Umbrella policies and trusts

[bingybear]

Yes my parents set up a trust as co-settlors. The original attorney is long gone and we hired a trust administration attorney.

I haven't asked her about umbrella coverage yet.

But she's been generally talking about how we will split the assets up among several trusts, the one tied to my late father is irrevocable but we can create a trust for my mother which is revocable while she is alive.

We haven't done the mapping of how the assets will be delegated.

The idea is to minimize estate taxes down the line.

My mother is 83 and she still drives so I wanted to make sure we cover her to the highest extent possible.

But recently we refinanced the mortgage on her residence, which is held in trust.

So I applied for her and at closing, when they discovered she resigned as trustee and that I'm now trustee, they had to change the paper work around. Essentially, I assign the property to her temporarily for the purpose to getting the new mortgage and then she assigns it back to the trust.

That is why I'm unclear on whether to get umbrella policy for her or increase the coverage on my own policy to cover some of the estate assets.

So you took the house out of the trust so that you could get a mortgage on your mother's house and then you changed the owner back to the trust, is this correct? I assume you did this because she could not get a mortgage on a house that was not in her name? (that is a question) Did this violate the mortgage agreement? I understand you were not trying to do anything wrong and I don't know if you violated anything in the mortgage agreement. But I have to think there was a reason they wanted a to have a house in a person's name for the mortgage.

Also, getting yourself as trustee would likely not protect the items in the trust, but may cover errors and omissions as trustee.

 

[explanade]

Yes we applied for the new mortgage under her name, her credit, her income, her SSN.

They have a lot of accounts and a couple of real estate properties.

So it's going to be a hassle to arrange everything into different entities, to minimize estate taxes if any.

Of course the point of the trust was to avoid expensive and lengthy probate.

 

[MJ]

Let's go through an example. Suppose you are involved in an auto accident with a loss of life. The estate of the deceased will send a notice of intent to file a lawsuit.

The estate will go through discovery to learn the insurance policy limits. That is easy enough to find. They may also do discovery on your personal assets and discover another $1M in assets they could go after.

I just go off the phone with my state farm rep. She is not an agent but she assured me 100% that they DO NOT give out insurance information in a lawsuit unless I authorize it, which of course I WOULD NOT.

Is she correct or can attorneys legally compel them to reveal my liability coverage?

 

[Brat]

It isn't in the interest of your insurer to reveal your liability coverage amount. Keep in mind the fact that your insurer will be defending you in any lawsuit so simply communicate that type of demand to them.

 

[ExFlyBoy5]

It isn't in the interest of your insurer to reveal your liability coverage amount. Keep in mind the fact that your insurer will be defending you in any lawsuit so simply communicate that type of demand to them.

In some states, as soon as a claim is filed, the policy limits must be disclosed. No discovery or other legal "digging" required. And, there are some information brokers that have much more information on your assets than you might expect. There is big $$$ in asset location.

 

[Luvdogs]

Couple things--my understanding is that 401K plans are protected from lawsuits but IRAs are not--or are at least not as protected. I don't have any firsthand info but that is what I have read FWIW.

Anyone have any more solid info on that?

Also, we pay about $1000 for either 2 or 3 million umbrella (still have one kid on it with a car so that drives up the cost). But the difference in premium of 1 million vs 2 or 3 million was very little once you get the initial 1 million coverage.

 

[bingybear]

Couple things--my understanding is that 401K plans are protected from lawsuits but IRAs are not--or are at least not as protected. I don't have any firsthand info but that is what I have read FWIW.

Anyone have any more solid info on that?

IRA's creditor protection is dependent upon which state you live in. Not sure about 401ks. However, if you get successfully sued and you are protecting your $ in a 401k, be careful when you withdraw from the 401k... the protection would likely be gone.

 

[Ready]

I just go off the phone with my state farm rep. She is not an agent but she assured me 100% that they DO NOT give out insurance information in a lawsuit unless I authorize it, which of course I WOULD NOT.

Is she correct or can attorneys legally compel them to reveal my liability coverage?

Yes and no. No insurance company would voluntarily disclose this information, but as ExFlyBoy5 stated, it is easy to get this information once a lawsuit has been filed and discovery has been initiated. So I would say her response is a bit naive.

 

[explanade]

Yes and no. No insurance company would voluntarily disclose this information, but as ExFlyBoy5 stated, it is easy to get this information once a lawsuit has been filed and discovery has been initiated. So I would say her response is a bit naive.

Well based on other threads, most carriers only underwrite umbrellas to $5 million.

I just talked with an insurer. He said I might be able to reinsure up to $10 million with Lloyd's of London.

But if it's true that most umbrella insurers go up to $5 million, wouldn't most attorneys know that?

 

[Dash man]

Well based on other threads, most carriers only underwrite umbrellas to $5 million.



I just talked with an insurer. He said I might be able to reinsure up to $10 million with Lloyd's of London.



But if it's true that most umbrella insurers go up to $5 million, wouldn't most attorneys know that?

Typically if you want more than $5M your insurer will want to share the risk. They’ll work with reinsurance companies to help you out.

