BackerReport )
A newsletter addressing issues of concern to South Florida Community Associations February 2009
Articles In This Issue
  • Is Your Association's Money Safe in Your Bank?
  • Back Issues of BackerReport Available Online
  • 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.


    Is Your Association's Money Safe in Your Bank?

    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.

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