If you are the sole owner of your car, or you co-own the car with someone else and the title lists your name “and” the other person’s name, then the car will have to go through a probate administration process when you pass away. Then the car will probably become an unmitigated headache for your family, and especially whoever is in charge of winding up your financial affairs when you pass away (i.e. the “Executor”). Therefore, keeping your car out of probate upon your death should be one of your many estate planning goals. In fact, I can’t think of a benefit to purposefully having your car dragged through probate.
One reason this is a big headache is that when there is a car in probate, it is essentially owned by the estate until the Executor transfers it to whoever is the beneficiary under the will. That process could take several months. In the meantime, the advice is that no one should drive the car. This is because if someone does drive it around and gets into an accident, there is a half-decent chance that the estate will be sued. Then a probate process that is already a bit of a chore for the Executor will become several times worse when the estate is named as a defendant in a lawsuit. So, the car should ideally stay in the driveway, and no one should touch it until title is formally transferred to the beneficiary.
The second issue is that, regardless of whether the car is a $50,000 luxury vehicle or a $500 junker, the car cannot be sold, junked or even donated until the probate process is well off the ground. Again, this could take months. So, it must sit in the driveway and continue to be a nagging concern for the Executor, along with the dozen or so other concerns she has.
How do you avoid this? If you own the car with someone else and the word “or” appears between the two names then it will automatically be solely owned by the other owner when you pass away, thereby avoiding probate. Or you could fill out the beneficiary designation section on the back of your registration. Then title will automatically switch to the designated beneficiary upon your death. If you do not see beneficiary designation language on your registration, you could use a “Beneficiary 1” form (click here) which the beneficiary must submit to DMV within 60 days of your death. Finally, if you have a revocable living trust, you could re-title the car into the name of the trust, although this requires more paperwork than any of the above alternatives.
Today’s takeaway estate planning lesson: keep your car out of probate.
DISCLAIMER: This blog does not offer legal advice, nor does it create an attorney-client relationship. If you need legal advice, consult with a lawyer instead of a blog.
