Authored by: Collin D. Dickey
It is not uncommon for someone to pass away without thinking about what will happen to their vehicles when they are gone. But when considering your estate plan and wishes for the transfer of your assets, you should consider each asset and any unique liabilities it may implicate for your estate. A car, for example, is not necessarily treated the same as other assets when it comes to administering an estate. And being aware of some of the consequences of not planning for your vehicles could save your loved ones’ time, energy, and money.
The biggest consideration is whether you own or lease your car. If you own your car, the probate courts and probate process will not typically be involved in the transfer of the car because you do not have any creditors associated with that car. This makes the process for transferring ownership of the car relatively simple. In Michigan, the person you choose to leave your car to after you pass away can transfer title to that car easily. All they need to do is go to the Secretary of State with proof they are an heir entitled to that car, your death certificate, and the Title to the car.
If you are leasing a car, it is important to realize that your lease payments are not always immediately terminated upon your death. Your lease agreement should be reviewed to determine the remaining payment responsibilities upon your death. Occasionally, leases will have specific language stating terms that come into effect if you pass away, including whether your death constitutes an “early termination.” If death does not constitute early termination pursuant to your lease language, then the financial obligations, such as monthly payments, will likely continue to become due. The responsibility for these lease payments then falls onto the personal representative of your estate. It is then up to them to work with the dealership or lender to satisfy the outstanding payments, while of course complying with the probate process for paying creditors.
If you already have an estate plan in place, you may wonder whether you should put your car, just like your other assets, in the name of the Trust. The short answer is that cars are not generally put in Trusts for the very reason that they can simply be transferred outside of the Trust upon your passing by using the process explained above. Moreover, titling a car in a Trust’s name raises liability implications that may expose the entire Trust to creditors’ claims.
When it comes to car lease agreements, you may also arrange to have your lease agreement transferred to another person. While this may solve issues with regard to remaining lease payments owed by an estate, you should still be aware of any transfer fees charged by the dealer or lender. Overall, planning for the transfer of your lease may be ideal for limiting a lease creditor’s access to your estate and, in turn, may leave more assets for your loved ones to inherit.
If you find yourself dealing with outstanding car lease payments after a loved one passes away, call our office for assistance at 248-792-9193.
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