Author: Chris Boggs

Dying is a particularly complicated business; not necessarily for the deceased, but for those left behind. Because of these complications, my mom decided to set up a trust to ease some of the burden of probate that will fall on me upon her death.

Whether or not the burden is lightened is yet to be seen, but my discussions with my mom have once again proven that lawyers are generally good at addressing the legal aspects of life and death but know nothing about the insurance aspects of life (forget death).

My mom was detailing the trust set up by the lawyers; of course, she will fund the trust with her personal assets – most notably her home. As we neared the end of our conversation I asked, “Did the lawyer happen to mention that you need to endorse your homeowners' policy once the trust is in place and funded?"

“Wait, what?" was my mom's response. “What do you mean I have to endorse my insurance policy?"

I explained that once a trust is set up her relationship to the house changes. She now fills several roles relative to the trust and the house. All at once she is now a “grantor," a “beneficiary" and a “trustee." And I now assume the role of a “beneficiary" and a “secondary trustee." I tried to explain these terms in a non-legal way as best I could, explaining:

• “Trust": A legal process that may create a separate legal entity (legal person) that is a fiduciary arrangement allowing a third party, or trustee, to hold/manage assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries.
  
• “Trustee": The legal owner of the property responsible for managing the assets in the trust to the satisfaction of and according to the wishes of the “grantor" as outlined in the trust document. When the “grantor" is also the trustee, successor trustees are named to step in after death or incapacitation.

• “Grantor": The person who conveys or transfers title in real property (selling or giving) to another and sets the terms of the trust. Other terms are “trustor" or “settlor."
• “Beneficiary": The person(s) who derives the benefit or assets of a trust. Also known as the cestui que trust, this is the beneficial or equitable owner of the property – though not the legal owner. The beneficiary is said to have the "use" of the property and can appeal to the court for an accounting or replacement of the trustee to ensure proper use of the property.

(Sometimes the grantor, beneficiary and trustee is/are the same person(s) when a home is placed into trust. Sometimes it's the following generation who is the beneficiary.)

Because all these new roles arise out of the creation of a trust, her homeowners' policy needs to be endorsed to account for the various positions held by her - and me. If the trust was also going to own any vehicles (including motorcycles), those policies would also require endorsement. Further, if there is an umbrella policy, it may require an endorsement.

Click here to link to a list of all the available personal lines trust endorsements promulgated by Insurance Services Office (ISO). Some carrier may offer proprietary endorsements as well. Note that different forms and edition dates exist from state to state. There are also some states that do not appear to have all the necessary form available for use.

Closing Note

What triggered the writing of this article was the fact my mom was never told any changes were necessary to her homeowners' policy (or other policies). I fear that many of our clients create trusts and make other decisions that directly affect their insurance coverage and never consider the need to call us. Further, years may pass or a loss may occur before the agent ever discovers any changes occurred.

Never assume anything about any client. You must communicate with every client, every year. Had my mom not had a son who works in insurance, she probably would have never known her actions required changes to her homeowners' policy.

Last Updated: February 1, 2019