Short Answer

Usually, yes. In North Carolina, if a lender requires the financed vehicle to be titled in an individual borrower’s name, the trust typically cannot be shown as the owner on the certificate of title while the loan is in place. However, estate planning can still address the vehicle by (1) planning for a later retitle to the trust after payoff or (2) using other plan documents and instructions so the vehicle can be handled smoothly at death.

Understanding the Problem

In North Carolina estate planning, the key decision is whether a financed vehicle can be titled in a trust when a lender and insurer require the certificate of title to show an individual owner. The issue comes up when a person is buying a vehicle with a loan, wants probate-avoidance planning, and is told there may be an insurance or lender problem if the trust is placed on the title. The practical question is whether the trust can still be “listed” in any meaningful way for estate planning when the lender insists the borrower be the titled owner.

Apply the Law

North Carolina’s title system is also the primary system for recording and perfecting a lender’s security interest (lien) in a vehicle. In a financed purchase, lenders commonly require the borrower to be the titled owner so the lender can have its lien noted on the certificate of title and control the payoff/transfer process. North Carolina law also treats transfers “to a trust” as transfers to the trustee(s) of that trust, which helps when property is later retitled into a trust, but it does not override a lender’s underwriting requirements for a financed vehicle.

Key Requirements

• Title and lien must match the loan structure: With a vehicle loan, the secured party typically requires the owner/debtor information on DMV paperwork to be consistent with the loan and insurance.
• Perfection happens through the title record: For vehicles that require a North Carolina certificate of title, the lender’s security interest is generally perfected by notation on the certificate of title through the DMV process.
• Trust ownership requires correct “trustee” titling: If a vehicle is later placed into a trust, the titling should identify the trustee(s) (because a transfer to a trust is treated as a transfer to the trustee(s)).

What the Statutes Say

• N.C. Gen. Stat. a7 20-58 (Perfection of security interest on certificate of title) – Explains that a security interest in a titled vehicle is generally perfected through notation on the certificate of title via DMV procedures.
• N.C. Gen. Stat. a7 39-6.7 (Transfers to or by trusts) – Provides a rule of construction that transfers “to a trust” are treated as transfers to the trustee(s), including for personal property.
• N.C. Gen. Stat. a7 20-72 (Transfer by owner) – Describes how title transfers occur and includes rules that commonly matter when later retitling a vehicle.

Analysis

Apply the Rule to the Facts: Here, a prior trust-based estate plan exists, and the vehicle is being purchased with a loan. Because North Carolina uses the title system to record and perfect the lender’s security interest, the lender may insist that the borrower be the titled owner during the loan term. If the title must remain in the individual’s name to satisfy loan and insurance requirements, the trust usually cannot be listed as the owner on the certificate of title until the lien is paid and the lender releases its interest.

Process & Timing

1. Who files: Typically the dealer, borrower, and/or lender. Where: North Carolina Division of Motor Vehicles (often through a plate agency). What: Title application and lien notation paperwork required by the DMV for a financed purchase. When: At purchase/registration and during the lender’s lien notation process.
2. During the loan: The lender’s lien is noted on the certificate of title, and many lenders restrict transfers or retitling without payoff or written consent. Insurance carriers may also require that the named insured and titled owner match the loan structure.
3. After payoff: Once the loan is satisfied and the lien is released, the owner can typically retitle the vehicle into the trust (usually by titling it in the name of the trustee(s) of the trust) as part of “funding” the trust.

Exceptions & Pitfalls

• Lender rules control the practical answer: Even if a trust could legally hold title, the loan contract and lender underwriting may prohibit titling the collateral in a trust (or may require a trust review and trustee documentation).
• “Trust” versus “trustee” titling mistakes: If the vehicle is later transferred, paperwork should be consistent with North Carolina’s rule that a transfer to a trust is treated as a transfer to the trustee(s). Incorrect naming can cause delays at the DMV and complications for insurers.
• Insurance mismatch: If the policy’s named insured, the garaging address, and the titled owner do not match what the insurer expects for a financed vehicle, coverage disputes can arise. This issue should be confirmed in writing with the carrier before changing any ownership records.
• Over-funding the trust with “high-friction” assets: Many estate plans treat vehicles as assets that can be handled through administration at death rather than constantly retitled, because vehicles are frequently bought, sold, traded in, or totaled.

Conclusion

In North Carolina, when a vehicle is financed, the lender’s lien is typically perfected through the certificate of title process, and many lenders require the borrower to be the titled owner while the loan is outstanding. If that requirement applies, the trust usually cannot be listed as the owner on the title until the loan is paid and the lien is released. A practical next step is to confirm the lender’s written policy and, if permitted after payoff, file the DMV title transfer to retitle the vehicle in the trustee’s name.

Talk to a Estate Planning Attorney

If an estate plan includes a trust and a lender or insurer is raising issues about titling a financed vehicle, our firm has experienced attorneys who can help explain the options, the paperwork, and the timing. Call us today at (919) 341-7055.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.