INSURING WILLS and TRUSTS
Presented by
Jill Haynes Gidge
CPCU, CIC, CISR, CRIS, AAI, ACSR, AAM, AIT, CPIW, AIS, BSN, RN
INSURE-ED
“Achieving Excellence Through Education”
Nashua, NH
Learning Objectives
• To describe the use of wills and trusts in personal lines estate planning
• To describe how the unendorsed Homeowners Policy responds or does
not respond in a trust-ownership situation (ISO 1991, 2000 and 2011
ed.)
• To describe how the unendorsed Personal Auto Policy (ed. 2005) does
or does not respond to trust-ownership situations
• To describe how other personal lines coverage forms and policies may
be utilized to close coverage “gaps”
• To describe specific endorsements to close coverage “gaps” (HO 05 43
and HO 06 15)
p. 3
Purposes of Wills
• Orderly transfer of assets following death
• Identification and acknowledgment of
executor or administrator, heirs and
beneficiaries
p. 3
Purposes of Wills - 2
• Stipulate bequests
• Confer endowments
p. 3
Purposes of Wills - 3
• Co-ordinate with Trust provisions and
documents
• Assure continuity of other financial plans
p. 4
Purposes of Trusts
• Transfer of Assets Prior to Death and
Stipulation of Asset Disbursements Before
and After Death
Purposes of Trusts - 2
p. 4
• Provide a source of income to specified
beneficiaries
• Co-ordinate with “gifting” to living children
or grandchildren
p. 4
Purposes of Trusts - 3
• Create “life estates”
• Protect assets from legal actions of third
parties or creditors, etc.
• Reduce or eliminate probate or estate taxes
p. 4
Trust Definitions
• Grantor – person transferring
title to property to the Trust
• Trustee – manager of the Trust for the
benefit of Beneficiaries
• Beneficiary – party to whom income or
services will be given by the Trust
p. 5
Trust Definitions - 2
• Revocable Trust – may be altered or dissolved by
the grantor at any time
• Irrevocable Trust – may not be altered after
formation - permanent
• Charitable Remainder Trust – a way of gifting a
charity during life and also receiving an life
income from that charity while leaving any
remaining assets to the charity upon death
Coverage Issues
• Homeowners Policies
• Who’s Covered?
– Named insured
– Spouse resident in Named Insured’s household
– Family members resident in the Named Insured’s
household
– Others in the care of the Named Insured, a resident
family member and also resident in the household
p. 7
Coverage Issues - 2
• What’s Covered?
– Property (Section I)
•
•
•
•
Dwelling
Other Structures
Personal Property
Loss of Use
– Liability (Section II)
• Medical payments
p. 8
Coverage Issues - 3
• Additional Coverages:
–
–
–
–
Claims expenses in addition to limits
First aid expenses
Limited damage to property of others
Loss assessment (Sections I & II)
p. 9
Coverage Issues - 4
• Areas of Concern:
– “Spend down” requirements
– The Trust is NOT a “natural person”
– Trustees MAY be persons not part of the
original insured’s (grantor’s) family unit
• A bank officer
• An attorney
pp. 9-10
pp. 10-11
Problem Areas
• When the “residence premises” is owned by a Trust, people own
nothing
– The Trust becomes the “you”, not the people!
• Residents of the Trust-owned property will lack insurable interest in
property at the time of loss
• Residents may be held legally liable for damage to the Trust-owned
property while in their custody, care or control
• Residents will not have coverage for Trust-owned personal property
OFF the “residence premises”
– Vacation, etc.
Potential Homeowner
Solutions
pp. 11-12
• Issue a Homeowners Form:
– Naming People AND Trust as Named Insureds
– Naming People as Named Insureds and Trust as
Additional Insured (HO 04 41)
• However, Trust will ONLY have coverage under Coverage A,
Coverage B and Coverage E!
