Ensure Your Property Insurance Is Updated After a Title Transfer
Transferring real estate into a trust or business entity is a common estate planning strategy to protect assets and avoid probate. However, these transfers can unintentionally impact insurance coverage, leaving homeowners vulnerable if not properly addressed.
With the recent Los Angeles wildfires, ensuring adequate insurance protection is more important than ever. A common mistake occurs when property owners assume their existing homeowner’s policy automatically remains valid after a title transfer. However, insurance policies typically cover only the named insured—and if ownership changes, coverage could be lost unless the policy is updated.
Key Considerations for Different Ownership Structures
🔹 Revocable Trusts: A homeowner’s policy may remain in effect, but the trustee(s) should be listed as an additional insured to maintain proper coverage.
🔹 Irrevocable Trusts & LLCs: Standard homeowner’s policies often do not cover these entities. A new policy in the name of the trust or LLC may be required to ensure continued coverage.
A Cautionary Legal Precedent
The importance of updating insurance was underscored in Kwok v. Transnation Title Insurance Co. (2009). In this case, California’s Second District Court of Appeal ruled that when a property was transferred from an LLC to a revocable trust, the existing title insurance policy was terminated—leaving the owners without coverage.
What You Should Do
✅ Review your insurance policy before transferring real estate into a trust or business entity.
✅ Contact your insurer to confirm whether the new ownership structure requires an update or a new policy.
✅ Ensure liability coverage is sufficient for the specific needs of the trust or business entity.
Estate planning should provide security, not unexpected risks. Taking these steps will help ensure that your assets remain protected no matter what the future holds.
For more estate planning insights, contact Kaminski Law Group at (916) 540-7618 or visit www.californiatrusts.law.
