Ethan R. Okura
Hawai‘i Herald Columnist
Just about every family owns a car; many families own more than one. You may have wondered whether your car should be owned by your revocable living trust or whether it should stay in your name. Or, should it be in two names? In this month’s column, we’ll 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 isn’t necessary to do that. Hawai‘i probate laws have a special rule concerning motor vehicles. A motor vehicle (car, truck, motorcycle, etc.) does not require you to go through probate at your death, no matter how much it is worth.
Probate is a court proceeding that takes six months to a year or longer. If you own any real estate in your name only or as a “tenant-in-common” at the time of 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 it into your trust, that’s fine; 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. If no probate is required on account of other assets owned by the deceased, you can just go down to the Department of Motor Vehicles 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’ll also need to pay a transfer fee, which is $10 on O‘ahu, $20 on Maui, $5 on Hawai‘i island and $10 on Kaua‘i. 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 or cars. A married couple with $139,400 (in 2022) or less in other countable assets can get Medicaid to pay the nursing home expenses even if the person in the nursing home owns a car or cars (among other exempt assets). 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. We did have one client who purchased his dream car — a Jaguar — shortly before applying for Medicaid for his nursing home costs. However, you generally 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 thus far, but legally, they probably could. There are other legal strategies that can be used to protect some of the assets (including cash, real estate and motor vehicles) when applying for Medicaid assistance and from Medicaid estate recovery.
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 few cases like this in the past. In one case many years ago, the Medicaid eligibility worker claimed that the purchase of the car was a transfer of assets for less than fair market value, 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 for transfer of assets, the time penalty had already expired and there should be no delay in Medicaid benefits.
As I read the law, it seems to me that there should have been no waiting period at all for purchasing a car, as long as you’re not paying more than fair market value for the car. My understanding of the law on that point appears to be correct, as our clients have never had trouble with purchasing a car and qualifying for Medicaid in the 20 years since. 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 and often preserve some of the remaining cash of other assets, even when the family and their other advisors thought it was impossible.
It’s always a good idea to consult with an estate-planning attorney to understand the benefits, risks, tax consequences, and possible effects on future Long-Term Care Medicaid qualification for nursing home costs before you make any major decision regarding your car or other assets.
© OKURA & ASSOCIATES, 2021
Honolulu Office (808) 593-8885
Hilo Office (808) 935-3344
Kauai Office (808) 241-7500
Ethan R. Okura received his JD from Columbia University in 2002. He specializes in Estate Planning to protect assets from nursing-home costs, probate, estate taxes and creditors.
This column is for general information only and is not tax or legal advice. The facts of your case may change the advice given. Do not rely on the information in this column without consulting an estate-planning specialist.
