Southern California loves its cars. California’s traffic congestion is well-known throughout the country despite our extremely wide roads. Car companies specifically advertise to San Diego consumers with special car colors and SoCal editions of certain models. Like many of our other assets, cars may be worth next to nothing, or more than some people’s houses, or may carry substantial sentimental value (a la Gran Torino). Also, like our other assets, we can’t take them with us when we go. However, dealing with vehicles is frequently overlooked in the estate planning process.
A vehicle may be transferred into trust, following the ordinary transfer protocol. Doing so funds the vehicle into your revocable living trust and makes the vehicle subject to the terms of the trust. Personally, I rarely fund a vehicle into a living trust. Under California law, a vehicle will never cause a probate proceeding. However, if a probate will occur, the vehicle (if not funded into the trust) typically will be part of the probate. Therefore, as long as all of the financial/investment assets of the individual are properly funded into the trust, generally a probate will not occur and there is little reason to title the vehicle in the name of the trust. I did break that rule, once, for a client who had an investment grade, antique, Mercedes Benz.
Properly funding the trust facilitates a smooth transition of asset ownership from you to your successor trustee after death. Trust administration is frequently smoother and less expensive than estate administration due, in large part, to the lack of court intervention. The trust only has control over assets that reflect trust ownership in their titles. If the vehicle is worth a large amount, particularly if it is an antique car that appreciates in value, it may be wise to fund it into the trust at the outset. However, if the vehicle is not funded into the trust, it may still be handled expeditiously in most cases.
Where title is not transferred into trust, an Affidavit for Transfer Without Probate (Small Estates Procedure) may be completed if certain requirements are met. The affidavit procedure may be used in cases where there is only one beneficiary of the estate, where there are many, or where there is a trustee of a trust. The estate (assets left outside of trust) may not exceed $150,000. Additionally, a Spousal Property Petition may be used as a summary probate procedure if there is a surviving spouse.
If there are multiple owners of a vehicle, the second owner will automatically become the sole owner of the vehicle upon the joint owner’s death. If there is only one owner of the vehicle, a Transfer on Death designation may be made for the benefit of a single beneficiary. The title to the vehicle will reflect the transfer designation. In both instances, there is no planning for the event of the co-owner or beneficiary predeceasing the other owner.
Depending on the nature and value of your vehicles, any of these methods may be suitable. Because cars typically have relatively short lifespans and rapidly decreasing values, many individuals choose not to change title of their existing car into the name of the trust. Some purchase their next car in the trust’s name. In all cases when transferring a vehicle, it is likely that multiple forms will be necessary, especially to avoid use tax and smog certification. Although use tax and smog certification may be avoided in most family transfers, transfer fees are generally still assessed. No matter how you choose to transfer your car, it has reliably taken you “from Point A to Point B;” shouldn’t you make sure it ends in the right place?
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