You can’t take it with you! If you leave a survivor – widow or widower, he or she can simply re-register the car in his or her own name, no questions asked. But what if you are single? The car becomes part of your probate estate. Someone must petition the court to be allowed to gather up your belongings, pay your debts, and distribute the remaining assets, according to your will if you had one, otherwise according to the law.
If you have done living trust planning, the lawyer probably told you this would all be taken care of without having to go through the court process. The trust would simply be “settled.” A new trustee would take over from you and make all the distributions.
But trusts only work for property that is placed in the trust. Your lawyer may have made out a deed to place your house in the trust. He or she may or may not have helped you through a process of placing your bank account in the trust, along with your investment accounts and so on. But what about that car?
In Massachusetts, in order to transfer a car, even within a family, there must be a change of registration, which requires proof that the new owner is properly insured. The attitude of many insurance agents in Massachusetts has been that transfer of a car into a living trust requires expensive commercial insurance. Consequently, many attorneys have advised that the car can be left outside the trust.
That means probate. Don’t worry, they say. There is a simple procedure, called Voluntary Executor, for probate estates of less than $15,000 plus a motor vehicle. So you can safely leave your car outside the trust.
There is only one problem with this approach. A voluntary executor is still an executor, and an executor is personally liable for estate taxes. (And may be liable for the decedent’s debts, if the creditors file claims properly). If your non-probate estate (living trust, IRA accounts, insurance…) might be taxable, do you really want to be asking someone to put themselves in a position of being liable for estate taxes on property over which they may have no control? And a voluntary executor is stuck with the position. Unlike an ordinary probate process, which is closed when the judge approves the executor’s final account, there is no provision in the law for closing a voluntary executorship.
As it turns out, there is an easy fix. Put everything, including your car, in your living trust. Notwithstanding what your insurance agent may say, this is perfectly possible. No commercial policy is required. A special endorsement allows the policy to cover a vehicle owned by a trust. There are fees imposed by the Registry of Motor Vehicles for changing the registration, but the fees are less than $100, and it may be worth it to avoid laying liability as a voluntary executor on the shoulders of your designated successor trustee.
You may have to change insurance agents, if the one you have doesn’t understand the endorsement, and insurance companies, as some still insist that this can’t be done. But there are companies out there who are willing to write insurance for a vehicle in a living trust, and agents who are willing to go the extra mile for their clients.