It's pretty common that after you've spent all that time working on creating a trust, you sit back and congratulate yourself on a job well done. And you should, it's an important step for your estate planning. But before you completely cross the estate plan off your list, make sure you've taken care of some important post-signing steps. The first step that most people (unfortunately not all) take is to transfer assets into their trust. If you don't do this step, then the trust isn't "funded" and there's nothing owned by the trust. And if one of the assets you are transferring to your trust is real estate, you need to make sure that you also transfer your insurance policies to the trust as well.

Naming Your Trust as an Insured

You've spent all the time and moved your house and other assets into the trust, so don't forget to add the trust to your insurance policies as well. If you've never had to go through the process before, you'll quickly find out that if something happens, the insurance company will only pay out to those who are specifically named on the policy. If you have transferred your home to the trust, your trust is now the owner of the home and needs to be added to your insurance policy as an insured. If you don't add the trust, then you may be paying for insurance coverage that won't properly protect you in case of a tragic event.

This situation is another example of the importance of having a TEAM (Trusted Experts, Authorities and Mentors) around you who can help you. In this case, it's important to work with a trusted insurance professional who can make sure that you have the correct insurance policies in place. Unlike a slow cooker ("set it and forget it"), your insurance agent should be reviewing your coverage with you on a regular basis to make sure that you've got the appropriate coverage. If you haven't already, check out my free My Personal Planning Essentials checklist, which helps make sure that your TEAM are all listed and easy for your family to find in case of an emergency. As you'll see, your insurance agents are included as a trusted advisor that needs to be on your TEAM.

What Kind of Insurance Should I Change?

The simple answer is that any asset that is transferred to the trust that has insurance coverage needs to have its insurance policies reviewed. This is why, rather than have to go one by one, it's important to have that insurance professional who will know which assets need to have their insurance policies changed.

  • Home Insurance - This is a pretty clear one to make sure you get taken care of. Once the home is transferred to the trust, the trust now owns the home, not you. Although you continue to live there and everything else seems to be the same, from an insurance standpoint, there can be big changes. If there's a fire in your home and it destroys your structure (that is now owned by the trust) and your insurance is in your name, not the trust, you may not be able to collect your insurance proceeds.
  • Umbrella Policies - If you don't make the change to your policy, the trust that owns your home is vulnerable to claims, judgments and legal expenses. You're defeating the purpose of your policy and other assets in your trust could be exposed to these claims.
  • Personal Property Insurance - Like the other forms of insurance, if you have a personal property policy, it's important to have the trust covered. As part of setting up the trust, you've likely signed an assignment of personal property to transfer the ownership of your personal property to the trust. If you also have insurance coverage, especially for things like fine jewelry, make sure to get your insurance policies updated as well.

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Next Steps

If you're considering moving assets into a trust or are interested in setting up a trust to protect your family's legacy, let's set up a Legal Strategy Session to discuss the best options for you.

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