Should I tell my insurance agent that my house is going into my trust?

Yes indeed. You need to contact your insurance agent to discuss how your trust owned real estate is covered in the event of loss. Your property insurance agent can help you figure out how the trust ownership should be reflected on your policy.

Here is the back story on this:

People use revocable living trusts in an estate plans all of the time. This is because a revocable living trust can keep a person’s assets out of probate. A revocable living trust can also be used to feather money to minors or to adults that need to be protected, keep your affairs private after death, and decrease cost while adding efficiency in distribution to your heirs after death.

If you choose to use a revocable trust in your estate plan, you will likely go on a mission to “Fund” it after you form it.  “Funding” a trust is a fancy way of saying that you will transfer ownership of your assets into the trust or change the named beneficiary to the trust. You do those things so that your assets are held in the trust  vs. going through the probate process when you die.

Your real estate is an asset the goes into your trust during the “Funding Process”.  You can accomplish this by signing a quit claim deed that states you are changing the ownership of your real estate from you to your revocable living trust.  You would then filed that deed with the Register of Deeds.

The Rub:

The real estate that you plan to transfer into your trust is covered by property insurance. If you leave the property insurance policy in your name alone without adding the trust in some way, the property insurance policy may not pay if you have a loss.  In short, the insurance company could avoid paying if the “owner” of the house is not an “insured party” on the policy.

The Answer:

You should contact your property insurance agent to determine how the trust ownership should be reflected on your policy. It is something that insurance companies see regularly, but the necessary adjustment does not happen without your reaching out to the company.

Discussing this with some of my insurance agent friends, here is what I have learned about it. They suggest that you should continue your property insurance coverage in your name – just like you had before you developed your trust.  Then, along with that, add the name the revocable living trust as an “additional insured” on the policy.

When your revocable living trust is added as an “additional insured” to your insurance policy, you still get the liability coverage and personal property protection for the contents of your home. The trust, on the other hand, is also protected against liability and casualty issues that occur with the property.