Death and the Automobile

Chances are, you own a motor vehicle. It is less likely that you have spent much time thinking about what happens to that motor vehicle when you die. There are many emotions that come with the death of a loved one, most of which cannot be avoided. Ensuring that your assets transfer easily at your death can ease the administrative part of the grieving process, which may be particularly important for motor vehicles because many households rely on them every day.

If your vehicle is titled in your name alone, then it will be transferred according to your will as part of probate. Probate is the process of administering a will when someone dies and involves the appointment of a personal representative or executor by the court. The appointed person will oversee the payment of debts and the transfer of assets in accordance with the deceased person’s will.

Revocable trusts are a popular tool to avoid probate and some of the anxieties associated with transferring assets at death. Other reasons for a revocable trust include privacy and management of the owner’s assets in the event of diminished capacity. Retitling assets in the name of the trust is a crucial step to ensure the owner’s assets can be managed, invested, and distributed according to the owner’s wishes. However, that does not mean every asset should be titled to a revocable trust. Motor vehicles are a good example.

For one thing, most states require the owner of a motor vehicle to carry automobile insurance; when a motor vehicle is titled in a revocable trust, the insurance company may require that the trust be included on the policy as an insured party. In some cases, this could lead to increased insurance premiums and difficulty securing coverage. Another hurdle may exist for a motor vehicle that is financed; the financing agreement may require the owner to notify the lender of the transfer, and the lender may have the right to deny the transfer. Lastly, even if transferring a motor vehicle to a revocable trust is feasible, the owner may find the process impractical; the numerous steps may not be worth the hassle for an asset that will likely be owned for only a handful of years.

In the rare instance where an owner expects to own a motor vehicle for an extended period, the vehicle is not financed, and the owner is not concerned about updates to the insurance
policy, it may be appropriate to think about the motor vehicle as a collectible, like art, fine wine, or jewelry (the car from Ferris Bueller’s Day Off comes to mind). However, even in that
situation, the owner may still prefer a more convenient alternative for transferring the motor vehicle at death.

In Maryland and Virginia, an owner can designate a Transfer-on-Death (TOD) beneficiary for their motor vehicle. A TOD designation allows the beneficiary to receive title to the vehicle at the owner’s death without going through probate. Only one beneficiary can be designated at a time, and if the beneficiary dies before the owner, the owner will have to designate a new beneficiary. The beneficiary can be changed or updated any number of times.

In addition, Maryland, DC, and Virginia permit an owner of a motor vehicle to title the vehicle with another person as joint tenants with right of survivorship (JTWROS). However, there are pitfalls. For one, a vehicle owned as JTWROS with a spouse may be subject to a dispute about who is entitled to retain the vehicle if the couple goes through a divorce. Titling a
vehicle as JTWROS may also require an update to the insurance policy. These issues, and other potential pitfalls, should be discussed with an estate planning attorney before titling a motor vehicle as JTWROS.

If you do nothing and your motor vehicle is titled in your name alone at your death, probate can be relatively straightforward in some states. For example, Virginia allows a vehicle to be transferred without probate if the owner’s will makes clear who is to receive it and the will does not otherwise need to be admitted to probate; Maryland has a small estate proceeding that simplifies the process for those with relatively low-value assets subject to probate at their death ($50,000, or $100,000 if the spouse is the only recipient of the estate).

Regardless of the type of estate plan you implement, your motor vehicles (cars, trucks, and motorcycles, but also boats, recreational vehicles, and planes) should not be forgotten. A
sound estate plan should contemplate all of your assets. The best approach will be the one that meets your goals and gives you peace of mind.