I always impress upon estate planning clients the importance of updating their homeowners’ insurance after conveying real estate to a trust, even if the transfer is via a “ladybird deed” that doesn’t take effect until the client is deceased. A recent unpublished opinion issued by the Michigan Court of Appeals affirms the wisdom of this advice.
In Thompson v Fremont Ins Co, the homeowner set up a living trust and then transferred his home to the trust. He failed, however, to name his trust as the insured party under his homeowners’ insurance policy. Because of his oversight, the insurance company was able to avoid paying out any money when an individual was injured in the house after the homeowner died. The injured party recovered money from the trust, but when the trust in turn filed a claim with the insurance company, the claim was denied because the trust was not the insured under the policy.
The lesson for all of us is to review our homeowners’ insurance to ensure that the right parties are insured. If you have any questions about what this means for you, give us a call!