Most of us own one or more cars. These are a blessing, helping us to move from one point to another effortlessly and to transport our items. But have you ever paused and wondered what will happen to your vehicle when you pass away?
You need to understand that the vehicle is a huge part of your estate plan, and the earlier you make it a part of your estate plan, the better.
You can own or lease a vehicle, and this dictates how the vehicle is handled when you pass away.
Before you begin the process, you need to consult with a qualified estate planning lawyer to understand the laws governing vehicle succession in your state.
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Handling a Leased Vehicle
When you lease a vehicle, you don’t make it part of the estate at all. This is because you don’t own this vehicle; rather, you have it on contract.
The lease agreement is what determines the next steps that you take. The terms of the lease will guide you on what to do or what not to do. Don’t assume that once you pass away your family will just return the vehicle to the lot and that will be done – it is much more difficult than you think.
We go back to the first point – you need to review the terms of the lease agreement before you take the car out on the road.
Many leases are for a certain period of time and at times they specify that they can be passed onto the heirs or successors.
In some cases, the person that leased the vehicle triggers the termination of the lease when he dies. However, the family usually has an obligation to clear any arrears on the vehicle.
If you had an early termination clause in the contract, then your family might end up paying a penalty for the termination of the lease, regardless of what caused the termination.
This is the point when your family needs to consult with an estate planning attorney. The legal mind will assist the family to interpret the lease agreement and then determine if they are responsible for any remaining payments under the lease. The attorney will also try to reach an agreement with the company so that the amount can be reduced.
With proper documentation, the company can transfer the lease to one of the family members. The family might have to pay transfer fees for this task, but this is a good thing because your loved ones won’t be inconvenienced when moving around.
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Managing Vehicle Ownership
Here, you own the vehicle and this automatically makes it part of the estate. Your vehicle in this case is subject to probate when you die.
Many states allow your vehicle to be transferred to a beneficiary without the need to go through probate, which is often expensive and takes long.
If you own the vehicle with your spouse, then it is automatically transferred to her or him upon your demise. This is true if you are spouses. In other states, you have to specify in the title that you own the vehicle jointly with another person for this rule to stand.
For your information, you need to understand that if you make someone else the joint owner, then creditors can seize the car if the person owes them.
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Assigning a Transfer-on-death (TOD) Beneficiary
Many other states also give you the chance to come up with a TOD on the registration form that allows the vehicle to be transferred to the person without probate upon your demise.
This is possible for single and joint ownership, but you have to confirm with the rules of the state whether this is applicable or not.
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What Happens if the Vehicle Has an Existing Loan?
If you financed the vehicle using an auto loan, then it is vital to let the family members and your estate planning lawyer know about this. You need to try and avoid a default because the lender might end up repossessing the vehicle when you pass away.
Try and talk to your family or the estate administrator to contact the loan company to take the necessary steps to proceed with loan repayments after you pass away.
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Give Trusts and Estates a Call Today
You can lessen the stress on your family by coming up with plans in advance for a smooth succession of your vehicles. We have the capacity to help you make a decision on who to receive the vehicles upon your demise. We also draft documents that you need to carry out the wishes.
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source
https://trustsandestate.com/estate-planning-for-vehicles/
