Recently, I blogged about the anguish of car buying as it compares with a trust or estate dispute. I’m proud to report that, after much trial and tribulation, I’m the owner of new Volkswagen GTI-S! I’m especially excited that it sports a manual transmission. Only one percent of new cars currently sold in the U.S. have a manual transmission, and eighteen percent of Americans can drive one.
As an estate planning attorney, I always need to think ahead. When it’s my time and I end up hurtling toward the great highway in the sky, what will happen to my newly acquired but already much-loved GTI? Can my estate sell it, knowing that, with each year that passes, fewer people will be able to drive it? Or should I distribute it in my Will to a friend who relishes driving a manual? Outside of a primary residence and bank, investment and retirement accounts, often, a vehicle is someone’s most valuable asset.
How should a car be transferred to a beneficiary as part of estate planning? It could be mentioned as a specific bequest in a will – identifying the car and stating it should be distributed to a particular beneficiary. Alternatively, the vehicle could be distributed pursuant to the will’s Personal Property Addendum.
As yet another option, the will might not mention the car at all. Then, during the probate process, perhaps a residual beneficiary who has always lusted after the car could pipe up and request, “Please, please, please, give it to me!” The personal representative may then decide to distribute the car to that beneficiary and deduct its value from the beneficiary’s share of residual assets. For example, suppose the car is worth $45,000 per Kelley Blue Book. And George Leadfoot, an estate beneficiary, is supposed to receive a total of $450,000 in estate assets. George could take the car, and then receive $405,000 in cash assets from the estate so that the distributions to equal out.
If someone has a car loan and passes away, guess what? The estate now has a car loan. With a car loan, the loan is generally secured by the vehicle itself. This means that if the estate fails to make loan payments in a timely manner, the lender can repossess the vehicle. It’s a good idea to store information about the car loan in an accessible way so that the named fiduciary can find it in the event of an emergency and continue making timely payments. Also, if someone has a car loan and wants to distribute the car to a beneficiary as part of their estate planning, two options should be considered. First, working with counsel, they can make clear within the will that the estate should pay the loan in full, and then the car will be transferred to the beneficiary free of debt. Second, if the beneficiary receiving the car will also be receiving a percentage of the estate’s cash assets, the will can indicate that the estate will pay the car loan, and then the amount of cash to be distributed to that beneficiary should be reduced by the amount of the loan payoff amount.
Please keep your engines revved up for my next blog post, which will continue the discussion of how vehicles fit into the estate planning and probate process.
This post is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting with an attorney.