While transferring real property into irrevocable trusts is a commonly used estate planning technique, doing so may have the unintended consequence of losing title insurance coverage originally held by the property owners. Courts have held that the voluntary act of transferring the property into a different entity can violate certain policy agreements. To avoid this, you should always review the insurance policy agreement to see if estate planning entities are included in the definition of “insured.” If not, you can request an Additional Insured endorsement to include the planning entity.
See Gerry W. Beyer, “Title Insurance Issues Triggered By Estate Planning Transfers,” Wills, Trusts & Estates Prof Blog (December 19, 2014).
Posted by Ryan Moore, Associate Editor, Wealth Strategies Journal