Homeowners Solutions - 2
• Dwelling Policy issued to Trust and HO 4
issued to People
– Not cost effective
• Dwelling Policy issued to both the People
AND the Trust
p. 14
Homeowners Solutions - 3
• Issue a 2000 ISO Homeowners Form HO 3 or HO
5 and:
• Attach the Residence Held in
Trust Endorsement (HO 05 43)
– Name Trustee as Named Insured and identify the Trust
– Schedule grantors, other trustees, and beneficiaries
– Non-resident trustees will ONLY have liability coverage arising out of the
ownership, maintenance or use of the “described residence”, and their
family or household members will have NO coverage
p. 15
Homeowners Solutions - 4
• Issue a 2011 ISO HO 3 or HO 5 and attach
the new HO 06 15 Trust Endorsement
– Trust can be “named insured”
– Grantors, beneficiaries and trustees have coverage for
activities/residency
– Trustees receive notice of cancellation
– Trust may be named insured if state law allows
– Trustees’ activities NOT considered business
Coverage Issues
• Personal Auto
– Eligibility not an issue
– Who Is An Insured?
•
•
•
•
Named Insured
Resident spouse
Resident family members or relatives
Permissive users
p. 16
p. 17
Coverage Issues - 2
• What is a “covered auto”?
– An “auto” OWNED by the Named Insured
– An “auto” which is “newly acquired” by the Named
Insured
– An “auto” which is being used as a temporary
substitute for a “covered auto”
• Breakdown, loss, service, repair, destruction
pp. 17-18
Coverage Issues - 3
• What coverage is provided?
– Part A Liability
• Damage caused by an “insured” to other people or other people’s property with a
“covered auto”
– Part B Medical Payments
• “Bodily injury” to an “insured” or any guest passenger while “occupying” a “covered
auto” without regard to fault
–
Includes “insureds” while pedestrians
– Part C Uninsured Motorists
• “Bodily injury” to an “insured” or any guest passenger while “occupying” a “covered
auto” and struck by an “uninsured auto”
–
Includes “insureds” as pedestrians
– Part D Coverage for Damage to Your Covered Auto
• Direct loss or damage to a “covered auto” owned by the “insured, including loss of use
p. 19
Areas of Concern
• Grantors and beneficiaries will only be permissive users of
the Trust-owned autos
– May still be held personally legally liable for damages over and
above policy limits, but will have no policy on which to “fall back”
• Grantors and beneficiaries will not be ale to demonstrate
insurable interest in the Trust-owned “autos” at the time
of loss
– May not be entitled to loss of use
pp. 20-22
Personal Auto Solutions
• Issue a Personal Auto Policy (PP 00 01) and:
– Name the People AND the Trust as Insureds
– Issue PAP to Trust (if permitted) and add People as
Additional Insureds
• Most carriers will utilize PP 13 34 Joint Ownership Coverage
– Issue PAP to People and add Trust as an Additional
Insured
• Most carriers will use PP 13 34 Joint Ownership Coverage
pp. 20-22
Personal Auto Solutions - 2
– If permitted, issue PAP (PP 00 01) in name of Trust and individual
Named Non-Owner Policies to ALL operators in the household (PP
00 01 with PP 03 22 endorsement attached)
• Not cost effective!
• Don’t forget furnished or available for regular use issues – use PP 03
06 Extended Non-Owned Coverage for a Named Individual
– Attach Certificate of Insurance – Trusts (PP 03 33)
• Essentially useless
– Attach Trust Endorsement (PP 13 03)!
• Amends Definitions so that an “auto” whose ownership has been
transferred to a Trust will be deemed as owned by an individual
p. 23
Other Considerations
• Personal Inland Marine Floaters
– Mono-line Scheduled Personal Articles Floater
(PAF)
– Personal Property Floater (PPF)
– Personal Effects Floater (PEF)
p. 25
Closing
• Keep up to date!
• Use all methods available to you to discover
exposures and ownership issues!
• Know your products and coverage forms!
It’s A Wrap!