How Does Creating a Trust Affect My Insurance Policies?

What you should know about your trust and insurance policies.  

Trusts are commonly used structures for wealthy families. Your attorney may recommend that you place all of your assets in a trust. This trust will preserve your assets against lawsuits and against the need to “spend down” to qualify for financial assistance. It also allows your assets to pass to your beneficiaries without going through probate. Before you put all of your worldly goods in a trust, you need to know how it will affect your personal insurance coverages.

Trusts can present some challenges when it comes to homeowners insurance. All too often, there is an issue with who is insured on a homeowners policy. In your homeowners policy, it likely lists yourself, your spouse, and possibly family members as the insured parties. When you place your home in a trust, you no longer have any insurable interest in the residence and, consequently, you’re no longer covered. When you put your home in a trust, one of the most important things you need to do is add the trust to your home insurance policy and any applicable umbrella policies.

When a trust is properly added to your insurance policy, you still get the broad liability coverage you need, along with the personal property protection for the contents of your home. In this situation, the trust is protected against liability issues that occur within the residence, but left exposed to issues arising on vacant land or properties that are rented to others. In order for the trust to be protected in these circumstances, you’ll need to work with your agent to come up with a plan that will accommodate the needs of the trust.

By properly including the trust to your homeowner and liability policies, very expensive uninsured risks can be avoided. The fix may be as simple as giving your insurance agent the name of your trust, but in most situations, you will also want to consult with your estate planning attorney.

Do you need help covering your assets? Talk to the professionals at Lou Aggetta Insurance Services in Pleasant Hill. Our experts are ready and waiting to help you determine your life insurance needs and explain how a policy can protect your finances. Give us a call today to get started!