Insurance Policies and Wealth Transfer With LLC or Trust

If you’re planning to use a trust or limited liability company to transfer wealth, you should consider the complicated insurance considerations to avoid a potentially catastrophic loss of coverage. All insurance policies are underwritten to provide coverage to the titleholder of the asset the insurance is covering.  The importance of this concept is demonstrated by the following example:

If a homeowner creates a trust or LLC for estate planning, and the house is subsequently transferred to the trust or LLC, the homeowner’s insurance policy must be altered to reflect that change in ownership.  If that change does not occur, and the house is damaged, the insurance company could question the change in ownership. 

See Kathleen Tierney, Trusts And LLCs: Smart Ways to Transfer Wealth and Risk, But Mind the Details, Advisorone, Feb. 21, 2013. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.