By Joseph Ferrucci
September 16, 2015

 

Typically, when you purchase real property, the title company will offer you (the buyer) title insurance for the property.  Title insurance protects you against losses that would result from errors in title, such as boundary disputes with neighbors or undiscovered liens or easements.  Like property insurance, title insurance covers the owner, not the property itself.  When ownership changes from you to your living trust, the title insurance policy may no longer provide coverage.

Title companies typically provide standard policies through the California Land Title Association (CLTA) and the American Land Title Association (ALTA).  CLTA and ALTA have issued different versions of their title policies in different years.  Each policy has its own unique provisions. Some policies expressly extend coverage to living trusts, while others do not.

A 2012 review concluded that CLTA/ALTA Homeowner’s Policy of Title Insurance, 1998 to present does extend coverage to living trusts, because under the terms of the policy, the definition of the “insured” party includes the trustee of a trust to whom the insured party transfers title. ALTA Owner’s Policy, 2006 to present, covers living trusts only if the insured purchased the “extended” version of the policy and paid the higher premium for the extended coverage.

In contrast, CLTA Standard Coverage Policy 1990 and ALTA Owner’s Policies 1970, 1987, 1990, and 1992 do not appear to extend coverage to living trusts.  California Assembly Member Steve Fox proposed A.B. 2196 in 2013 to extend coverage to living trusts, for all policies, but the bill failed to move forward.  Starting May 18, 2014, CLTA altered Standard Coverage Policy 1990 to include language extending coverage to living trusts, but other policies remain unchanged.

How can a property owner make sense of all this?  And what should be done?

First, if you purchased your home after 1997, it is likely that your title insurance policy covers your living trust, because most homeowner title insurance policies issued since 1998 were CLTA 1998 policies.  But if you purchased your home before 1998, or if you own investment property, you may not have a CLTA 1998 policy.  Thus, it depends on what particular title insurance policy you have.  To confirm whether your policy covers your living trust, carefully review your title insurance policy.  The policy should have been provided to you at the close of escrow.  If you cannot find a copy of your policy, contact your title company and request a copy.

Second, if you find out that your policy does not cover your living trust, you have two options:

  1. You may contact the title insurance company and request an endorsement (specifically, a CLTA 107.9 endorsement) to extend coverage to your living trust.  Generally, title insurance companies will issue these endorsements for a small fee.
  2. If you have an ALTA 2006 – present policy, you may obtain “extended” coverage on the policy by paying an additional premium. 

Keep in mind that title disputes are relatively rare and typically come up in the first few years of purchasing real property.  Still, it is better to be safe than sorry. For added peace of mind, review your title insurance policy, and if your policy does not already provide coverage to your living trust, request either an endorsement or extended coverage.

 

DISCLAIMER: This article contains general information about legal topics. It is not, and is not intended to be, legal advice. Your use of information in this article does not make Joseph Ferrucci, Attorney at Law P.C., or any of its attorneys, your attorney and does not establish an attorney-client relationship. Every case must be analyzed independently, based on the specific and unique facts of the case. If you have questions about your particular case, consult with a licensed, qualified attorney. This article is intended for personal use only, and not for publication or distribution.

© 2016 Joseph Ferrucci, Attorney at Law P.C.