Tuesday, July 29, 2014

TRUST AND YOUR PROPERTY – IN WHOSE NAME SHOULD THE HOMEOWNERS POLICY BE WRITTEN?


Lynn A. Dean
Estate Planning Attorney
Today, many families are learning that with a proper estate plan, they can use revocable trusts to avoid probate and pass property to their heirs. Probate is the legal process that distributes personal assets after someone dies. It can take months and be costly - fees are set by law.  A Trust provides assurance that probate will be avoided, provided that the property has transferred to the Trust with a quitclaim deed, recorded with the county.   Trusts are becoming increasingly popular, and we are always on the look-out for changes in law or matters that affect the estate plan.  Most recently, a homeowner’s personal line policy became an issue and was brought to our attention.  


The client had his estate plan created many years ago and all his property, including out of state rental property, had been transferred to the name of his Trust.  His property management company did not inform him that the tenant’s renter’s insurance had lapsed. Friends of the renters were staying at the home.  They had more friends over for a party and one of them was bitten by a dog, fainted and taken to the ER by ambulance. The victim of the dog bite is now suing the people that own the dog, the management company and the owner of the property.  Since our client’s property is in a Trust, the insurance company won’t cover the owner because they say the owner and the Trust are separate entities.  This is not something insurance agencies have advertised well. Agents don’t typically question the homeowner about the title being in a Trust upon renewal. This issue may go unnoticed until a claim is made. 


THE BOTTOM LINE is you must contact your insurance company to see what their recommendations are and what they require from you to insure both Trust and individual(s). Each company is unique.  Most insurance companies prefer to have the policy in the name of an individual (someone in the trust) and then to add the living trust as an additional insured. This method is preferred because insurance companies do not want to provide worldwide liability for a trust. By having the trust as additional insured it only provides liability at the location insured. It covers the interests of both the individual(s) and the Trust. In addition, you have not taken away needed liability coverage from the individuals or extended overly broad coverage to the Trust.

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