Estate Planning

Titling a Car in Your Living Trust

By Gregory Herman-Giddens

I often prepare Living Trusts for clients, who like the idea of avoiding the cost, time, and hassle of probate.  However, probate can only be avoided completely if there are no probate assets.  One type of asset that is often overlooked is vehicles.  If someone dies with only a $15,000 vehicle in his or her name, probate will often be required in order to transfer title. 

In the past clients have told me that when they have tried to transfer their cars to a living trust, the Division of Motor Vehicles requires them to pay the 3% highway use tax upon transfer in addition to the new title fee.

However, under North Carolina law, there should be maximum of only $40 due.  Thus, assuming you can get the folks at the local DMV office to agree, the cost of transferring a vehicle to a trust should be fairly reasonable, and certainly less than the cost of probate.

N.C. General Statutes Section 105-187.6 provides, in pertinent part (emphasis added):

(b) Partial Exemptions. – A maximum tax of forty dollars ($40.00) applies when a certificate of title is issued as the result of a transfer of a motor vehicle:

(2) To a partnership, limited liability company, corporation, trust, or other person where no gain or loss arises on the transfer of the motor vehicle under section 351 or section 721 of the Code, or because the transfer is treated under the Code as being to an entity that is not a separate entity from its owner or whose separate existence is otherwise disregarded, or to a partnership, limited liability company, or corporation by merger, conversion, or consolidation in accordance with applicable law.

Full post as published by North Carolina Estate Planning Blog on November 26, 2007 (boomark / email).