The State Bar of California recent answered several questions about the FDIC and clients' trust accounts. While their comments relate to California lawyers, their comments are instructive for all lawyers with clients' trust accounts. Caveat: Check your jurisdiction's rules and regulations, including those of both the bar and the banking associations.
In general, the insured limit for a single depositor is now $250,000. The title of the account and the social security number on the account are factors used to determine if we're dealing with one depositor with multiple accounts or multiple depositors.
If you i.) have an IOLTA account (not all clients' trust accounts are IOLTA), and ii) the title of your account discloses that it is a trust account for clients, and further iii) keep trust account records in good faith and in the regular course of business, clients funds are separately insured to the maximum amount permitted by FDIC. In other words, you don't have to split the account into smaller segments just because the entire trust account exceeds the cap. Where your client has an account in the same banking institution where you have your trust account, however, the combined amount of his/her funds and the funds allocated from your trust account will be considered for protection, not each account separately. Discussion with your clients about this now very sensitive issue is suggested.
Another caveat requiring the attorney to be careful in selecting the deposit institution: Although FDIC may cover the account, delays in retrieving funds may cause severe hardship for your client(s). One such hardship might be the inability to finance a merger, or close a transaction, etc. Though the principal amount will be recovered, economic consequences to your client may be severe...and there may be repercussions for attorneys by way of claims of negligent management of client money. Lawyers Beware!