The rules are a little different, if you are passing down a collectible car versus your daily driver. There are a few steps you’ll need to follow.
Despite the affection some car owners lavish on their vehicles, as far as the law is concerned, a car is simply personal property, as explained in a recent nj.com article that asks, “What is the best way to pass a car to your heirs when you die?”.
You can transfer the car to an heir, by mentioning it specifically in your will, or just using the phrase “personal property.” If it’s a collectable car, however, there will need to be a specific reference.
Typically, the executor of the estate (if there’s a will) or the administrator (if there’s no will) would either:
- Execute the bill of sale and the old title to sell the car to a third party; or
- Execute the old title to transfer the car to the person who inherits it in the will.
The executor should have an original document provided by the probate court that shows the executor's authority to act on behalf of the estate. This is called Letters Testamentary. If there is an administrator, Letters of Administration will also be required and should be given to the new owner.
However, if the car is owned by both a husband and wife or by civil partners, the transfer can be made in New Jersey, for example, by sending a copy of the death certificate, the old title, and an affidavit supplied by the Motor Vehicle Commission confirming the status of ownership and the co-owner's death without the need for Letters Testamentary or Letters of Administration.
If the estate is small, under $50,000 in the case of the car passing to a spouse/civil partner or under $20,000 where the car passes to another heir, the documents required by the New Jersey Motor Vehicle Commission will include an Affidavit of the Spouse or Next of Kin, as filed with the probate court rather than Letters Testamentary or Letters of Administration, in addition to the old title.
To complete the transfer, the transferee will also need the odometer reading on the vehicle, the transferee's driver's license, her insurance information and payment of the fee charged by the Motor Vehicle Commission.
Because it’s so easy to transfer a motor vehicle, there’s no reason to put a vehicle in a trust prior to death. That’s only going to possibly increase insurance rates. Likewise, transferring the vehicle to a different owner prior to death, again could increase insurance rates.
However, there are several things that could cause a delay in the transfer of the vehicle's ownership. For instance, there could be a lien on the vehicle for an auto loan that would have to be paid before the car could be transferred. There also could be inheritance or estate taxes or other creditor claims that would need to be addressed, before a distribution can be made.
Other reasons your heirs could run into delays:
- If the old title can’t be found, someone will have to obtain a duplicate title
- Family members might fight about who should get the vehicle, unless that has been discussed and resolved in advance.
- If your executor is having trouble performing their tasks, because of grief or other reasons.
Talk with your estate planning attorney about this particular asset, especially if it has a great deal of sentimental value to the family. If there’s an issue with the title, take care of that in advance. Talk with your family members about the car, to preclude any disputes.
Reference: nj.com (November 13, 2018) “What is the best way to pass a car to your heirs when you die?”