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Traps to Avoid in Leaving Your Vehicle to a Beneficiary

(…While Staying Out of Probate)

Traps to Avoid in Leaving Your Vehicle to a Beneficiary

When a loved one passes away, a family’s emotional burden is compounded by the practical stresses of managing their loved one’s final affairs.  In developing estate plans for our clients, we endeavor to anticipate and avoid these practical stresses to the maximum possible degree.  This includes providing strategies for passing property as quickly and seamlessly as possible.  Here are some helpful tips for passing your vehicle to a loved one without the involvement of the Probate Court.

Joint Ownership:

Most people assume that if their vehicle (car, boat, RV, trailer, etc.) is jointly owned, then it will pass directly to the joint owner upon their death.  However, this is not always the case!

A jointly owned vehicle will only pass to the co-owner if the magic word “OR” appears between the owners’ names on the registration (regardless of what the title or loan documents say).  For example, the registration must say “Bert or Ernie” for the vehicle to pass automatically to the survivor.

Conversely, a vehicle will not pass to a joint owner if the registration includes the words “and” or “joint” between the names, or if there are no words between the owners’ names, as follows:

  • Bert and Ernie
  • Bert joint Ernie
  • Bert Ernie

Legally speaking, the words “and” or “joint,” or the absence of a word between the owners’ names, signifies that the property is held as tenants in common.  This means that each person owns half of the vehicle, and that the co-owner will not inherit the other half upon the co-owner’s death.  In this scenario, the Probate Court will need to issue a written order to convey the deceased individual’s half interest.  However, depending on the beneficiaries named in the individual’s estate plan (assuming they died with a Will), there is no guarantee that the half interest would pass to the co-owner at all!

Sole Ownership:

When an individual is the sole owner of a vehicle, he/she must designate a beneficiary on the vehicle’s registration in order to pass the vehicle outside of probate.  This designation must be signed in the presence of a witness.  Upon the owner’s death, the named beneficiary must bring the registration and death certificate to the DMV within sixty days of the date of death.  If this step is not carried out within the required time period, then the vehicle will revert to sole ownership and must be distributed by the Probate Court in accordance with the individual’s estate plan (assuming they died with a Will).

If you’ve found yourself caught in these traps for the unwary, or if you are seeking additional planning strategies tailored to your personal circumstances, we are always here and happy to help.