When someone dies in the UK, their car becomes part of their estate. Whether it’s a reliable family car or a prized collectable classic, vehicles have legal and financial implications when passed on.
You can leave your car to a named beneficiary in your will, but if you don’t specify it as a gift, it falls into the residue of your estate and may be sold or pass to your residuary beneficiaries.
So, if you want to ensure it passes to the right person, be specific in your will – include the make, model and registration – and update it if you sell or change vehicles.
While the car remains in the estate, the executor (or administrator if there’s no will) is responsible for managing it. This includes:
- Arranging insurance or storage
- Valuing the car
- Transferring ownership
- Distributing it as per the will (or the intestacy rules if there is no will)
Can someone drive the car?
Not usually. The existing insurance policy ends with the owner’s death. The executor can insure the vehicle on behalf of the estate, but no one should drive it until it is insured and ownership is transferred. The executor can transfer ownership through the DVLA, for which they will need:
- The V5C (logbook)
- A death certificate
- A letter or completed form V317 (depending on whether the car is sold or gifted)
- The new keeper’s details
Inheritance Tax and cars in the UK
A car is included in the estate for IHT purposes. The executor has a duty to obtain a proper open market valuation, and include it as an asset in the estate reporting.
If the deceased owned a classic, vintage or collectable car, things can be more complicated. These cars often increase in value and may be worth far more than their original purchase price.
In this instance, the executor should get a professional valuation from a classic car expert, and keep all documentation including service history, original paperwork, MOTs and upgrades.
HMRC may challenge under-valued cars, especially well-known collectables.
Gifting a classic car before death
If you make a gift during your lifetime and survive seven years after making the gift, the value will fall outside of your estate for IHT. Gifting the car could, therefore, be a way of tax planning. However, the gift will not count if you continue to benefit from it in some way (i.e. you still want to drive it). If you did wish to still drive it, you would have to pay the new owner full market rent. Tax advice should be taken before considering such an arrangement.
The executor’s checklist when handling a classic or high-value car includes:
- Locate the V5C (logbook) and keys
- Secure the car in a garage or insured location
- Inform DVLA of the owner’s death
- Arrange temporary insurance for the estate
- Get a professional valuation from a recognised classic car valuer
- Include the car’s value in the IHT and estate calculations
- Check for outstanding finance or loans on the vehicle
- Distribute the car or sale proceeds according to the will at the appropriate time
Whether it’s a daily runner or a cherished vintage model, your car forms part of your estate and can have a significant impact on inheritance tax and estate distribution.
If you own a collectable or classic car in the UK, it’s wise to mention it clearly in your will and keep good documentation and valuations. Consider inheritance tax implications and take professional advice about your will.
And if you’re acting as an executor, take care to properly value, insure and distribute any vehicle, especially if it’s rare or high in value.
Again, proper advice is essential.
By Hannah Furr, Partner at DFA Law
Find out more about this topic by contacting DFA Law on 01604 609560 or visit their website.
