How to handle car titling in estate planning

Anyone who has worked with an attorney to create a revocable trust has been advised, possibly even admonished, to be sure to title their assets in the name of the trust. And so we dutifully set off to retitle our house, our bank and brokerage accounts and anything else capable of being retitled into the name of our new trust. At some point we look in our garage and think: “But what about the car?” This is a question I often hear from clients and it is important since a car’s ownership has to be transferred regardless of its value.

The short answer is, “Yes, you can retitle your car into the name of your revocable trust.” But just because you can, should you? For many people, there are alternatives to titling the car in the name of your trust that will accomplish the goals of avoiding probate and ensuring that the car passes per your wishes without adding unnecessary complications.

First, for purposes of this article, when I refer to a “trust,” I will be referring to a revocable trust – the sort of trust that is created during your lifetime and that can be changed or dissolved at any time by the trust’s creator as long as he or she is alive and competent. I can’t think of a situation in which I would recommend putting a car into an irrevocable trust.

Second, when I refer to a “car” in this article, I will be referring to the car you drive daily. Car collections, commercial vehicles and Bugattis are outside the scope of this discussion and deserve an article all their own.

Why Is This An Issue?

There are a few good reasons to think through this question before making a decision. In my experience advising clients on their estate plans, I found that some insurance companies are not familiar with revocable trusts and can make the car owner jump through additional hoops to get the car insured. If you do choose to title your car in the trust name, please call your insurance agent to be sure that your policy is properly issued. It is also my experience that lenders are not eager to finance a car titled in the name of a trust. Most importantly, remember that your trust will become irrevocable at your death. If someone continues driving your car after your death and is involved in an accident, ALL assets of your now irrevocable trust are at a risk should there be a lawsuit. Those you intended to benefit from your estate could lose their inheritance due to needless litigation.    

What If Titling The Car In The Name of my Trust Is Not the Ideal Choice?

You may simply leave the car titled in your individual name. In that case, at your death, a relative can complete a No Administrator Affidavit and take it, along with the death certificate, to the local tag agency to transfer title of the car. This option is only available when there are no other assets outside of the trust that require a probate and when it is clear who should receive the car. As I mentioned, only a family member can submit this form. If you have any reason to think there will be a disagreement over who should receive your car at your death, this is probably not a good option for your situation.

A second commonly used option is to title the car in joint name with right of survivorship. Generally, this is an option chosen by married couples.  At the death of one spouse, the other automatically becomes the owner of the car. A word of caution – especially if you are a married couple that maintains separate assets: titling the car in joint name with your spouse can expose assets of both spouses to liability should one spouse have an accident. Also think carefully and consult your attorney before titling your car in joint name with someone other than your spouse. It can be tempting for a single person to put, for example, his or her child on the title as a joint owner to avoid probate. Doing this could have unintended consequences, such as causing the car to be subject to the creditors of your child.

A third option, and one that I like very much, is the Transfer On Death Notice procedures that have been available to Oklahomans since 2016. The Transfer On Death Notice acts much like a beneficiary designation on a bank account in that the title automatically passes at the death of the car owner. Upon the owner’s death, as long as the Transfer On Death (TOD) Notice Application (available at www.ok.gov/tax/Individuals/Motor_Vehicle/Forms_&_Publications/General_Motor_Vehicle_Forms/) is completed and properly signed, the “transferee” (the person designed by the owner to receive the car) simply submits the necessary paperwork and takes title to the car.

The TOD Notice procedures are a relatively straightforward process and allow flexibility in that as long as the owner of the car has capacity, he or she may revoke and/or change the instructions at any time, as long as the correct procedures are followed. There is one limitation on use of the TOD Notice procedure: it can only be used for a car with clear title, where there are no liens on it.

Every person’s situation is different and we recommend that you speak with your estate planning attorney about the best way to title your car in your specific case. We are also happy to guide you with our real world experience in getting numerous vehicles transferred to the rightful heirs. As they say: “an ounce of prevention is worth a pound of cure”.

Joanna K. Murphy
Senior Vice President

(918) 744-0553
JMurphy@TrustOk.com