How to Pass on Your Car Collection through Estate Planning

You’ve spent years curating your classic car collection, handpicking each vehicle for its unique story and place in automotive history. This collection is your pride and joy, a true labor of love. And if you’re like most collectors, you want to make sure it’s protected for the future.

The truth is, estate planning for classic cars can be complex, especially when you’re trying to do it alone. At Hammond Law Group, we’re in the business of securing legacies. Our attorneys have worked with collectors of all kinds to safeguard their most prized possessions. We know the questions to ask and the details to wade through to build you an estate plan that really works, so you can have confidence your collection will live on the way you intend.

Estate Planning Tools for Your Car Collection

There are several estate planning tools available to help you pass on your car collection seamlessly and efficiently. Let’s explore a few options:

Revocable Living Trusts

A revocable living trust is a popular estate planning vehicle that allows you to transfer ownership of your classic cars to the trust during your lifetime. As the grantor, you can maintain control over the vehicles and make changes to the trust as needed.

Benefits of using a revocable living trust for your car collection include:

• Avoiding probate, which can save time and maintain privacy
• Specifying exactly how your cars should be managed, maintained, and distributed to beneficiaries
• Providing a clear roadmap for your trustees to follow

Irrevocable Trusts

An irrevocable trust is another option to consider, particularly if asset protection is a priority. Once you transfer your classic cars into an irrevocable trust, you relinquish control and ownership, which can help shield the assets from creditors and potential lawsuits.

Limited Liability Companies (LLCs) and Family Limited Partnerships (FLPs)

Forming an LLC or FLP to hold your car collection can provide liability protection and facilitate the transfer of ownership to your heirs. By creating an LLC or FLP, you can distribute ownership shares to your beneficiaries, which can be passed down without going through probate.

Joint Ownership with Right of Survivorship

If you co-own a classic car with another person, such as a spouse or partner, you may consider holding the title with a right of survivorship. Under this arrangement, when one owner passes away, the vehicle automatically transfers to the surviving owner, avoiding probate.

Transfer-on-Death Vehicle Registration

Some states, including Colorado, offer transfer-on-death (TOD) vehicle registration, which allows you to designate a beneficiary to inherit your car upon your death. To set up a TOD registration in Colorado, you’ll need to complete the “Beneficiary Designation for a Motor Vehicle” form (DR 2009) with the DMV.

Minimizing Estate and Gift Taxes

When creating an estate plan for your car collection, we always consider potential estate and gift taxes. As of 2024, the federal estate tax exemption is $13.61 million per individual, meaning that estates valued below this amount are not subject to federal estate taxes. But tax laws can change over time.

One strategy to minimize estate taxes is to use the annual gift tax exclusion, which allows you to transfer up to $18,000 per recipient per year without triggering gift taxes. By gradually transferring ownership of your classic cars over time, you can reduce the overall value of your estate.

Charitable remainder trusts (CRTs) are another tool that can help minimize capital gains taxes when selling a classic car. By creating a CRT and transferring the vehicle to the trust, you can sell the car tax-free and receive income from the proceeds for a specified period before the remaining funds are donated to a charity of your choice.

Tips on Passing On Your Classic Car Collection

As a classic car collector, you know that the devil is in the details. The same holds true when it comes to estate planning for your cherished vehicles.

To ensure your plan is airtight and your wishes are carried out smoothly, consider these key legal tips:

Update Your Car Insurance, Registration, and Title

As you create your estate plan, don’t forget to update your car insurance policies, vehicle registrations, and titles to align with your chosen estate planning vehicles. This will help ensure a smooth transition of ownership and minimize potential legal hurdles.

Keep an Inventory and Appraisals

Maintain a detailed inventory of your classic car collection, including key vehicle information, provenance, and value. Regular appraisals by qualified professionals will help ensure your estate plan accurately reflects the current value of your cars and can help minimize disputes among beneficiaries.

Review and Update Your Estate Plan Regularly

Estate planning is not a one-time event; it’s an ongoing process. As your life circumstances, car collection, and tax laws change, it’s important to review and update your estate plan regularly. At Hammond Law Group, we recommend reviewing your estate plan every 3-5 years or whenever a significant life event occurs, such as a marriage, divorce, or the acquisition of a new classic car.

Preserve Your Car Collection with Hammond Law Group

At Hammond Law Group, we’re more than just an estate planning law firm. We’re your partner in preserving your legacy and protecting what matters most to you – your family and your passion for classic cars.

When you work with us, you become part of our family. We’re here to guide you through the estate planning process and help you safeguard your cherished collection for generations to come.

Whether you’re looking to minimize estate taxes, navigate title transfers, or prevent potential disputes among your loved ones, we can help. So, if you’re ready to take the next step in securing your automotive legacy, give us a call or schedule a consultation today.