The Caton Law Firm PLLC
206 S. Tennessee, PO Box 387 McKinney, TX 75070 - Phone.972.562.0777 - Fax.972.562.0780

Current Events and General Client Memos

Karen C. Caton

Attorney and Counselor
McKINNEY, TEXAS 75070-0387

KAREN C. CATHEY*(972) 562-0777
* Board Certified -- Estate Planning and Probate LawFAX (972) 562-0780


TO:Estate Planning Clients
FROM:Karen C. Caton
RE:Information Regarding Homeowners and Auto Insurance
DATE:June 13, 2001

I have found that often your home and car agents do not know how to structure your insurance once you have a living trust. This Memo should help. It was taken from one insurance company's internal memos to its agents.

Homeowners Insurance. It's easy to design a homeowners policy to cover these exposures. The eligibility rules in the Texas homeowners manual say that a Homeowners Form A, B or C "may be written only for the owner-occupant of a dwelling or townhouse unit used exclusively for private residential purposes." This rule, an references to "you" and "family members" within the policy forms, imply that the homeowners policy is designed for persons rather than entities such as trusts. An exception to the eligibility rule, however, permits a homeowners policy to be issued on a dwelling owned by a living trust. When this is done, the occupant (a beneficiary of the trust) is the named insured, and the trust and trustee is an additional insured on Endorsement HO-301. When this endorsement is used on a policy covering trust property, both the Section I (Property) and the Section II (Personal Liability) boxes should be checked.

Auto Insurance. Most people will go through several autos after I do the estate plan, thus I generally advise you to simply sign the back of your car titles and hold them, assuming you have a clear title. They can then be placed into the trust, or otherwise dealt with at your death, if indeed you still have that particular auto. If you endorse and hold your auto titles, you do not need to address any unique insurance issues. Even if you did not endorse a title, at death your heirs at law can transfer the car after simply signing an affidavit. Assuming your heirs at law are all cooperative, this works well.

Sometimes this just won't work, for example if the owner of the car has children of a prior marriage, who would be included in his "heirs at law" and they are not cooperative, or they are minors. If you decide to place title to autos in the Trust, follow this special rule. In the Texas Auto Manual, the eligibility rules state that an auto can be written on a personal auto policy only if it is "owned by an individual or jointly by two or more individuals who are residents of the same household." There are a couple of exceptions to this rule, but none involve covering an auto owned by an entity such as a trust. The key to insuring a trust-owned auto is found in the following definition: "'Owned' as used in (this section) includes an auto leased under written contract for a continuous period of at least six months." This definition provides a way to work around the manual rule. It permits the trust, as owner of the auto, to execute a written lease of at least six months to the person having custody of the vehicle. That person will be the named insured on the PAP and the trust will be an additional insured as lessor (Endorsement 510A). A simple lease form can be prepared for you if you need to go this route.