Almost every family owns a car. Many families own more than one car. You may have wondered whether your car should be owned by your revocable living trust. Or should it stay in your name? Or should it be in two names? Today we will discuss what to do with your car in your estate plan.

If you have a revocable living trust, should you transfer ownership of the car to your trust? No, it is not necessary to do that. The probate laws in Hawaii have a special rule about motor vehicles. A motor vehicle (car, truck, etc.) does not have to go through probate, no matter how much it is worth. Probate is a court proceeding that takes 6 months to a year or longer. If you own any real estate at all in your name only or as a “tenant-in-common” at your death, it has to go through probate. If you own assets other than real estate worth $100,000 or more at death (without a beneficiary or joint owner), the assets must go through probate. Motor vehicles are an exception. Since a car does not have to go through probate, you do not have to put it into your trust. If you have already put your car into your trust, that’s O.K. It doesn’t do any harm.

When someone dies owning a car, the person who is to inherit the car can easily have the ownership changed. Just go down to the Department of Motor Vehicle office in the county where you live. Take with you the following papers: the title (certificate of ownership), a certified copy of the death certificate, the odometer reading, a current safety check, and the current registration. They will have you sign a paper called Affidavit For Collection of Personal Property. You also need to pay a transfer fee which is $10 on Oahu, $10 on Maui, $5 on the Big Island, $3 on Kauai. It’s that simple.

What should you do with the car if the owner has to go into a nursing home? Motor vehicles are exempt for Medicaid qualification purposes. That means that an unmarried person with $2,000 or less in other assets can get Medicaid to pay the nursing home expenses, even if the person owns a car. A married couple with $103,640 or less in other assets can get Medicaid to pay the nursing home expenses even if the person in the nursing home owns a car. In theory, a person in a nursing home who has too much in assets to qualify for Medicaid could buy several expensive cars to get cash assets low enough to qualify for Medicaid. However, you should not do that. After the person dies, the government could possibly go after the cars and sell them to repay the amount Medicaid paid for the nursing home patient. I have not heard of the government doing this yet, but legally they probably could.

If the person in the nursing home has some cash but no car, can you safely buy a car to reduce the cash, even though the nursing home patient will never be able to drive the car? Our law office had a case like this last month. The Medicaid eligibility worker claimed that the purchase of the car was a transfer of assets, resulting in a penalty (a waiting period before Medicaid will help.) We convinced the Medicaid worker that, in this particular case, even if there were a penalty, the waiting period was already over, so there should be no delay in Medicaid benefits. As I read the law, it seems to me that there should be no waiting period at all for purchase of a car. If a relative of yours is in a nursing home with too much in assets to qualify for Medicaid, consult with an estate planning attorney experienced in Medicaid planning. There are many cases where we have been able to get Medicaid to pay for nursing home costs when the family thought it was impossible.