Funding Automobiles into Trust
Funding automobiles into trust can be a challenging exercise. These challenges are mostly wrought from the necessity of interacting with the North Carolina Department of Motor Vehicles to effect the title changes.
Funding is accomplished by transferring title of the vehicle from the individual to the trustee. Like with any other transfers of vehicle titles, this is accomplished at the DMV. As not all NC DMV offices service title changes (some simply service driver licenses), it is necessary to first identify the proper DMV office. From the DMV website, look for those offices having “license plates” listed under services.
Prior to getting started, it’s important to note that only vehicles to which title is in your name may be transferred. Generally speaking, lien holders possess title until the vehicle is paid off, thus commonly vehicles with liens may not be transferred into trust until the debt is paid off. To transfer title, visit a local DMV branch with the following paperwork:
- Original title
- Copy of insurance
- Copy of the Trust (or a Certification of Trust)
- Check book
Unfortunately, funding vehicles into trust is likely the most expensive trust funding procedure. In North Carolina, you should expect to pay the following fees: $40 Title Fee, $33 Plate Fee (you will be issued new plates), $30 Vehicle Fee, plus the annual vehicle tax (based on percentage of value as determined by the State). The DMV will require you to pay the full years registration fee (annual vehicle tax), regardless of when you made your last payment. DMV personnel have indicated that a refund for partial year vehicle tax may be obtained from the North Carolina Department of Revenue. Good luck with that one!
In addition to the fees previously mentioned, the DMV representative may try to apply a highway use tax (HUT), which is normally applicable to vehicle transfers. There is in fact a HUT exemption for vehicle transfers to revocable trusts when the vehicles owner is the sole beneficiary of the Trust. If the representative attempts to assess this fee, you should request the representative provide you a HUT exemption form where the transfer to trust exemption is delineated.
Lastly, it should be noted that some legal commentators recommend against funding vehicles into trust. Some believe that identifying the trustee as registrant may invite lawsuit in the event of a vehicle accident. This may or may not be true (empirical evidence has yet to be sited in this argument). Of course adequate insurance coverage (both automobile policy limits and additional umbrella policy) should alleviate this concern. The other concern that does hold validity is the issue of exposing assets inside of the trust to creditor claims should the funded vehicle be involved in an accident. This is only a concern when the revocable living trust become irrevocable, i.e. after the Grantor’s death. This again is addressed by immediately removing the vehicle from trust after the Grantor’s death.