between now and January of next year
remains to be seen.
The safest way for an association to be
confident that its funds are safe is to keep
no more than $250,000.00 in any one bank.
Since the $250,000.00 limit drops back to
$100,000.00 after December 31, 2009, a
conservative depositor would not buy a CD for
more than $100,000.00 that matures after
December 31, 2009. Even though a better rate
of interest may be earned on larger CD's held
for longer terms, until the current banking
crisis ends, safety trumps return on investment.
Nationally, there are currently more than
8000 FDIC insured institutions. Fortunately
for South Florida communities,
there is no shortage of banks locally. A
search for
banks within Backer Law Firm's Boca Raton zip
code alone
revealed nineteen (19) different banks. At
the bottom of this article is a link to the
FDIC website where you can use their search
tool to find active banks in zip codes near
your community.
It is important when calculating the amount
of funds that your association keeps at a
particular bank to consider whether there are
other funds of the association that may be
held at that institution in accounts over
which the association has little or no
control. For example, those clients of
Backer law Firm for whom we perform
collection services are aware that many
owners who pay their delinquent assessments
pay them to the law firm's trust account.
Currently, Backer Law Firm maintains its
trust accounts at Bank of America. Since the
money which is held in the law firm's trust
account does not belong to the law firm, but,
rather, belongs to our individual clients,
the funds held in our trust account are not
used when this law firm calculates the amount
of funds that are covered by FDIC insurance
on the firm's total deposits at Bank of America.
Money that we are holding in our Bank of
America trust account on behalf of Happy Land
Condominium, for example, is the property of
Happy Land Condominium. That condo would need
consider those funds when doing its
calculation of whether it has more than
$250,000.00 in Bank of America. For
Backer Law Firm clients, if your community
also banks at Bank of America, it would be
prudent to periodically inquire of us concerning
the amount of money we hold in trust for
your community if your Bank of America
deposits are otherwise approaching the
$250,000.00 level. Similar inquiries should be
made by other associations to their lawyers
who may be holding money on their community's
behalf.
It is difficult to anticipate whether the
U.S. government will change the FDIC
insurance limits or otherwise provide
assurances to depositors in some other way.
If you watch the news, you have likely
observed that these are unique times and the
rules and conditions are changing daily.
We will continue to keep our clients advised
of changes. If you have questions concerning
the safety of your association's deposits you
should
contact your association's attorney.
You may obtain back issues of BackerReport online by going to our website www.BackerLawFirm.com. Click the image above. |
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