Climate Change and Estate Planning: Navigating Insurance Issues, Real Estate Investments, and Beneficiary Expectations

Wildfires, hurricanes, floods and heatwaves are no longer rare. In the past few years the United States has faced an unprecedented series of catastrophic events. 2025 wildfires near Los Angeles killed 29 people, destroyed 16,000 structures and displaced more than 100,000 residents. Just a year earlier Hurricane Helene flooded towns in western North Carolina and killed over 100 people, leaving billions of dollars in damage. The National Oceanic and Atmospheric Administration reports that the U.S. experienced 27 separate disasters costing more than $1 billion each in 2024, with total damages of about $183 billion. Climate‑driven disasters are expected to increase in frequency and severity, raising questions about the security of real estate assets held in trusts and estates.

As more families use trusts to hold vacation homes, income properties and legacy real estate, trustees must grapple with the rising risks of climate change. Many trust documents were drafted before climate threats were fully understood. Today trustees are facing higher insurance premiums, non‑renewals and even “uninsurable” properties. In this article we explore how climate change is affecting property ownership and insurance, and how trustees can protect trust assets and beneficiaries.

The Insurance Crisis: Homes Becoming Uninsurable

Insurance is fundamental to property ownership, yet climate change is upending the market. Insurers are responding to skyrocketing claims by raising premiums, imposing strict underwriting guidelines or pulling out of high‑risk areas. The Center for American Progress notes that the U.S. is moving toward an uninsurable future as companies reduce coverage or exit markets, leaving property owners with few options. Because trusts often own high‑value properties in coastal or wildfire‑prone areas, trustees are uniquely exposed to this trend. Without adequate insurance, a single disaster could wipe out decades of wealth and expose trustees to claims of negligence.

At the same time, flood risk is far more widespread than many people realize. Recent studies show that 14.6 million U.S. properties face substantial flood risk, nearly 70 % more than those officially classified as high risk by FEMA. Sea‑level rise and extreme rain events now endanger properties far from the coasts, including desert and mountain regions. Many homeowners underestimate or ignore flood risk until it’s too late. For trustees, this means a careful review of every property’s vulnerability and insurance coverage is essential, even in places previously thought to be safe.

Assessing Climate Risk in Your Trust

Before developing a mitigation plan, trustees must understand the specific risks faced by each property. Here are critical steps:

1. Map risk exposure – Evaluate wildfire, flood, hurricane, and heat risk using public tools such as FEMA maps, state wildfire hazard maps and climate risk analytics. Even inland homes may be vulnerable to extreme rainfall or drought. Compare hazard maps with property locations to identify high‑risk assets.

2. Review insurance policies – Determine current coverage limits, deductibles and exclusions. Many standard policies exclude flood damage entirely and limit wildfire or wind damage coverage. Check whether the policy adheres to the “80% rule,” which requires coverage equal to at least 80% of replacement value to avoid coinsurance penalties.

3. Investigate insurer viability – Some carriers are experiencing financial distress due to climate losses. Monitor insurer ratings and state regulatory actions. Keep abreast of changes in state “FAIR plans” or residual insurance pools that provide coverage when private insurers withdraw.

4. Consider property location – If trust beneficiaries or future plans allow, evaluate whether selling or relocating a high‑risk property makes sense. Real estate markets in hazard zones may decline as risk and insurance costs rise.

Mitigating the Impact: Strategies for Trustees

Strengthen Insurance Coverage

Securing comprehensive coverage is the first line of defense. When standard markets retreat, trustees can explore surplus lines insurers or state‑run programs such as FAIR plans and the National Flood Insurance Program (NFIP). While these programs may have higher premiums or limited coverage, they protect against catastrophic losses. Trustees should coordinate with insurance advisors to:

• Increase dwelling limits to reflect rising construction costs.

• Add riders for flood, wind and wildfire perils not covered under standard policies.

• Reassess deductibles to strike a balance between premiums and out‑of‑pocket risk.

