Protecting Your Client’s Settlement Money Is Just As Important As The Settlement


In a wrongful death lawsuit, there is often a delay between the settlement and court approval of the settlement. In New York, settlements of wrongful death must be approved by the Supreme Court or Surrogate’s Court before the client can sign a release agreement and finalize the settlement. This delay between the settlement and court approval of the settlement often results in a significant loss of money for your client who is deprived of the interest that can be earned on the settlement funds. What do you do?

In a wrongful death action in New York, the Supreme Court can approve the legal fee and reimbursement of disbursements and then transfer the case to Surrogate’s Court for distribution and allocation of the remaining settlement funds to the distributees. The Order approving the legal fees and disbursements and authorizing the plaintiff to sign a general release should specify that the net proceeds of the settlement (the funds remaining after the payment of the legal fees and disbursements) be deposited in a fully insured interest-bearing trust account until the Surrogate’s Court decides who gets how much and orders the final distribution to the distributees of the Estate.

Deposit accounts are covered by the Federal Deposit Insurance Company (FDIC) up to $250,000, but the coverage from the FDIC is limited to $250,000. If the settlement funds that you deposit with a bank exceed $250,000, the portion of the funds exceeding $250,000, are not insured by the FDIC, and your client stands to lose the funds in excess of $250,000 in the event of a bank failure. What do you do to ensure that all of your client’s settlement funds are fully-insured in those cases where the deposit exceeds $250,000?

Some banks often additional protection for deposits beyond the $250,000 guarantee offered by the FDIC. For example, the deposits at Legacy Bank are covered by both the FDIC and the Depositors Insurance Fund (DIF). All deposits above the FDIC limit are insured in full by the Depositors Insurance Fund. The combination of FDIC and DIF insurance provides your clients with full deposit insurance on their settlement money that is deposited with this bank. No depositor has ever lost a penny in a bank insured by both the FDIC and the DIF. DIF insurance coverage requires no applications or special terms. Depositors automatically receive this added insurance benefit at no cost whenever they make a deposit to a new or existing account at a DIF member bank.

Keep this in mind when considering what banks to use when you are holding large amounts of money in interest-bearing accounts for the benefit of your clients, especially if the amount exceeds the $250,000 in FDIC insurance.