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Why You Should Add Your Revocable Living Trust to Your Insurance Policies

Annie Rogers Portrait

Annie Rogers

Christina Knopke Portrait

Christina Knopke

In this month’s podcast, Attorneys Annie Rogers and Chrissy Knopke discuss how and why you should add your revocable living trust as an insured on your auto, home, life, and other insurance policies. They also share a real-life example of what could happen when you don’t (hint: it involves probate).

Learn the differences between revocable and irrevocable trusts here: https://creativeplanning.com/podcast/revocable-trusts-vs-irrevocable-trusts/

A Matter of Trust, hosted by Creative Planning Attorneys Annie Rogers and Christina Knopke, is a thoughtful, informed discussion about ideas, trends and developments in estate planning. Our mission is to educate and inspire people to make better financial choices through knowledge, tools and strategies that ensure a more prosperous future.

Have questions or topic suggestions? Email us at [email protected]

Transcript:

Chrissy Knopke: Welcome to Creative Planning’s A Matter of Trust. I’m Chrissy Knopke. And I’m here with my friend and colleague, Annie Rogers. We’re both estate planning attorneys at Creative. And today, we are going to talk about how to add and why you should add your revocable living trust as an insured on any homeowners or automobile policies.

Annie Rogers: You know, once you’ve created a trust, we’ve talked about funding it. So one asset that you need to make sure you include in that are your insurance policies. And on your homeowners policy, especially if your home is owned by your trust, it is really important to make sure you’ve accounted for your trust. And you need to make sure you and your spouse or individually are the insured. The next options are—a lot of this has to do with what your insurance rider will do and every company is a little different.

Chrissy: Right, the actual policy is what’s going to govern who is actually insured for that policy. And so if it typically includes you, your children, anyone else living in that household, and if you just put your revocable living trust down, your revocable living trust doesn’t have related members. So if there is a claim made and your trust is the only insured, it may not extend to additional family members. So Annie’s and my best advice, if your carrier will allow it, is to name you personally, like husband and wife or single person, and then your trust as an additional named insured.

Annie: Right.

Chrissy: If they won’t allow that…

Annie: As an owner of the policy, basically.

Chrissy: Correct. And if they won’t allow that, the second best practice is to make sure they’re an additional insured—the trust is an additional insured to your policy. And some of the reasons we want to insure that is that if there’s a fire and people are injured and the check needs to be made out to the trust, it can be done that way if the trust is added as an insured.

Annie: Or even if you pass away and your kids sell your house, but you paid for your homeowners premium for the entire year, they’re going to cut a little check back to your estate if you don’t have the trust listed. And that’s something that might require probate.

Chrissy: Right. If they can’t issue the check directly to the trust, then it’s going to be issued to the named insured, which then would require probate to cash that check.

Annie: And this goes for auto insurance too. And this is super easy. When I did it on my policy, I just emailed my insurance agent and they added it to the policy and then got something in the mail showing that it was on there. So it’s not hard to do.

Chrissy: No. And Annie’s actually going to give us an example of where this went awry with life insurance in not having the beneficiary named appropriately. So at Creative Planning on any life insurance policies you have, our recommendation is to always add the trust as the primary beneficiary even if you are married.

Annie: Right. So a few years ago at a previous firm I was with, their recommendation was to list your spouse first and then your trust. And this couple did a really good job. Everything else was in their trust. The husband passed away. The wife filled out all the paperwork, the life insurance company mailed her the check for the insurance proceeds, and then she died unexpectedly before she had cashed the check, which resulted in us having to do a full probate for this really large life insurance check of her estate because the check was made out to her. So a way to avoid that is to list your revocable trust as the primary insured because there’s going to be a successor trustee who can cash that check. And especially if you are leaving everything to each other anyway, we can make sure it gets where it’s supposed to go or to your other beneficiaries without requiring a probate.

Chrissy: Yep. And so if you have insurance, life insurance, your homeowners insurance, auto insurance and you have questions about how to properly put that asset inside your trust or have it covered, give your attorney a call. And thank you for joining us today.

Annie: Thank you.

Disclosure: This commentary is provided for general information purposes only and should not be construed as investment, tax, or legal advice. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed. This commentary and the information provided may be considered advertising in some jurisdictions under the applicable law and ethical rules. The determination of the need for legal services and the choice of a lawyer are extremely important decisions and should not be based solely upon advertisements or self-proclaimed expertise. No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers.

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