Last Updated on April 22, 2024 by Tresi Weeks

Probate attorneys play a huge role in ensuring that your assets are distributed according to your instructions in your will. If you have left no will they will play an even more important part in a court-supervised legal process.
Have you considered what will happen to your car when you pass away? In 2019, it is projected that there will be 281.3 million registered vehicles in the United States. Your car is a valuable asset—as well as a potential source of liability—that you should consider in your estate plan. Cars can be owned or leased. The way they are handled after you die depends on these and other circumstances. There are some steps you can take in your estate planning to make sure the transfer occurs smoothly.

Is the Car Part of Your Estate?

If you are leasing your car, it is not actually part of your estate because you do not own it. A lease is a contractual relationship, so what happens if you pass away will depend upon the terms of the lease. Do not assume that your family can just return the car to the leasing company with no further obligations or simply continue to drive the car. The terms of car leases vary, so it is important to review the contract carefully.
Leases are often for a certain duration and sometimes specify that they are binding on heirs, successors, and assigns. Also, under the provisions of some leases, if the person who leases a car dies, then an “early termination” of the lease is triggered, but often, there is still a financial obligation to make some or all of the remaining payments. When the lease contains these types of terms, even after your family returns the car to the leasing company, your estate may still have to satisfy the amount of the remaining payments on the lease or pay an early termination fee. There may also be fees, for example, for processing paperwork or excessive wear and tear. Under these circumstances, we can help your family determine if your estate is responsible for the remaining payments under the lease, and if so, try to reach an agreement with the leasing company to satisfy the lease obligations for a reduced amount.
It is possible that the leasing company or the terms of the lease may permit the transfer of the lease to another person in your family. This arrangement may involve transfer fees, but at least your family may have the opportunity to continue using the car for the remaining period of the lease.

Are There Ways to Avoid Probate?

If you do own your car, it may be part of your estate and subject to probate. However, there may be ways to avoid probate.
(1)   In Texas, there is an Affidavit of Heirship for a Motor Vehicle (Form VTR-262) which is signed by the heirs before a notary public. The form transfers the car to someone without having to go through the probate process. The heir takes the form to the county tax assessor-collector’s office for processing and additional documents, such as an Application for Texas Title and/or Registration, the car’s title, and proof of insurance, may be required.
(2)   Joint Ownership with Right of Survivorship. On the very bottom of a Texas car title, there is a place where you and the car’s joint owner can agree that the ownership is joint and that the surviving owner automatically becomes the sole owner if you die. This means that upon your death, ownership vests automatically 100% in joint owners, such as your surviving spouse, with no need to probate. Typically, all that your spouse will need to do is go to the department of motor vehicles with the title and the death certificate to obtain a new title in his or her name alone. Texas also offers car owners a form, the VTR-122, to use to create a right of survivorship ownership with your spouse or another person(s).
Warning: If you are considering making someone else a joint owner of your car just to avoid probate, keep in mind that you will be making a permanent gift to that person which could be seized by his or her creditors. Also, if the co-owner’s interest is worth more than the annual gift tax exclusion (currently, $15,000), you will have to file a federal gift tax return—though no gift tax will be due unless you exceed the federal gift and estate tax exemption, which for 2019, is $11.4 million for an individual.
(3)   If you have a small estate, you may be able to transfer your car (and any other assets) using a Small Estate Affidavit.

What Happens If There Is a Car Loan?

If your car is financed by an automobile loan, it is important to let your family members and estate planning attorney know. Whether ownership of your car is transferred with or without probate, it is important to make arrangements to avoid a default if there is a car loan. Otherwise, the lender could repossess the car. The new owner, executor of your estate, or court-appointed administrator will need to quickly contact the loan company after your death to take the necessary steps to continue making the car payments or pay off the remaining debt.

Get a Probate Attorney to Help You Plan for Your Car

Help lessen the stress on your loved ones by making plans in advance for a smooth transfer of all of your assets, including your automobile. An estate planning attorney can help you think through who you would like to receive your car after you pass away and the best way to accomplish the transfer of ownership, as well as draft any documents needed to carry out your wishes.
Contact our probate attorneys today to discuss your probate needs and alternatives to ensure the process is simple and effective for your loved ones.

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