March 26, 1993

Dear Ms. ________:

This responds to your letter of March 8, 1993 to Chief Counsel James F. Carrig, wherein you requested advice as to the nature and extent of the collateral required by Probate Code Section 16225(a) to secure deposits by your client, ________ (“________”) as trustee, in excess of the limits of Federal Deposit Insurance. The short answer to your inquiry is that, if ________ relies upon the authority of Section 16225 in making an investment in a deposit account at a financial institution, I believe it will wish, as a matter of safety and soundness, to limit such deposit to the amount covered by Federal Deposit Insurance. I further believe however that this conclusion will have little or no effect upon ________’s activities, as explained herein.

At the outset, it is assumed that your inquiry relates only to deposits with institutions other than ________. Funds awaiting investment or distribution deposited or left with the trustee institution or its parent are required to be collateralized to the extent and in the manner set forth in Financial Code Section 1562. While it is often true that funds held in certificates of deposit are regarded as invested, as opposed to awaiting investment, your letter indicates that the funds in question are left in CD’s only until they can be used to purchase “other authorized investments”.

With respect to deposits with financial institutions other than ________ itself, it is first pointed out that Section 16225, and hence its restrictions, applies only to the power of a trustee to deposit trust funds. In the situation described in your letter, the deposits in question were made by the settlors of the trusts of which they are now assets and were subsequently transferred by them to ________ as trustee.

Even if, however, your question is extended to cover deposits made by ________ as trustee, it should be noted that Section 16225 is primarily a statutory grant of a trustee power and the effect of the restrictions it contains is only to limit the power it confers. Probate Code Section 16200 provides that the trustee has, in addition to powers granted by statute, the powers conferred by the trust instrument and powers to act in accordance with the standard of care imposed by statute. It is submitted that it is rare indeed that a trust instrument does not provide powers broad enough to permit the making of an interest bearing deposit independent of the restrictions which appear in the statute.

In the event that it becomes, nonetheless, necessary for ________ to rely on Section 16225, two problems arise which militate against making a deposit in excess of the insured limit. First, the statute does not provide any guidelines for the amount or nature of the collateral required. While it may very well be that a court would look to the provisions of Financial Code Section 1562 for guidance, no assurance can be given that the courts of law would so decide. Second, the purposes for which a California state bank may hypothecate assets to secure deposits are set forth in the Banking Law (see, for example, Financial Code Section 1203) and do not include pledges to secure deposits in this category.

To sum up, it is concluded that the restrictions in Probate Code Section 16225 would, in the rare instances in which they would become applicable, limit ________ ‘s fiduciary deposits in other financial institutions to the amount covered by Federal Deposit Insurance.

This opinion is limited to the facts presented and to the provisions of the Banking Law. No advice is offered, for example, as to whether making or maintaining a deposit in excess of federal deposit insurance coverage meets the standards of care imposed by the Trust Law or other statute or case law.

Please call me if you have any questions.

Very truly yours,

Superintendent of Banks



cc: State Banking Department, San Francisco
J. F. Carrig

bcc: P. A. Van Hoecke
A. F. Rutherford

Help us improve the DFPI website! Share your feedback.


Last updated: Jun 28, 2019 @ 11:34 am