Residence Held in Trust
Transferring ownership of your home to a trust or some other similar entity has become a common estate planning technique. I'm told that it may provide protection from creditors, facilitate gifting, and/or provide for management of property owned by multiple individuals or families. I'll leave it to the attorneys and estate planners to explain all that.
It can also create an issue with your homeowners insurance that needs to be addressed.
Consider this scenario: Ownership of your home has been transferred into a trust. Chances are your homeowner policy still shows you as the insured on the policy. After the house burns down, the adjuster shows up with the big check to pay for rebuilding the home and asks to see the title. And, now we just might have a problem. It seems that the policy covers the residence premises of the insured, which is you. The problem is that you don't own the house; the trust owns it. Insurance companies tend not to pay people for houses they don't own.
OK, so we put the house in the name of the Trust. First of all, eligibility for homeowner policies generally is limited to people who own and occupy a home,(not an artificial entity like a trust). But let's assume you get the insurer to list the trust as the insured. The house burns down, the insurer pays the trust to rebuild the house, and we're ok, right? Not quite. The problem now is that the contents of the house probably do NOT belong to the trust. The insurer will have a problem paying you for your contents when you are not the insured on the policy.
By this point, you're probably saying, "so list the individuals AND the trust as insureds. That is the solution that would seem to resolve the problems and some insurance companies (but not all) have now written endorsements to their homeowner policies to accomplish that.
The points to take from this blog are:
1. Even if you have deeded your home to a trust, YOU should be listed as the named insured on your homeowner policy.
2. The trust should be added as an "additional insured" as respects their specific exposures.
3. Make sure you work with an insurance agent who understands the issues and has the insurance companies that can meet your need as the resident of a residence held in trust
It can also create an issue with your homeowners insurance that needs to be addressed.
Consider this scenario: Ownership of your home has been transferred into a trust. Chances are your homeowner policy still shows you as the insured on the policy. After the house burns down, the adjuster shows up with the big check to pay for rebuilding the home and asks to see the title. And, now we just might have a problem. It seems that the policy covers the residence premises of the insured, which is you. The problem is that you don't own the house; the trust owns it. Insurance companies tend not to pay people for houses they don't own.
OK, so we put the house in the name of the Trust. First of all, eligibility for homeowner policies generally is limited to people who own and occupy a home,(not an artificial entity like a trust). But let's assume you get the insurer to list the trust as the insured. The house burns down, the insurer pays the trust to rebuild the house, and we're ok, right? Not quite. The problem now is that the contents of the house probably do NOT belong to the trust. The insurer will have a problem paying you for your contents when you are not the insured on the policy.
By this point, you're probably saying, "so list the individuals AND the trust as insureds. That is the solution that would seem to resolve the problems and some insurance companies (but not all) have now written endorsements to their homeowner policies to accomplish that.
The points to take from this blog are:
1. Even if you have deeded your home to a trust, YOU should be listed as the named insured on your homeowner policy.
2. The trust should be added as an "additional insured" as respects their specific exposures.
3. Make sure you work with an insurance agent who understands the issues and has the insurance companies that can meet your need as the resident of a residence held in trust
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