Homes and Cars in Living Trusts – Check With Your Insurer

Asset Protection

Revocable living trusts are a common estate planning tool for avoiding probate. It is not uncommon for a home to be transferred to the trust for that purpose, as well as occasionally motor vehicles. I normally advise my clients to check with their insurance company to make sure their coverage will not be affected.

However, yesterday I had a conversation with a local independent insurance agent, who said that most of the insurance companies he works with will not insure homes and cars owned by revocable living trusts under standard personal policies. Instead, business policies must be used, which can be more expensive.

For homes owned by living trusts, the insurance companies require a business fire policy, and then for complete coverage a renter’s policy must be obtained.

If this causes the insurance costs to increase significantly, it may outweigh any benefit of avoiding probate.

Bottom line – check with your insurance agent or company before transferring a home or a car to your trust. If the new ownership will up your insurance costs, discuss the matter with your attorney to make sure the transfers are still worthwhile from a financial standpoint. For real estate, you should also check with your title insurance company. Finally, make sure your umbrella liability insurance covers your trust assets also.

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