If you are like many diligent property owners, you have worked with an attorney to create a plan for transferring assets after your death. This often involves the formation of a revocable living trust which allows you to retain ownership and control of your assets during life and to direct how they are distributed after your death while helping your heirs avoid probate.
Should I Title My Vehicle to Trust?
It is common practice to transfer ownership of real estate to your trust. Should you also place your vehicles in trust?
While you can title your vehicles to trust, this may result in some consequences you didn’t bargain for. Some insurers may charge higher rates if a vehicle is owned by a trust or they may refuse to insure the vehicle at all. Your lender may balk at issuing a loan to the trust or modifying an existing loan to acknowledge change in ownership to a trust. If you are involved in a fender bender, you may receive a check issued in the name of the trust. This can be problematic if you don’t have a bank account in the name of the trust.
Transfer of Title to a Surviving Spouse
Vehicle laws differ from state to state, but a vehicle typically passes automatically to a surviving spouse upon the death of the owner. The surviving spouse may or may not need to re-title the vehicle to their name before transferring it to a third party. Some examples:
- New Hampshire allows a surviving spouse to transfer the title to a third party by signing the title and providing a copy of the death certificate. The surviving spouse is not required to have the title reissued in their name first.
- Massachusetts and Florida require the title to be re-issued to the surviving spouse.
Transfer of Title to Someone Else
If you die without a spouse or would like to leave a vehicle to someone other than your spouse, the process can be more complicated. It’s best to put a plan in place prior to your death so your heirs don’t have to go through probate to have a vehicle title transferred.
Transfer by Will – You could designate the recipient of the vehicle in your will, but this would typically require that an executor or administrator of the estate be named by the probate court before the title can be issued to the heir.
Name a Beneficiary on the Title – Your state may allow you to name a beneficiary on your title. This could be an ideal solution.
- New Hampshire and Florida do not currently have this provision.
- Neither does Massachusetts, but there is a bill supporting this currently in committee.
Name a Joint Owner – If your state allows for joint ownership of a vehicle with rights of survivorship, the vehicle title will pass to the named co-owner.
- This provision exists in New Hampshire and Florida.
- While Massachusetts does allow for joint ownership, our research suggests that rights of survivorship are probably NOT available to non-spouses. We recommend using the practical solution provided below.
- If your state title application doesn’t specify that joint owners have rights of survivorship, you will want to verify this before assuming that a listed co-owner will automatically get full title upon your death.
- There are obvious drawbacks to naming a joint owner for the sole purpose of avoiding probate after your death.
- You may change your mind and not want that person to have half ownership, or own the vehicle after you pass.
- If the other party files for bankruptcy, it would subject the vehicle to a creditor claim.
- If the other party doesn’t have a financial stake in the vehicle, you have gifted them half of the value of the vehicle. If half of the value is over $18,000 (2024) then you have to file a gift tax return.
A Practical Solution
If the above options for leaving a vehicle to someone other than your spouse seem less than ideal, consider a more practical solution. You can sign (not date) the back of the title as Seller and keep it in a secure location with written instructions identifying the desired recipient of the vehicle. Make sure that the location is known by and accessible to your heirs. The recipient can then fill in their name and odometer reading after you pass.
Need Help?
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Bartley Financial has an experienced team of CPAs and CFPs® (Certified Financial Planners®) dedicated to helping clients manage their investment portfolios, plan for retirement, strategize taxes, or execute any other initiatives in pursuit of optimum financial health and minimal financial stress. From our offices in Andover, MA, and Bedford, NH, we work to ease clients’ financial concerns, strengthen their portfolios, and assuage their worry that they don’t know what they don’t know.
Contact us today to begin a relationship with a team of knowledgeable, trustworthy professionals who put their clients first.
By Joanne Tackes
Joanne is a Certified Public Accountant and Financial Planner on our team who believes that no financial decision should be made without knowledge of the tax consequences. Her methodical approach to financial planning leaves no stone unturned as she works diligently to provide you with a comprehensive financial plan.
