As a former car dealer, I occasionally had to help people transfer a car title out of a trust, usually to sell the car.
Whether you are a trustee looking to distribute assets to beneficiaries or want to remove a car from a trust for other reasons, the process can seem complicated.
So, I created this guide to help streamline the process of transferring a car title out of a trust.
Relevant Articles To Read:
- How to Transfer a Car Title After Death of Owner
- How Much Is Gift Tax On a Car
- How to Transfer A Car Title To A Family Member
- Can You Donate a Car Without A Title
- Can You Add Someone To A Car Title?
Table of Contents
What Is A Trust and Why Put A Car In One?
First, let’s cover some trust basics:
A trust is a legal entity that holds assets, like cars, for designated beneficiaries.
Trusts allow for easy distribution of property when the trust creator passes away without requiring court intervention through probate.
Many choose trusts to avoid this probate process.
Transferring car titles when the owner dies can also be streamlined through a trust.
Some also utilize trusts purely to protect assets from creditors or manage them for minors.
Key Benefits Of Holding Cars In Trusts
Here are the main perks of keeping vehicles titled to a trust:
- Avoids probate for a seamless transition to heirs
- Keeps cars safe from creditors/lawsuits
- Designate the use of vehicles if the owner becomes incapacitated
- Manage cars for minors until they can legally own property
Now, let’s get into the specifics of moving a car title out of a trust, whether revocable or irrevocable.
Steps To Transfer A Vehicle Title From A Trust
Follow these key steps to successfully change ownership from a trust:
1. Choose The New Owner
Decide who will take over the car. Often trustees transfer vehicles to trust beneficiaries. But cars can also go to third parties if allowed by the trust terms.
2. Gather Necessary Documentation
To prove you have authority and ownership, compile:
- The original title listing the trust as the owner
- Trust documents showing the trustee’s powers
- Odometer statement if under 10 years old
- DMV forms – varies by state
Complete The Car Title Transfer Paperwork
Fill out your state’s title transfer forms correctly:
- Mark the trust as the seller, with trustee signing
- Indicate the new owner’s name as buyer
- Include sales price and odometer reading
Pay Applicable DMV Fees
Each state sets their own title transfer fees. Budget around $50 per car in most states.
File Completed Documents With The DMV
Submit paperwork to your local DMV office for processing. After verification, they will issue a new title under the new owner’s name.
Can You Sell A Car From A Trust Without Transferring Ownership?
Beneficiaries often ask if they need to transfer a car to their name before selling it out of a trust. The good news is you can sell trust vehicles directly without titling it personally first.
- Trustees handle sales, but beneficiaries can demand assets be liquidated and receive proceeds.
- Trustees can sell without explicit consent, but should consult beneficiaries to prevent disputes.
- To sell the car, the trustee signs over title on behalf of the trust.
- Trustees must sell at fair market value to avoid breaching fiduciary duties.
How Does Transferring To A Trust Affect Car Taxes?
Many wonder if putting vehicles into trusts changes their tax obligations. Here is an overview of impacts by type:
- For revocable living trusts, no change – grantors still report income personally.
- Irrevocable trusts may owe income taxes on earnings from vehicles they hold.
- Most states don’t alter property taxes on cars in revocable trusts.
- Florida could assess higher property taxes.
- Irrevocable trusts may trigger increased property taxes.
- No gift/estate tax putting cars into revocable trusts since the grantor retains control.
- Transferring the vehicle to an irrevocable trust could create a gift tax if it is over annual exclusion.
In most cases, revocable living trusts do not create tax obligations on vehicles.
However, those with irrevocable trusts should consult a tax professional to understand possible impacts. Reach out with any other questions!
Key Considerations When Transferring From Trusts
Be aware of these potential issues when moving vehicles out of trust ownership:
1. Insurance Changes
Insurance can cost more under a trust. Shop policies when transferring title.
2. Limited Window For Transfer
In irrevocable trusts, trustees may have a deadline for asset distribution.
While trusts provide excellent benefits for managing cars, factors like insurance, taxes, and distribution timing should be evaluated when opting to transfer title out of trusts. Certain states also have specific laws governing trust vehicles.
Sources For this Article:
Legal Disclaimer: This article provides general information about transferring car titles from trusts. The information is not intended as legal advice tailored for any specific situation or individual circumstances. For personalized guidance regarding your unique situation and the laws of your jurisdiction, consult with a licensed attorney or appropriate professional before taking any actions related to transferring vehicle titles or amending trusts.