Don’t Lose the Value of Your Title Insurance – Get the Right Endorsement After Creating a Trust

Because I work extensively with both real estate law and estate planning, I see one common mistake people make that can cause trouble in the future. Fortunately, there’s an easy fix.

Real estate owners often purchase title insurance to protect themselves and their heirs if somebody later challenges the validity of their title to the property. Because of longstanding real property laws, the ownership of real estate is traced back through paperwork that can extend hundreds of years. If someone discovers a problem with the older paperwork, that clouds the title held by the current owner. That causes a host of problems and can reduce the value of the property.

Buying title insurance protects against those problems, so it’s a valuable resource. However, if you buy title insurance under your name and then transfer ownership of the property to a trust, such as a revocable living trust set up to avoid probate, you need to change the name on the title insurance as well. You should be able to do that by contacting the title insurance company to get an endorsement specifying the official name of the owner. If you don’t make that change, then the title insurance is worthless if a problem arises later because the insured individual no longer technically owns the property.

So, if you have transferred ownership of real estate into a living trust, a nominee realty trust or any type of trust, go back to your purchase paperwork, find the name of the title insurance company, and ask for an endorsement. If you have questions about this or other aspects of real estate law or estate planning, I’d be happy to help.