When you bought your real property from a seller, you most likely purchased title insurance (such as from Fidelity National, First American, Old Republic, or Stewart Title, etc.) to cover defects in the title or deed (for example, an old lien, an undisclosed ownership claim, lot line disputes, or a defect in a prior deed that could affect your rights as new/current owner). Most purchasers of real estate never need to use title insurance. Many people who bought their properties years ago may not even know who issued the policy or how to contact their title company because they no longer have any documents. For those who are able to locate the information, it is an excellent idea to contact the company and inform them that you are creating a living trust to hold title to the property(ies).

We recommend this step for those who still have their title insurance records because some title insurance policies no longer provide coverage once the original owner insured at the time of purchase no longer holds title to the property. Even though the living trust is your trust and you can change it at any time, legally the Trust will need to hold title, and a deed will need to be recorded to reflect the Trustee(s) of the Trust as the owner. If you transfer title out of your individual name and into a trust, the title company may view that as you no longer retaining the same insured interest, which can trigger the policy’s end-of-coverage rules. Contacting the company and explaining that the living trust is being created is an opportunity to find out if the existing policy will continue to cover the property, or if other steps should be taken to ensure continuity of coverage (such as a new policy, endorsement, or rider naming the Trustee of the Trust).

The title insurance policy was issued at the time of purchase and would be in your escrow documents. The company that issued the policy is the one you should contact. If you no longer have your documents, the title company is sometimes listed on the grant deed you received from the seller, which was recorded at the county recorder’s office. The bank that issued your purchase mortgage may also have used the same title insurer.

Note: our office does not handle title insurance issues. If you don’t have any information about your title policy or don’t know who the title insurance company was, this step may not be applicable to you because you can’t notify them without knowing who they were. If you cannot contact your former title insurance company, you may wish to contact a new title insurer to inquire about purchasing a new H Title Insurance policy for your property, but there is no legal requirement that you purchase or maintain title insurance.”

As a real property owner, you purchase fire and hazard insurance and pay premiums annually or more frequently. The policy covers various risks and hazards. Check your bill or call your agent — it is an excellent idea to contact the company and inform them that you are creating a living trust to hold title to the property(ies).

We recommend this step because some insurance policies may change coverage or deny a claim if the original owner insured at the time of purchase no longer holds title to the property when a loss occurs. Even though the living trust is your trust and you can change it at any time, legally the Trust will need to hold title, and a deed will need to be recorded reflecting the Trustee(s) as owner. If you transfer title out of your individual name and into a trust, the insurance company may view that as a change in insured interest, which can trigger policy exclusions or other rules. Contacting the company and explaining that the living trust is being created is an opportunity to confirm the existing policy will continue to offer the same coverage, or to update the policy, or add an endorsement or rider naming the Trustee(s) of the Trust.

Similar to the change-of-ownership issues for insurance policies, mortgages may contain “due on sale” or other clauses that could require refinancing or acceleration of the loan upon a transfer. Each mortgage company has its own policies regarding this, and the governing terms differ by lender. Contacting the company and explaining that the living trust is being created is an opportunity to find out if the lender has additional requirements. Some mortgage companies are well equipped to handle trusts; others may not respond at all, since their main function is to track and collect payments. Whether they respond or not, you may choose to advise them of the Living Trust funding by phone or by using the sample letter above.

We encourage open dialogue about the fact that you are preparing your documents, so that the people in charge after you will know you have made these important arrangements. We also recommend telling your doctor that you have a healthcare directive and asking if they’d like a copy for your medical file. Your successors should know where your important documents are stored. Prepare a storage area that is accessible to your successors but still secure from others — if someone may be unhappy with your plans, or you don’t fully trust them, they probably shouldn’t know where your documents are kept. Your Successor Trustee and Agents will be in charge of managing the Trust assets and carrying out its instructions, so they should be told where to find your important documents, and that you worked with our office to create them.

There may come a day when your instructions and wishes as set forth in your estate plan might be challenged by someone. If a challenge occurs, it will be extremely helpful to have your medical provider document your condition at the time your planning was done, so that your wishes can be defended from future challenges. One of the most common complaints from people unhappy with estate plans is that the maker “lacked capacity” to do the planning at the time they did it. If there is any medical history of treatment for any type of health condition, even a minor one, that history could be used against you by someone unhappy with your estate planning instructions. For this reason, our clients often choose to have their medical condition documented by their doctor, and a brief “capacity letter” about their medical status is added to their file with us for future reference.