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On money

Pondering revocable trust? Call insurance

Published May 29, 2005

If you've been thinking of putting your home in a revocable trust, talk to your insurance agent first.

Some insurance companies either will not insure the property or will not provide the same level of coverage if a trust owns the property.

"I suspect some people haven't found out about this problem because they haven't told their insurance agent that they've retitled their home," Clearwater accountant David Bezemek said. "My dad found out about the problem at renewal time when we volunteered the information to the insurance company. We cured the problem by taking the home back out of the revocable trust."

Some lawyers recommend using revocable trusts, also known as living trusts, as a form of estate planning. If you set one up, you can name yourself as the beneficiary and initial trustee and specify who should take over the trustee role when you become incapacitated or die. The trust outlines who inherits your property when you die. As the revocable part implies, you can change or revoke your trust while you are alive.

But the terms of the trust apply only to property titled in the name of the trust, which is where the situation gets sticky.

Citizens Property Insurance Corp., the statewide insurer of last resort, says it won't provide homeowners insurance if a trust would be the named insured on the policy.

"If the trust has to be the named insured, we write what's called a dwelling policy, which has different coverage limitations," Citizens spokesman Justin Glover said. "We cannot provide personal liability coverage because the person is not the insured."

Citizens can provide the more comprehensive homeowners coverage if the terms of the trust permit the beneficiary to be the named insured, he said.

Clearwater lawyer Alan Gassman, who draws up many trusts for clients, was surprised to learn about the restriction.

"There is no more risk because a house is owned by a revocable trust," he said. "I'll start adding this clause to each trust about the grantor or grantors being the named insureds, but it is a clause I have never used, seen or heard of before. When push comes to shove and someone with a trust gets sued, I'll bet that the courts will force the carrier to be responsible, but that is a lot of stress for someone to go through."

People who own property in revocable trusts should discuss the issue with their insurance agents, Gassman said, and then call their lawyers for a brief amendment if their agency won't approve coverage.

Q. We retirees were sitting around the pool deck when the subject of money given to relatives came up. It could not be decided whether this was limited by the government in amount or time. Is it?

Yes. There is something called the gift tax, which the IRS imposes after you have given away your first $1-million. So unless you or one of your neighbors was thinking of giving away more than $1-million, you don't have to worry about paying taxes as a result of your generosity.

But you are supposed to fill out a gift tax form if you give more than $11,000 to any person in a calendar year. Medical and tuition bills paid directly to the provider don't count toward the limit. Higher limits apply to contributions to 529 college savings programs.

Gifts of more than $11,000 in a year count toward your lifetime gift-tax exemption of $1-million and reduce your $1.5-million estate-tax exemption.

This is a frequently asked question, so a lot of people must have money they are thinking of giving away.

Important Reminder

If you have student loans or know someone who does, going through loan consolidation before July 1 will provide substantial savings on interest rates. The U.S. Department of Education has taken the unusual step of permitting students who are still in college to consolidate their loans instead of waiting until after they finish school. Check with your lender and its competitors for details.

Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to or Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.

[Last modified May 29, 2005, 01:08:12]

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