Have you ever thought about what is going to happen with the family car after your death? The answer is the typical legal answer, depends; and I am not talking about the kind you wear.
If your car is in your sole name, is worth less than $60,000 and you have no other property that needs to be probated through the probate court process, your heirs can just go to the Secretary of State with your death certificate and proof of heirship and transfer your car into their name.
If you left a surviving spouse, they would be the only one that needs to sign off to transfer the property into their sole name. If you have no surviving spouse and just children, then typically all of the children must go to the Secretary of State office to sign off to transfer the car out of your name.
This not only works for automobiles, but it will also work for any titled vehicle other than a mobile home including travel trailers, motorcycles and other recreational vehicles.
If your assets are being probated or need to be probated through the probate court process, then your car would also be probated with the rest of your property. Your probate court appointed personal representative would take their letters of authority issued by the court to the Secretary of State office and then transfer the vehicle in accordance with your will. If there is no will, they would transfer the car to your heirs in accordance to the rules of intestate succession. The rules of intestate succession are just fancy words for who will get your stuff if you died without a will.
If your car is in joint names with rights of survivorship, your survivor(s) would need to go to the Secretary of State office with your death certificate and their identification to transfer the car out of your name and into their name(s).
If there is a loan on your car, the loan may have to be paid off upon your death. In that instance, before the car can be transferred out of your name, a release or discharge of that loan would need to be issued by the lender after the auto loan is paid off. If your auto loan’s terms are such that it does not need to be paid off upon death, then the auto could be transferred out of your name with the lien holder’s name remaining on the new title.
But what if you were leasing your automobile? You may think that your family could just turn in the car to the leasing company and walk away. They could, but leasing contracts are usually for a certain period of time and are binding upon your heirs, successors and assigns. So if they turn the car back in to the leasing company, your estate could still be liable for the rest of the payments on the lease.
Only if there is a specific provision in the lease that says it expires upon your death without liability would your heirs be able to just return the car to the leasing company. The car lease forms I have reviewed recently all state that death is a default of the lease. And upon default, the leasing company could repossess the car and assess an early termination fee. This early termination fee could be as high as all of the remaining payments on the lease. In such cases, your heirs would not only have to pay off the entire lease, they would not even get to keep the car for the remainder of the lease.
What if there are not any assets in your estate to pay off the lease? In that instance, if no one else signed on the lease, there may be no one liable for the payments due on the lease and the leasing company should be happy to just take the car back now. That way, they can get the most money out of selling it now, rather than getting it back later down the road through the repossession process with additional fees and costs and then selling the car when it is older.
The best thing your heirs can do is to consult with an estate settlement attorney after your death. The attorney should be able to review the title, lease and/or loan agreement and make a determination of what needs to be done with your car.
By: Matthew M. Wallace, CPA JD
Published edited August 30, 2009 in The Times Herald newspaper, Port Huron, Michigan as: What do we do with the car?