Trusts & Homeowner’s Insurance

Creating a living trust is a crucial step in protecting your home and family from probate costs, but many homeowners overlook the need to update their homeowner’s insurance. Without this update, you risk having an insurance claim denied, potentially leaving you to cover significant damages out of pocket. Here’s how to ensure your trust and insurance work together to safeguard your property.

The Hidden Risk of Trust Ownership

Transferring your home into a trust changes its legal ownership. Even if you still reside in the home as the trustee, the trust becomes the legal owner. For revocable trusts, this shift doesn’t impact taxes, but it can create issues with homeowner’s insurance.

Insurance companies base their policies on legal ownership. If your policy names you as the insured but your trust owns the home, the insurer might deny a claim. This misalignment has led to devastating losses for homeowners who discovered—too late—that their policy didn’t cover damage because it didn’t reflect the trust ownership.

Aligning Your Insurance with Your Trust

To avoid claim denials, notify your insurance provider immediately after transferring your home into a trust. Most insurers can update your policy by either listing the trust as an additional insured party or adding a trust endorsement.

When updating your policy, consider these key factors:

• Property Coverage: Ensure the replacement cost reflects current construction prices, which have risen significantly in recent years.
• Liability Protection: Confirm that both you and the trust are covered against liability claims in case of injuries on your property.
• Additional Structures: Verify coverage for detached garages, sheds, or other structures under the trust’s ownership.

Most insurance companies offer these updates at little to no additional cost, but failing to make these changes could result in financial disaster.

Common Mistakes That Put Your Property at Risk

Homeowners often discover gaps in their coverage only after disaster strikes. To avoid this, be mindful of these common pitfalls:

• Delayed Notification: Inform your insurer immediately after placing your home in a trust. Waiting months or years could mean paying for a policy that won’t protect you.
• Incorrect Trust Names: The name on your insurance policy must exactly match the legal name of your trust to avoid claim disputes.
• Lack of Regular Policy Reviews: Your insurance should be reviewed periodically to ensure it still meets your needs as home values and family circumstances change.
• Multiple Property Oversights: If you own multiple properties in trust, update each property’s insurance policy accordingly.

Comprehensive Protection Through Life & Legacy Planning

Avoiding these pitfalls is part of my Life & Legacy Planning process. Unlike generic estate plans that only provide documents, my approach ensures:

• A detailed inventory of your assets to identify risks;
• Ongoing reviews of both your estate plan and insurance policies to keep them aligned;
• Guidance on properly transferring assets to your trust;
• And much more to protect your home and loved ones.

We Help You Protect What Matters Most

As your Family's Lawyer for Life, I ensure that your Life & Legacy Plan is fully integrated with your insurance coverage. Through regular reviews and expert guidance, I help you avoid costly mistakes and maintain full protection for your family’s future.

Don’t wait until a claim is denied to realize there’s a gap in your protection. Schedule a Life & Legacy Planning? Session today to ensure your trust and insurance work seamlessly together.

Click here to schedule a complimentary 15-minute consultation:

https://abarlaw.com/get-started/