Sticky insurance questions need action

Dear Jonathan: My wife and I have a living trust and recently after consulting with our attorney, we transferred our home, as well as our family cottage to our trust for probate avoidance. Last week as I was writing out a check for our homeowners insurance premium, it occurred to me that my wife and I are the insureds on the policy, but our trust isn’t. Is that the way it should be, or now that the trust owns the home and cottage, should the trust now be the insured on the policy? I just want to make sure that we are properly covered.

Jonathan Says: It was a good thought to have and a good question to ask. Anytime real estate is transferred to a trust, it is critically important that the homeowners insurance agent is contacted to make sure that the proper coverages are maintained under the homeowners insurance policy.

With that said, you and your wife want to continue to be insureds on the policy and depending upon what your policy requires, you may need to name your trust as an additional insured on the policy. My recommendation is that you contact your homeowners insurance agent and advise him/her of the transfer of your home and cottage to your trust and ask the agent what needs to be done to make sure that the appropriate coverage is maintained and that the policy insures both of you, as well as your trust. I would also recommend that you have your agent provide you with a written response verifying what coverages you have and who the insureds are under the policy.

Dear Jonathan: After my uncle died, I found out that I was named as a beneficiary in his trust of the proceeds from a certain life insurance policy, which he identified in his trust by name and policy number. When I contacted the attorney handling his estate about when I can expect to receive those proceeds, he advised me that even though the trust named me as a beneficiary of those proceeds, the beneficiary of the life insurance policy was someone else and not the trust, so consequently I was not entitled to anything. Is that true? Do I have any recourse?

Jonathan Says: Generally speaking, the beneficiary of a life insurance policy is entitled to receive the proceeds regardless of what the insured’s trust says. In other words, the terms of the trust do not control who is to receive the death benefits under a life insurance policy when the named beneficiary named under the policy is someone other than the trust. In the case of your uncle’s trust, in order for you to enforce your rights as a beneficiary of that trust, the trust would have had to be named as the beneficiary of that life insurance policy.

Having said the above, if the death benefits from the life insurance policy are significant, you may want to consult with an attorney to see if there are any legal theories that might be available to you to pursue a cause of action. For instance, is there any evidence to support that someone may have unduly influenced your uncle to change the beneficiary on the insurance policy, if in fact the trust was ever named as a beneficiary under that policy? If any such evidence does exist, then you should ask the attorney as to the likelihood of your being successful if you decide to pursue this legally and what it would cost in attorney fees to do so.

Jonathan J. David is a shareholder in the law firm of Foster, Swift, Collins & Smith, P.C. in Grand Rapids, Mich.