A recent Maine Supreme Judicial Court decision should serve as a cautionary tale to beneficiaries of any estate involving real estate. Make sure any improvements on the real estate that are part of the estate are properly insured and don't assume that a homeowners' policy bought by the person who died will cover the home after his or her death.

In this case, Estate of Carol G. Frye v. MMG Insurance Company, the person who died, Caroll Frye, had given the home to his sons reserving a life estate to himself (the right to live there till his death). He then bought an insurance policy that covered his personal property and his interest in the real estate. His interest in the real estate terminated upon his death, so the insurance policy only covered his personal property after his death. About three months after he died, the house burned to the ground. Mr. Frye's sons asked for payment to the estate for the replacement value of the house, but the insurance company only paid the estate for the value of the personal property loss.

The sons challenged the insurance company in court. The trial court granted the sons' motion for summary judgment, but the Supreme Judicial Court reversed that decision, siding with the insurance company.

The take-home message is, if you are the beneficiary of an estate that includes real estate with improvements, make sure any homeowners' insurance covers any and all losses to the estate and, if not, figure out how to modify the existing policy or secure a new one.

If you don't know whether the policy you have covers what you need it to cover, we would be happy to review it for you. Give us a call.