I recently received the following question from Jack, one of my students, about putting cars in trusts:
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/.
What about irrevocable trusts?
You could theoretically put a car into an irrevocable trust, but you had better have a really good reason for doing so. Insurance companies are going to treat you differently, you won’t have control of your car, and the state may tax you differently.
Dad, 88, has had his car under the name of his revocable living trust since 2012. His license has expired and he’s opted not to renew it. Instead he has a Texas issued ID. He wants to hang on to the car as it has handicap plates and I use it sparingly (I live 200 miles away) when transporting him to doctor’s appointments. It’s used now only once or twice monthly. I was told today by his Allstate agent that per underwriting guidelines the car must be under his name and not that of the trust. As such they want the title changed. I’m skeptical. Can you offer any insight? Thanks.
Insurance agencies often have trouble understanding trusts. If a vehicle is in a revocable trust, the trust should be invisible to the insurance agency. Sometimes you have to explain how a revocable trust works to the insurance agent to see if they will allow it. Other times you just have to find a new insurance company or move the title into your Dad’s name. If everything else your Dad owns is in the trust, it is not very hard to transfer a vehicle in his name after his death. Most states allow you to transfer the vehicle without even going to probate court.
Where can i get the forms for a vehicle trust. I would greatly appreciate it. Thank you.
A vehicle trust is just a living revocable trust that happens to own a vehicle.
My two cars and one pickup are titled under, “My Full Name Trust” with “Mr. So and So, Trustee”. “He” pays my license plate renewals, and his signature is on each vehicle Registration card.
This trust was set up by my wife’s attorney before she died.
In the past, I had liability insurance with Progressive for “any non-owned vehicle”, realizing at the least the vehicles had no collision or comprehensive, and figured my liability insurance covered that requirement.
I have a need to continue to “not own” anything, and would like to keep the cars held in the trust. (or would I?)
I would also like to have a bit of coverage on the vehicles for collision of other losses.
What can I do, and what – if anything – am I doing wrong?
I don’t know that you are doing anything wrong by having the cars owned by your late wife’s trust. They are not your cars, because her trust became irrevocable on her death, got its own tax ID number, and is a standalone entity. This is very different from a standard living revocable trust. I don’t know how the insurance company will handle it. Just make sure that you and the trust are named on the insurance company’s papers. Let them know exactly what is going on. I am sure you can get insurance. It may be “commercial” vehicle insurance and cost more, but you can get insured. Cars aren’t an asset often taken in a law suit. I assume when you say you don’t want to own anything, that is for asset protection purposes. It is hard to go through life not owning anything. The assets in your late wife’s trust should be protected from your creditors. Here again, this is very different from the standard living revocable trust. The additional cost of insurance and possibly increased property tax on the cars, may make it economical for you to own the cars. Carry heavy liability insurance on the car, use LLCs and other legal entities with asset protection facets to them, and you should be able to live a normal life pretty safely without worrying about whether or not you own any assets.
I am the owner of the car but my mother’s name is also listed as owner as a revocable trust on the title. The only reason her name is on it was because in the previous state I lived in, you could put TOD but the state I moved to does not have that. My question is if I were to get in an accident, could she also get sued since her name is on the title even though it’s just as a revocable trust? I don’t want someone to be able to go after my mother if I were to be in an accident.
Technically, the owner can always be sued, but there would have to be a “causal connection” between her ownership and the accident or problem that the lawsuit is claiming. She could almost always get out of the suit, but it would take some work and expense. (lawyers love that)
I have a terminal illness and will be withdrawing living benefits from my life insurance. I had to retire suddenly without savings and supported on Social Security and retirement pensions.I plan to pay off as much debt as possible. I understand creditors cannot claim any of these assets. The only property I own outright,is a $26,000 car .I need asset protection on the car and plan to leave it to my son upon my death. I live in NYS and considering an irrevocable trust..
My questions are
Will I still have access to drive,insure and maintain the vehicle?
12-18 months appears to be time frame upon withdrawing property in the trust after death. Is there a process to expidite thus?
Are there alternatives to protect the vehicle from creditors?
The irrevocable trust should protect the car. It depends on the state’s fraudulent conveyance / transfer laws. You may be required to “bring the car back” if it was transferred as a gift. Putting it into the irrevocable trust would be a gift of the car to the beneficiaries. You wouldn’t own it, and so that would cause problems with the insurance policies. It is hard to protect the car and still have full use of the asset. I am not sure what the laws are on using the withdraw of living benefits from a life insurance policy. It may or may not be subject to your creditors.