Why Automobile Ownership is Important

Due to the hype about avoiding probate, many couples title their motor vehicles in both of their names.  For convenience, some couples title their vehicles in the name of the spouse who purchased them regardless of who regularly drives them.  Not paying close attention to how motor vehicles are owned can have devastating effects in Michigan.

Unlike many states, Michigan has “owner liability.”  What does this mean?  In simple terms, the owner of a motor vehicle is liable for an injury caused by the negligent operation of that motor vehicle.  See MCL Section 257.401.  So, the owner can be miles away from an accident, yet he or she can be legally responsible.

I have encountered many couples who title their vehicles in both names for probate avoidance reasons. It is true that if one spouse dies, the joint owner/surviving spouse is the sole owner of the vehicle without probate. The joint owner/surviving spouse can apply for a new title to the vehicle at the Secretary of State with a certified death certificate, the current registration and the original car title.

However, what many people don’t realize is that the process to transfer a vehicle title in Michigan after the sole owner’s death is relatively simple and can be done without probate in most cases.  If a person dies owning a vehicle (or several vehicles for that matter) in his/her sole name, his/her closest next of kin can go to the Secretary of State and apply for a new title as long as the total value of all vehicles is less than $60,000 and a probate estate has not and will not be opened.  The legal authority for this type of transfer is contained in MCL Section 257.236(2).

Bottom line.  Title a vehicle only in the name of the one person who usually drives it.  In Michigan, if the driver of the vehicle is also the sole owner, then only that person can be sued for negligence as the result of an accident involving the vehicle. So, be very careful about adding names to titles.  Don’t let your name be added to car titles for family members and avoid co-signing for car loans.  It is also a good idea to have an umbrella insurance policy that covers you for multiple loss contingencies.

In the end, how you title your motor vehicles should be controlled by liability concerns and not so much by estate planning or probate avoidance concerns.

For more information, please contact Fraser Trebilcock attorney Ryan Wilson at 517.377.0897 or rwilson@fraserlawfirm.com.

*This blog originally appeared in the Estate Planning Guru on August 19, 2011.