When you create a revocable living trust, it is important to transfer your assets into that trust, including any real estate that you own. However, if you are not mindful, transferring real property into a trust could result in the loss of your title insurance.
Estate planning attorneys who draft trusts for their clients always advise those clients to transfer assets into the trusts. This is important because if the assets are not transferred into the trust, then the terms of the trust may not cover how those assets are later used and distributed.
However, when dealing with real estate, you need to be careful as noted in a recent post by the Wills, Trusts & Estates Prof Blogtitled "Title Insurance Issues Triggered By Estate Planning Transfers."
The big issue? While your title insurance might cover your ownership of the property, it will not necessarily continue to provide coverage after the property is transferred.
If there are later legal disputes concerning the property, then you could be in trouble. For this reason, it is extremely important that you review any title insurance policies before transferring real estate into a trust. If necessary, you need to contact the insurance provider and get coverage for your trust.
This issue is easily avoidable, of course. Just make sure that you and your attorney review any title insurance before transferring property to a trust or other legal entity.
Reference: Wills, Trusts & Estates Prof Blog (December 19, 2014) "Title Insurance Issues Triggered By Estate Planning Transfers"