Pitfalls of Transferring Home Ownership

Over the past two decades, an increasing number of Americans are transferring personal ownership of residential property to trusts, LLCs, limited liability partnerships (LLPs) and other asset-protection or tax-advantaged entities. While transferring real property to an entity can offer a number of benefits, this strategy can also create significant unintended gaps in insurance coverage.

In fact, there are several circumstances in which this strategy could prove risky. As an example, an entity is a “what” and not a “who” (or “you,” “your,” or “family member”). Without a “who,” there is no coverage for an entity on an unendorsed homeowner’s policy.

Luckily, Assurex Global knows the questions to ask in order to provide solutions for these situations.

Start with the Right Questions

Provided the entity that owns the property does not conduct any business-related activities, addressing the following questions will enable us to properly assess each risk and help structure coverage that reflects the specific exposure:

  • Who will occupy the property?
  • How will the property be used?
  • In addition to the entity owner, what other parties have an insurable interest?
  • Does the entity own other real property?
  • Who are the parties to the trust, LLC, LLP, or other entity?

Protect ALL Parties

Protecting the insurable interests of all parties connected to an entity-owned personal residence requires careful planning and execution. This often involves protecting the interests of people and entities. For example, we consider:

  • The trust (including those individuals acting as a beneficiary, trustee, or grantor)
  • The LLC (and individuals acting as members)
  • Or, the family limited partnership (and individuals who are managing partners and limited partners)

All of this in addition to the individuals who occupy and/or have personal possessions located at the residence.

Please contact our office immediately if we are placing coverage for a residence owned by an entity.