Legal Ownership of Property

Why should you update your policies when you transfer assets to a Trust or LLC?

The practice of using trusts or limited liability corporations (LLCs) has become more common and they are often used for transferring legal ownership, asset protection, estate planning, tax strategies, or for privacy reasons.  As a business grows or as personal assets evolve, it’s easy to lose track of the legal ownership of property.  Anytime new property is purchased, or the ownership of property is changed or transferred, a corresponding update to the insurance policy covering the property must be made.  It is extremely important that the legal owner of buildings, property, equipment, and vehicles correspond to the associated insurance policies covering them.

If you transfer ownership of a building or home to a trust, LLC, or other legal entity, the entity owns the property. The same would hold true for the ownership of vehicles and equipment.   An insurance policy is a contract between the legal owner of the property and the insurance company.  Even if nothing has changed with the building or property when you transfer ownership, there may not be coverage in the event of a claim if you haven’t notified your insurance agent of the change in ownership.

Buildings:  Consider one of our worst nightmares – your home catches fire and burns to the ground.  A few years ago, you transferred ownership to a LLC, but did not notify your insurance agent.  When you file the claim, the insurance adjustor will ask for a copy of the title.  When they see the building is owned by the LLC and the LLC is not listed on the insurance policy, there may be a coverage problem and you may have to pay for damages out of your own pocket.

Liability:  Assume a visitor to your property slips on a patch of ice and breaks their hip.  As part of estate planning the prior year, you transferred ownership of the building to a trust, but did not notify your insurance agent. When your assets are owned by a trust, LLC, or other legal entity, those entities are vulnerable to legal expenses and judgements in the event you are sued.   If the injured visitor files suit, you may be left without insurance protection.

It is important to work with a trusted insurance agent to assure that you and all of your legal entities are covered for property damage and liability claims. If you have any questions or concerns about coverage, please contact us today.

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