Properties in Trust - Insurance Implications

If your property is held in a trust, it's crucial to ensure that your insurance coverage remains valid. Changes in ownership or trust structures can sometimes invalidate existing policies. 

 

Here are some implications to consider: 

 

1. Change in Ownership Structure 

 

Legal Ownership: When a property is placed in a trust, the legal ownership transfers from the individual to the trust. This change can affect how the property is insured, as standard homeowner policies typically cover properties owned by individuals, not those held in trust. 

Insurable Interest: The trust, rather than the individual, now has an insurable interest in the property. This means that insurance policies must be in the name of the trust to ensure proper coverage. 

 

2. Insurance Requirements 

 

Specialised Policies: Trust-owned properties often require specialised insurance policies tailored to their unique needs. These policies can cover risks such as natural disasters, liability claims, and other unforeseen events. 

Buildings Insurance: It's crucial to have buildings insurance in the name of the trust to protect the property adequately. 

 

3. Responsibility for Insurance 

 

Trustee Responsibility: Generally, the trustee is responsible for ensuring that the property is adequately insured. However, both trustees and beneficiaries should understand the insurance requirements to ensure the property is fully protected. 

Duty of Care: Trustees have a duty of care to manage the trust assets properly, which includes arranging appropriate insurance coverage. 

 

4. Tax and Financial Implications 

 

Allowable Expenses: Insurance premiums for trust properties can be considered allowable expenses under certain conditions, such as when deducted from rental income. However, these premiums are generally payable out of capital and not considered trust management expenses unless specific conditions are met. 

Financial Planning: Placing a property in a trust can be part of estate planning, potentially helping manage care home fees or inheritance. Proper insurance is essential to protect these assets. 

 

5. Management and Renewal 

 

Policy Renewal: It's important to ensure that insurance policies are renewed on time and that all correspondence is addressed to the trust. This helps prevent lapses in coverage. 

Specialist Advice: Given the complexity of trust property insurance, seeking advice from specialists can help ensure that the property is adequately protected. 

In summary, properties in trust require specialised insurance policies due to the change in ownership structure. Trustees are generally responsible for arranging this insurance, and it's crucial to ensure that policies are in the name of the trust to maintain proper coverage. 

 

Contact us for expert advice on maintaining adequate coverage for properties held in trust.