Beneficiaries of house not named in homeowner's insurance

[vbnm]

What is the name of your state (only U.S. law)? NY
As one of three beneficiaries of a trust containing only a house, which is in poor condition, should I take out my own homeowners insurance policy to be covered in the event of a loss? It would probably cost about $1,200/year.

When our relative passed away, one of the beneficiaries of the trust, who is also one of two trustees of the trust, added the house under her existing homeowner's insurance policy, which covers several investment properties that she solely owns. She is now the only named beneficiary on the homeowner's insurance, and it does not say in the policy that she is "trustee of the 123 trust."

She says that she is unable to get a separate insurance policy due to the poor condition of the house (electric needs to be upgraded). She dismissed my complaint about her being the only named insured on the policy. She wants to hold the property and isn't ready to sell or buy me out. I'm very concerned about liability and/or an electrical fire. If we suffer a loss, I don't want to spend my inheritance in court to get her to share the insurance proceeds under her policy.

If I take out my own policy, while she still has a separate policy, how could I expect the insurance companies to treat each policyholder? Would they make one policy secondary and only pay the amount that was not covered under the primary policy?

Please help!

 

[moburkes]

If there is a loss, the house will need to be rebuild. The only way you'll get cash is if the policy specifically states that they will allow you to receive cash instead of requiring you to rebuild. So, if there is a loss, you rebuild a new house then sell it. At that point, the proceeds will go to the estate.

But, if you feel it necessary, you can purchase a vacant home policy, but, based on your description, I can't imagine what company will issue it.

 

[vbnm]

Thanks for your help!!

Thank you so much for your response. It's enormously helpful!

 

[JustAPal00]

If there is a loss, the house will need to be rebuild. The only way you'll get cash is if the policy specifically states that they will allow you to receive cash instead of requiring you to rebuild. So, if there is a loss, you rebuild a new house then sell it. At that point, the proceeds will go to the estate.

But, if you feel it necessary, you can purchase a vacant home policy, but, based on your description, I can't imagine what company will issue it.

You don't have to rebuild the house! The trust would be responsible for clearing the debris and rendering the lot safe, and paying off all existing leins, but after that they could do with the money what they want. They would only get face value of the policy plus riders, so GRC wouldn't come into play.

 

[vbnm]

Thank you for your response!! Okay, now I'm back to losing sleep again.

The trustee who is the named insured would get the insurance proceeds, correct? She dismisses my concerns, and is not willing to change the name on the policy. And unless she willingly shares it, the beneficiaries would be in the position of having to spend money on lawyers to force her to? Correct?

Please let me know what you think. Your help is much appreciated!

 

[moburkes]

Thank you for your response!! Okay, now I'm back to losing sleep again.

The trustee who is the named insured would get the insurance proceeds, correct? She dismisses my concerns, and is not willing to change the name on the policy. And unless she willingly shares it, the beneficiaries would be in the position of having to spend money on lawyers to force her to? Correct?

Please let me know what you think. Your help is much appreciated!

The check will be issued "estate of ___" or "person, trustee for ___". She won't be able to deposit this check in a personal bank account. Also, the money must be used to repair the property. Lastly, if you purchase your own policy for the property, and there is a claim, your check will be for a PORTION of the claim, and the other check will be for a PORTION of the claim. Neither of you will receive a full for the claim. And, again, your check won't be written in your name, IF an insurance company allows you to purchase a policy. They will likely only allow a poliy in the name of the estate or in the name of the trustee.

 

[JustAPal00]

The check will be issued "estate of ___" or "person, trustee for ___". She won't be able to deposit this check in a personal bank account. Also, the money must be used to repair the property. Lastly, if you purchase your own policy for the property, and there is a claim, your check will be for a PORTION of the claim, and the other check will be for a PORTION of the claim. Neither of you will receive a full for the claim. And, again, your check won't be written in your name, IF an insurance company allows you to purchase a policy. They will likely only allow a poliy in the name of the estate or in the name of the trustee.

