I have discussed this issue with several “local experts” and every one of them states that this is a terrible idea because if you get into an accident and get sued, everything in the trust can be lost. I understand your reasoning about avoiding probate, but doesn’t the negative aspects of this overweigh the probate issues? Is there another way of avoiding probate, such as having more than one revocable trust?
Putting the car into a living revocable trust won’t change your liability. A living revocable trust doesn’t give you any more liability protection than if you title it in your name. If the car is in your name, all of the assets in your trust are still available to satisfy the liabilities associated with the car. You still carry insurance to cover the auto liability. It is the same insurance whether the car is in the trust or not.
If you live in a common law state, and you have a trust for you and a separate trust for your spouse, then you could put assets in your spouse’s trust and those assets wouldn’t be available to satisfy the liabilities of a car owned in your name or your trust’s name. That is not because the trust protects the assets, it is because ownership is held by another person.
If you are in the accident, they can’t sue me and take away my car, unless I have a causal connection to the accident. Did I own the car, manage the car, or was I the driver who caused the accident? This is ownership separation between me and you that is protecting my assets, not the trust protecting my assets. If I have a causal connection to the accident, all the assets in my living revocable trust could be used to satisfy the claims.
Make sure you and your spouse don’t have joint ownership of the car. She (her trust) should own the car she drives most of the time, and your trust should own the car you drive most of the time. Your insurance will cover both of you driving either car. However, if you are in the accident in your car, her assets are quite safe, while yours are not, regardless of whether they are in your living revocable trust or not.
For more information on why you do want to put a car into your trust in the first place, please see my article on “Revocable Living Trust-Owned Vehicles” at https://www.legalees.com/revocable-living-trust-owned-vehicles/.