• Ensure liability coverage is sufficient to protect the trust from claims arising from injury or property damage.

Invest in Resilience and Risk Reduction

Beyond insurance, proactive measures can reduce the likelihood and severity of climate‑related damage:

• Harden structures by installing fire‑resistant roofs, ember‑resistant vents, flood barriers and hurricane shutters. Encourage beneficiaries to perform regular maintenance such as clearing gutters and brush to reduce wildfire spread.

• Relocate or elevate critical systems (HVAC, electrical panels, propane tanks) above expected flood levels.

• Develop evacuation and emergency plans that include storage of key documents and digital backups.

• Consider conservation easements or land management strategies that reduce development intensity and preserve natural buffers.

Diversify and Adapt Real Estate Holdings

Trustees should consider whether concentrated real estate holdings expose beneficiaries to excessive climate risk. Diversification into different geographic regions or asset classes may reduce vulnerability. For example, an inland rental property might provide stable income if a coastal vacation home becomes uninhabitable due to rising seas or repeated hurricanes. Similarly, investing in infrastructure improvements such as renewable energy on trust properties can lower operating costs and improve sustainability. Collaboration with a real‑estate advisor familiar with climate trends can inform these decisions.

Plan for Contingency and Liquidity

Climate disasters can force sudden repairs or relocations. Trustees should maintain adequate liquidity in the trust or establish lines of credit to cover deductibles and uninsured losses. Consider setting up emergency funds specifically earmarked for climate‑related expenses. Additionally, trust documents may need amendments to grant trustees flexibility to sell or rebuild properties after disasters without seeking beneficiary consent.

Regulatory and Legal Considerations

Climate risk is prompting changes in state and federal regulations. Some states are tightening building codes, mandating wildfire mitigation or restricting development in high‑risk zones. Others are enacting “climate disclosure” laws requiring sellers or landlords to inform buyers or tenants about known hazards. Trustees must stay informed about evolving requirements and ensure properties comply to avoid penalties or liability. They may need to engage local counsel in multiple jurisdictions, particularly for trusts holding properties in states with different rules.

Litigation related to climate risk is also growing. Insurance disputes over coverage, claims against builders for negligent construction, and suits against public entities for failing to protect residents are increasing. Trustees should maintain adequate umbrella liability coverage and consult legal counsel about potential exposure.

Communicating with Beneficiaries

Climate change is not just an environmental issue—it directly affects the financial well‑being of trust beneficiaries. Transparent communication helps manage expectations and reduce disputes. Trustees should:

• Share risk assessments and insurance updates with beneficiaries. Explain how climate factors influence property management decisions and distributions.

• Discuss potential trade‑offs between preserving sentimental properties and protecting wealth. Some beneficiaries may prefer to keep a family beach house at all costs, while others may favor selling it to avoid escalating expenses.

• Document decisions. Maintain written records of risk analyses, insurance renewals, and mitigation efforts to demonstrate prudent administration if questioned.

Looking Ahead: The Trustee’s Role in a Warming World

Climate change will continue to reshape the landscape of estate planning. Trustees who proactively address these challenges can preserve trust assets and fulfill fiduciary obligations. Key takeaways include:

• Acknowledge the reality of increasing disasters.  Wildfires, floods and storms are more frequent and destructive. Ignoring this trend places trust assets at risk.

• Understand insurance dynamics and explore alternatives.  Rising premiums and non‑renewals require vigilance and creativity; state programs may offer a safety net.

• Invest in resilience and diversified holdings.  Physical upgrades and geographic diversification protect property value.

• Maintain liquidity and flexibility.  Plan for unexpected expenses and be prepared to amend the trust or shift strategy.

• Educate beneficiaries.  Clear communication builds consensus and avoids litigation.

Climate risk may feel overwhelming, but with careful planning trustees can navigate the storm. By acknowledging changing conditions, seeking expert advice and acting proactively, trustees ensure that real estate remains a source of security, not vulnerability, for generations to come.