If by this you mean rebuild the home, then no it does not. The home does not have to be rebuilt! It can not be left in disrepair or abandoned, but it doesn't have to be rebuilt. You are correct however about the money being paid to the trust and not to an individual.

 

[moburkes]

If by this you mean rebuild the home, then no it does not. The home does not have to be rebuilt! It can not be left in disrepair or abandoned, but it doesn't have to be rebuilt. You are correct however about the money being paid to the trust and not to an individual.

You're saying the trustee doesn't have the obliation to rebuild? You're saying that the trustee can take the money and run?

 

[JustAPal00]

You're saying the trustee doesn't have the obliation to rebuild? You're saying that the trustee can take the money and run?

No, that's not what I'm saying. I'm saying that if a fire were to destroy the home, the the proceeds would be paid to the trust. The trustee would have the right to decide wether to rebuild or clear the land and let the trust keep the difference. The trustee is obligated to distribute the equity in the trust as stated in the will. If the trustee keeps the money, that's another legal issue. I was just pointing out that the home doesn't have to be rebuilt.

 

[moburkes]

No, that's not what I'm saying. I'm saying that if a fire were to destroy the home, the the proceeds would be paid to the trust. The trustee would have the right to decide wether to rebuild or clear the land and let the trust keep the difference. The trustee is obligated to distribute the equity in the trust as stated in the will. If the trustee keeps the money, that's another legal issue. I was just pointing out that the home doesn't have to be rebuilt.

You're making the assumption for total loss. I was making the assumption for partial loss. Most home claims are partial, not total losses.

 

[JustAPal00]

You're making the assumption for total loss. I was making the assumption for partial loss. Most home claims are partial, not total losses.

It doesn't matter! The trustee has the right to determine wether to rebuild or remove a home. There is no law that says they have to make smart decisions. If it's a partial loss and the trustee decides that it would be less of a headache to remove the remaining home rather than fix it, they can. Whatever money is left over, if any, would go into the trust. Even with a partial loss, the trustee could decide to sell the home as is, and put the insurance payment into the trust. They do not have to repair the home under any circumstances!

 

[moburkes]

It doesn't matter! The trustee has the right to determine wether to rebuild or remove a home. There is no law that says they have to make smart decisions. If it's a partial loss and the trustee decides that it would be less of a headache to remove the remaining home rather than fix it, they can. Whatever money is left over, if any, would go into the trust. Even with a partial loss, the trustee could decide to sell the home as is, and put the insurance payment into the trust. They do not have to repair the home under any circumstances!

Yes, I do agree with the points you've made. However, OP is under the assumption (or at least that's the way I'm reading it) that the trustee will have an insurance payment made out to himself (not the trust), and will be able to spend that money. Neither of us knows if there is a loan on the property. Also, if they don't fix the damage the city could places fines on the property, so there are a lot of assumptions being made. There's also the bad market.

In any case, trustee shouldn't be able to keep the money for himself, and I don't see a point in OP also taking out an insurance policy.

OP, the 2nd policy (assuming that you could get one) would pay a portion of the claim, not 2ndary. So, if both policies are for the exact same coverages, then they'd each pay 50% of the damage.

 

[vbnm]

Thanks for your responses.

The named insured on the homeowner's policy is co-trustee #1's first and last name ONLY. It does not say "first name last name, trustee of abc trust." It also omits co-trustee #2's name (me), and there is no reference to a trust in the policy. Also, it is not a separate policy. It is included in an existing policy that covers properties solely-owned by co-trustee #1.

What would ensure that she couldn't just keep whatever the proceeds are, unless we sued her? (In which case the lawyers would end up with our inheritance.)

Your help is much appreciated.

 

[moburkes]

You'd need to sue.

 

[vbnm]

Thank you--your responses are extremely helpful!

As a co-trustee, I feel responsible for making the beneficiaries aware of this issue and the risks of not correcting the situation. I'm hoping they have more influence with co-trustee #1 than I have had alone.

Thanks so much!