As part of the formation of your living trust, generally, in order to cover a homeowner’s real property holdings under the living trust, title should be changed, but only by a professional who understands the nuance of working with real estate title changes.
Moving a property into a trust ensures that the homeowners’ wishes concerning their property, which they have stated in the living trust, can be carried out. Unfortunately, there are a few complications that arise from holding title through a trust rather than as an individual. But there is more to it than just changing title on the real property. It is also prudent to address the name on the homeowners’ insurance policy. Just because a homeowner changes title on the property does not automatically change the name on their homeowners’ insurance policy.
Homeowners insurance protects the interest in the property
Your homeowners’ insurance policy typically lists the names of the homeowners as the covered parties. Once you change title on the property, however, you also need to notify the insurance company that they need to add your new title as an “also insured” under the policy. That way, if some kind of catastrophic event occurs, like a house fire or a robbery, the homeowner will have peace of mind that they are covered by the insurance policy on the property even though the property is now held under their trust. Otherwise, the insurance company might have grounds to deny property owners’ claims against their coverage should their homes become uninhabitable or require major repairs. Small mistakes when creating a trust can lead to major financial challenges for the trustor. Those who have proper support when establishing a trust can identify potential sources of risk such as the need to alter homeowner’s insurance coverage.
Moving a home into a trust is a smart move, but property owners must ensure that doing so does not compromise their other protections.