 

[street]

I went in 3 week ago to get a price on an Umbrella Liability Coverage Policy. They called once and asked a few more questions and said they would get back with a price for 1,2 and 3 Million Policy. Now I haven't heard back from them yet. Does this sound unusual to have to wait this long for a price?

When they do give a price I will have a few questions for them also. From a poster here I need to ask if the uninsured and under insured are covered with this policy. Is there any other questions I need to ask about the Umbrella policy?

 

[Al18]

street, if you've waited for 3 weeks for a quote, I would shop for another company. If it takes them 3 week to quote, imagine how long it will be if you actually tried to use the coverage!

 

[street]

^ >>> yes exactly.

 

[MJ]

I know this is personal decision but I thought I would ask this anyway.
Right now, my total liability protection is $500,000 above my exposed assets.
Is it overkill to get another $1,000,000 (next increment) beyond your total exposed assets or I'm I wasting an extra $80/year? That would give me $1.5 mil additional protection. My wife and I don't live a liability exposed lifestyle, no guns, normal driving, live in a condo, no drinking, in other words, a boring normal life .

 

[Ready]

Well based on other threads, most carriers only underwrite umbrellas to $5 million.

I just talked with an insurer. He said I might be able to reinsure up to $10 million with Lloyd's of London.

But if it's true that most umbrella insurers go up to $5 million, wouldn't most attorneys know that?

Umbrella policies typically range from $1M-$5M. So an attorney could guess that the most the policy may cover would be $5M, but they would have to do some discovery to find out for sure. There is a big difference between $1M and $5M.

But I wouldn't overthink the idea of an attorney suing for $5M just because you have it. In practice it doesn't work that way. A jury still has to find damages totaling $5M which is highly unlikely unless there was gross negligence.

 

[Dash man]

I know this is personal decision but I thought I would ask this anyway.
Right now, my total liability protection is $500,000 over my exposed assets.
Is it overkill to get another $1,000,000 (next increment) beyond your total exposed assets or I'm I wasting an extra $80/year? My wife and I don't live a liability exposed lifestyle, no guns, normal driving, live in a condo, no drinking, in other words, a boring normal life .

It is a personal decision and only you know your complete exposure.
Personally, I don’t mind paying for a bit more coverage than I might need when looking at exposure. It’s relatively cheap insurance and uses the insurance company’s attack dog lawyers if needed.

 

[explanade]

Umbrella policies typically range from $1M-$5M. So an attorney could guess that the most the policy may cover would be $5M, but they would have to do some discovery to find out for sure. There is a big difference between $1M and $5M.

But I wouldn't overthink the idea of an attorney suing for $5M just because you have it. In practice it doesn't work that way. A jury still has to find damages totaling $5M which is highly unlikely unless there was gross negligence.

You're at fault for an accident which kills a breadwinner for a family who was making a good salary.

The survivors and their lawyer won't seek to sue for maximum damages?

 

[ncbill]

You're at fault for an accident which kills a breadwinner for a family who was making a good salary.

The survivors and their lawyer won't seek to sue for maximum damages?

Bird in hand vs. two in bush.

A company I worked for over a decade ago faced a lawsuit by a badly-injured plaintiff who rejected the insurance company's offer (~$1 million IIRC)

So the case wound through federal court for the next 5+ years, with the plaintiff (sole breadwinner for their family) losing at trial.

 

[kimcdougc]

We have a $2 million umbrella policy "just in case" for around $350 per year. It gives us a peace of mind. No questions asked from the insurance company.

 

[Ready]

You're at fault for an accident which kills a breadwinner for a family who was making a good salary.



The survivors and their lawyer won't seek to sue for maximum damages?

Yes they will. And if you were drunk while driving they will get a big payout. If it was just a typical accident that would not rise to the level of gross negligence.

 

[Scuba]

Just an update on the question of whether one’s trust needs to be a named insured on umbrella policy if one’s assets are held in the trust. Our trust attorney confirmed today what our Allstate agent had told us - ie as long as the trust’s only trustees are DH and me, there is no need to name the trust as an additional insured. All of our insurance policies will cover DH and my property and liability, even if trust-owned property is involved in the claim. The trust is transparent to the insurance company because DH and I are in complete control of it.

 

[Ready]

Just an update on the question of whether one’s trust needs to be a named insured on umbrella policy if one’s assets are held in the trust. Our trust attorney confirmed today what our Allstate agent had told us - ie as long as the trust’s only trustees are DH and me, there is no need to name the trust as an additional insured. All of our insurance policies will cover DH and my property and liability, even if trust-owned property is involved in the claim. The trust is transparent to the insurance company because DH and I are in complete control of it.

I'm sure your attorney knows a lot more than I do about this, so it's probably good advice. But somehow it still doesn't sit well with me. Allstate was the only insurance company I spoke with who refused to name the trust on our policy. Every other company not only said no problem but confirmed that we absolutely need to do so. So something doesn't seem completely right here.

We did end up moving the policy from Allstate to Amica this week, so that solved the problem for us.