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February 17th, 2017
Have a Personal Trust? Ask yourself, “Am I insured properly?”
Protecting the assets of a trust, when the title is transferred to a trust and trustee, requires notifying your personal insurance advisor.
Tax time is a popular time of year for individuals and families to put their finances in order and this includes changing and updating trusts. Trust agreements are a common recommendation during estate planning, in an effort to reduce estate taxes on tangible property. After trusts are formed, many policy holders either forget or are unaware, they need to notify their private client advisor that they have moved personal assets into the name of a personal trust for tax purposes.
The following claim example illustrates the importance of adding a personal trust to your personal insurance policies.
Bill and Mary have been through an estate planning session with their attorney. He recommended they transfer ownership of their $2M home and their estimated $1M in personal property including artwork, a sailboat, and canoe, to a trust in their name. They follow his advice and sign the trust documents, appointing Mary’s brother, Joe, as a trustee of the trust. No changes are made to any of the insurance policies so the named insured listed on the homeowners and umbrella policies remain under Bill and Mary.
As a result of a defective electrical circuit, their home burns down, destroying the building and all contents. The replacement cost of the property is $3M (same as the insurance coverage). The insurance adjuster, when delivering the $3M check, requests a copy of the title of their home and sees the title in the name of the trust and Joe as trustee. On further investigation, the adjuster also discovers the household personal property is also owned by the trust. The adjuster rips up the check.
Neither the trust, or trustee is defined as an “insured” under a standard homeowner policy, leaving the trust property ownership of the home, and personal property completely uninsured in this situation. Bill and Mary will probably receive payment only for the economic value of their insurable interest – the additional living expenses for renting a fully furnished home. The value of the estate, including the trust assets, however, has just been reduced by $3M.
Always notify your personal insurance advisor if you have a trust, to avoid the claim scenario explained above. When your advisor is aware that any personal property is titled in a trust, an endorsement is issued to add the trust as an additional insured for property and liability coverage. The cost is minimal, if any, and broadens the definition of an insured on standard homeowner policies.
At Brown & Brown, personal attention and expertise is where we differentiate ourselves. Our advisors provide comprehensive reviews, an extensive range of coverage options, and exceptional service. The result is enhanced protection and increased value for all of your personal insurance needs. Contact us today, for your insurance peace of mind.
Suzette Mann is a licensed Property/Casualty Personal Lines Account Executive at Brown & Brown Insurance Services of CA. She currently plays an integral role in the development and marketing of the personal high net worth division. With a demonstrated ability to cost effectively manage complicated personal insurance programs, she brings a wealth of experience and strength in serving affluent individuals and their families nationwide.