Good planning includes having a Trust and keeping your major assets titled to yourselves as Trustees of the Trust. (This does not apply to retirement account assets.) Failing to maintain proper titling can result in unintended consequences, such as triggering a probate court proceeding or resulting in a disposition of your property to persons other than as you had intended.
Real estate is a good example of the type of asset that should be kept titled to your Trust. Instead of “John Doe and Jane Doe, Husband and Wife,” it should be “John Doe and Jane Doe, as co-Trustees of the Doe Family Trust dated XYZ.”
For most clients, this is accomplished by the attorney in the estate planning process. Where things “go south” is when the clients later refinance the property — which usually results in the bank retitling the property to “husband and wife.” If you have refinanced your property since making your estate plan, you should contact your attorney or a title company to be certain that your property is still titled to your Trust.
Update Your Insurance Policies to Reflect the Titling to Your Trust.
Titling is not the end of the story. You should also update your homeowner policy and your title insurance policy to reflect the change. Some court decisions cast doubt whether the insurance company is still obligated to provide coverage after a transfer to a revocable trust unless an update is made. While this is usually not a problem, it is always “better safe than sorry.”
The homeowner policy can easily be updated by contacting your insurance agent and asking that the trust be added as an additional insured. In the above example, the additional insured would be “John Doe and Jane Doe, as co-Trustees of the Doe Family Trust dated XYZ.”
You should also consider updating your title insurance policy. This is the policy you purchased in conjunction with the purchase of the property. It insures the validity of your real estate title against certain risks from others claiming to have an ownership or lien rights in the property.
If you purchased your property prior to 2006, you can obtain an endorsement (called a Form 107.9) from the title company that issued the original policy. Most title companies charge a fee of $150 for this endorsement, but it is a one-time expense and remains valid so long as you own the property through the trust. If you purchased your property in 2006 or later, you are probably already covered. Most policies issued since then already include language to cover you as trustees of a revocable living trust.