One of the most common assets that people own is a motor vehicle. Unfortunately, it is sometimes overlooked when it comes to estate planning. Cars that are not handled properly during the creation of an estate plan may ultimately have to go through the probate process in order to transfer ownership after your death. Good estate planning can avoid this extra hassle.
Four Options for Handling Motor Vehicles in an Estate Plan
When you are ready to create your estate plan, you will need to visit the California Department of Motor Vehicles office in Fullerton or another nearby location to retitle ownership of your car. There are four possibilities to consider with regard to how your car should be held:
- Title the car so that it is held in your living trust. Cars held in trust will avoid the probate process. The successor trustee of the trust will be in charge of owning, maintaining, and ultimately distributing this asset after you pass.
- Have the car jointly owned with someone else, with a right of survivorship so that ownership of the vehicle automatically transfers to the survivor upon your death. This is known as joint tenancy, and it works especially well for married couples.
- Register the vehicle with a transfer-on-death designation. This is an easy way of avoiding the probate process by transferring title to the vehicle upon your death. You would simply name the beneficiary whom you want to receive the car after you pass, and he automatically becomes the owner as of your date of death.
- If you no longer drive the car, consider making a lifetime gift of the asset. Depending on the value of the car, it may even qualify as your annual gift tax exclusion. The asset will pass to your loved one in a manner similar to the way it would pass to him upon your death. However, the transfer will be effective during your lifetime. The advantage is that there will be no need to open up a probate proceeding to transfer title—the transfer will already be complete.
Since each option has its pros and cons, and every person’s estate planning needs and goals are unique, it is important to seek guidance from an experienced professional before making a decision with regard to your car. We are here to help. We encourage you to reach out today—send us an email!