Our estate planning clients often ask us about retitling vehicles or mobile homes. What is the best method? Are there pros and cons? Below you will find an easy-to-follow Q&A regarding ownership recommendations for various types of property in Texas.
How do I verify ownership of a motor vehicle?
The Texas Department of Motor Vehicles (“DMV”) issues titles for automobiles, recreational vehicles, and mobile homes not affixed to the land. These titles are evidence of ownership and are the basis for determining who will inherit the asset upon the death of its owner. There is no public registry of title information, so it is important to keep the title in a safe place.
What are the ways to title a car, RV, or mobile home owned by two people?
Texas law permits three types of joint ownership on DMV titles. Presumably, they are intended to simplify the choices available, but they can be rather difficult to tell apart. The types of joint ownership are as follows:
- “Michael Smith or Susan Smith” – This form of ownership is commonly used by auto dealerships when they sell a motor vehicle to a married couple. During the owners’ joint lifetimes, either owner is authorized to transfer the vehicle. Upon the death of a joint owner, the surviving owner does not need to update the title because it is assumed that either owner has full authority to transfer the vehicle. Upon the death of the remaining owner, the vehicle is subject to probate.
- “Michael Smith and Susan Smith” – This form of ownership is rarely used. During the owners’ joint lifetimes, the signature of both owners is required to transfer the vehicle. Upon the death of either joint owner, the interest of the deceased owner is subject to probate.
- “Michael Smith and/or Susan Smith” – This form of ownership is also known as joint tenancy with the right of survivorship. During the owners’ joint lifetimes, the signature of both owners is required to transfer the vehicle. Upon the death of a joint owner, the surviving owner does not need to update the title because of the right of survivorship, although a death certificate would be needed to transfer the vehicle. Upon the death of the remaining owner, the vehicle is subject to probate.
What is the best way for a married couple to hold title to a car or RV?
The most flexible titling method for a married couple is the “OR” designation. However, some may prefer the more cautious approach of the AND/OR designation to avoid unauthorized transfers.
Is it possible to designate a “payable on death” beneficiary with the DMV?
Although relatively unknown as an estate planning tool, the DMV offers a form to designate a beneficiary of a car, RV, or mobile home not affixed to the land. See Form VTR-121 “Beneficiary Designation for a Motor Vehicle” available on the DMV’s website. If the proper form is stapled to and presented with the current title, the beneficiary designation is effective for title transfer after death. Assuming this condition is met, the beneficiary may apply for a new title in the beneficiary’s name upon presentation of a death certificate.
Should I title my car in the name of my living revocable trust?
Many people who establish revocable living trusts want to know whether they should re-title their cars into the living trust. The general answer is “No.” It is relatively simple to transfer a car after a death, provided the owner’s remaining property otherwise subject to probate is titled properly in a living trust.
What about leased cars?
A leased car is a liability, not an asset. The car is titled in the leasing company’s name throughout the duration of the contract. In the event the lessee (the driver) dies, the lessee’s estate still has an obligation to pay the balance of the contract whether anyone drives the car or not. There are a few options. The person responsible for administering the estate could ask if the leasing company will assign the balance of the lease to someone else, or could negotiate a lump sum payment to end the lease. The amount of the lump sum is usually determined according to a formula in the fine print of the lease contract. The latter option could be rather expensive, and feel unfair, but it often is the best option. As for assigning the lease, there is a small but growing market for lease assignments.
If the deceased person has no assets subject to creditor claims, another option is to just bring the car back to the dealership and refuse to pay the remaining obligation. Although the leasing company could sue the estate, there would be nothing for them to get. But this only works when the deceased person was unmarried and left no assets subject to the claims of creditors.
