If you have placed your home in Trust, it is still important to ensure that it continues to be protected by adequate home insurance.
You are likely to have arranged such cover all of the time that you owned you property and there may be a temptation to think that if you are one of the Trustees, you may simply continue with the insurance policy as before.
This is an error that might lead to serious consequences for all concerned:
placing your home in Trust means transferring ownership to a new legal entity, the Trust – you no longer own the property even though the way the Trust has been set up allows you to continue to live there and even though you might be one of the Trustees and principal beneficiaries;
- the transfer of ownership means that you no longer have an insurable interest in the property – that interest is assumed by the new owners, the Trustees;
- it is important that the Trustees, therefore, arrange proper and adequate home insurance for the property owned by the Trust;
- without this protection, of course, there is no compensation available in the event of loss or damage to the property or if claims against the owners’ liability are made by members of public who have been injured or have had their own property damaged in connection with the home in question;
- protection of the Trust’s assets and the proper management of any insurance of those assets – such as a house placed in Trust – is a primary duty of the Trustees;
- administration of that insurance cover is not simply a question of putting it in place, but ensuring that it does not lapse for any reason;
- this means making sure that the policy is renewed each year in accordance with any renewal notices from the insurer;
- it also means making certain that any intention by the insurer to terminate cover – in the event of premiums remaining unpaid, for example – is known by the Trustees and the appropriate action taken;
- all of this means that any insurer needs to know the correspondence address for the Trust and its Trustees – even though you may be a Trustee and continue to live in the home, that is no longer the address to which correspondence from insurers needs to be sent;
- failure on the part of the Trustees to maintain adequate and unbroken insurance cover may represent a breach of their duty of care.
Placing your home in Trust may be a sensible way of transferring one of your principal assets in order to avoid paying home care costs when the time comes. If you choose this widely popular way of protecting your home against the need to sell it to pay for long-term care, it is vitally important that the property remains properly and adequately insured.