Vermont Law Allows Vehicles to Pass Probate Free
Vermont introduced many changes to its estate planning laws in 2009, as discussed in earlier articles on the state's reduced estate tax threshold and changes in the probate laws. While these laws received mixed reactions, the state legislature also passed one little noticed law that indisputably benefits everyone: the right to place a transfer-on-death designation on your vehicle title.
Why is this important? Because almost everyone has a vehicle, and vehicles have been a problematic asset even for clients with advanced estate plans. Most estate planning attorneys recommend against transferring vehicles to a revocable living trust because if a client is involved in even a minor auto accident, the "victim" who sees that the other driver has a trust predictably assumes that the client must be rich. Sensing opportunity, the "victim" could exaggerate their claims. The problem with leaving vehicles outside of one's trust is that then they have to go through probate, which is what people seek to avoid when creating a trust.
A transfer-on-death designation allows you to add someone to the title of your vehicle, but maintain absolute control over the vehicle until you die. Other common forms of ownership used to avoid probate have drawbacks. For instance, joint tenancy with rights of survivorship requires that you transfer ownership of a portion of the vehicle to someone else now, which can have gift tax implications and also cause problems if one owner later wants to sell the vehicle and the other does not.
Under the transfer-on-death designation, there is only one owner of the vehicle who may sell it without the need to seek consent of a co-owner. In fact, the person named as the transfer-on-death beneficiary has absolutely no rights to the vehicle until the owner dies. If the owner dies, then the transfer-on-death beneficiary may re-register the vehicle in their own name, without the vehicle having to first pass through probate. The new process transfers the vehicle to the new owner much faster than probate allows, and costs nothing, aside from the re-registration fees.
Because completing a transfer-on-death designation is very easy, it makes sense for almost everyone, whether you have a trust, a will, or no formal estate planning. In all circumstances, probate is avoided for the vehicle, which cuts down on probate-related expenses and keeps the vehicle on the road rather than parked during the pendency of the probate process.
To add a transfer on death beneficiary, you need to complete a Vermont Department of Motor Vehicles form (TA-VT-007; Notification of Transfer on Death), located on the Forms page of the DMV's website. In addition to the form, you need to submit your existing vehicle title and a check for $31, to cover the processing fee. A new title will be issued that includes the transfer on death beneficiary on the face of the vehicle title.
The transfer-on-death designation is available only for vehicles that are owned by an individual. For instance, if the vehicle is co-owned by husband and wife, a transfer on death designation is not possible. Further, the transfer-on-death beneficiary remains subject to any liens, such as loans used to purchase the vehicle that are not fully paid off. Nonetheless, the transfer-on-death designation for vehicles allows everyone to get one more asset out of the probate process, which equally benefits those with advanced estate plans and those who intend to get their planning done but wait until it's too late.
NorthEast Estates and Trusts (NEET) is a Shelburne, Vermont-based law firm serving clients in Vermont, New York and Massachusetts. Attorney Adam Bartsch focuses solely on helping clients identify and solve their estate planning concerns and risks. Adam Bartsch can be reached at 802-985-8811, and you can read more than 60 published estate planning articles on the NEET website at http://www.NEET.info
Why is this important? Because almost everyone has a vehicle, and vehicles have been a problematic asset even for clients with advanced estate plans. Most estate planning attorneys recommend against transferring vehicles to a revocable living trust because if a client is involved in even a minor auto accident, the "victim" who sees that the other driver has a trust predictably assumes that the client must be rich. Sensing opportunity, the "victim" could exaggerate their claims. The problem with leaving vehicles outside of one's trust is that then they have to go through probate, which is what people seek to avoid when creating a trust.
A transfer-on-death designation allows you to add someone to the title of your vehicle, but maintain absolute control over the vehicle until you die. Other common forms of ownership used to avoid probate have drawbacks. For instance, joint tenancy with rights of survivorship requires that you transfer ownership of a portion of the vehicle to someone else now, which can have gift tax implications and also cause problems if one owner later wants to sell the vehicle and the other does not.
Under the transfer-on-death designation, there is only one owner of the vehicle who may sell it without the need to seek consent of a co-owner. In fact, the person named as the transfer-on-death beneficiary has absolutely no rights to the vehicle until the owner dies. If the owner dies, then the transfer-on-death beneficiary may re-register the vehicle in their own name, without the vehicle having to first pass through probate. The new process transfers the vehicle to the new owner much faster than probate allows, and costs nothing, aside from the re-registration fees.
Because completing a transfer-on-death designation is very easy, it makes sense for almost everyone, whether you have a trust, a will, or no formal estate planning. In all circumstances, probate is avoided for the vehicle, which cuts down on probate-related expenses and keeps the vehicle on the road rather than parked during the pendency of the probate process.
To add a transfer on death beneficiary, you need to complete a Vermont Department of Motor Vehicles form (TA-VT-007; Notification of Transfer on Death), located on the Forms page of the DMV's website. In addition to the form, you need to submit your existing vehicle title and a check for $31, to cover the processing fee. A new title will be issued that includes the transfer on death beneficiary on the face of the vehicle title.
The transfer-on-death designation is available only for vehicles that are owned by an individual. For instance, if the vehicle is co-owned by husband and wife, a transfer on death designation is not possible. Further, the transfer-on-death beneficiary remains subject to any liens, such as loans used to purchase the vehicle that are not fully paid off. Nonetheless, the transfer-on-death designation for vehicles allows everyone to get one more asset out of the probate process, which equally benefits those with advanced estate plans and those who intend to get their planning done but wait until it's too late.
NorthEast Estates and Trusts (NEET) is a Shelburne, Vermont-based law firm serving clients in Vermont, New York and Massachusetts. Attorney Adam Bartsch focuses solely on helping clients identify and solve their estate planning concerns and risks. Adam Bartsch can be reached at 802-985-8811, and you can read more than 60 published estate planning articles on the NEET website at http://www.NEET.info
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