What happens when a car owner dies?
Dealing with a vehicle after its owner's death can be challenging and complicated. Any outstanding auto loan will still be in effect. The process for transferring ownership of a car after death and updating the auto insurance policy may vary by state and whether the owner had a will. Driver's license cancellation isn't always automatic, so you might need to contact the department of motor vehicles.
How to transfer ownership of a car after death
Several factors determine the process for transferring car ownership after the original owner dies. The car title lists the owner or owners, and state requirements for transferring a car title vary. Several states have community property rules, where the car becomes the surviving spouse's property.
Transferring the car title when the owner is deceased might be complicated, if the owner didn't have a last will and testament — a legal document that specifies what should happen to the person's assets. A state probate court, which focuses on the legal process after someone dies, might end up determining who can transfer the title. This process can take several months to complete.
Once you have the legal authority to transfer the car's ownership, you'll need to complete the process through the state department of motor vehicles (DMV), including providing documentation such as a death certificate, your photo identification, and a letter from the court.
What happens to a car loan when the owner dies?
Auto loans don't disappear when the car owner passes away. Any debts the person owed in life will still need to be paid. Typically car loans have a death clause that details the repayment process if the borrower dies. If there's a will, the heir or heirs might inherit the loan along with the vehicle.
State law varies, and so do loan terms, but the surviving co-signer on the car loan or the borrower's estate is usually responsible for the remaining balance. An estate is the deceased person's total net worth, including savings, investments, real estate, belongings, and other assets. The estate might need to sell off assets to pay the auto loan. Learn more about car insurance requirements by state.
Sometimes, the lender will require refinancing on the car loan after the original borrower's death. If there's no one to make payments and the estate can't provide enough to satisfy the loan, the lender could repossess the vehicle.
What if the car insurance policy holder dies?
Auto insurance policies vary, so it's important to determine exactly which steps you need to take with the insurance company. Notify the insurance company about the person's death if that hasn't been done already, and ask them about the next steps. Sometimes, the surviving spouse or estate executor will inherit an auto policy that continues after the driver dies. In this case, make sure that the policy specifies which driver is covered. Since the policyholder is changing, be aware that the car insurance premium and discounts could also change.
To cancel the deceased car owner's auto policy, you'd still need to contact the insurance company. They might request a death certificate copy and documentation to show that you're the estate executor to prevent fraud.
How to sell the car of a deceased person
Owning the vehicle jointly with the deceased person means that you should be able to take full legal ownership easily. Once you contact the DMV and have the car title in your name, the car is yours to sell.
Selling the vehicle should also be relatively straightforward if you're the executor for the deceased person's estate. The DMV might require certain paperwork and fees before a sale. For the sale itself, you'll sign the title with your name and your role as the deceased person's executor. Transferring the title will then be up to the buyer.
When a vehicle owner dies, transferring the car title and updating the auto insurance may require an official death certificate. Request one right away because obtaining it could take several weeks, depending on the state.
Does the DMV know when someone dies?
Some states have a vital records department that notifies the DMV about a driver's death so that their license gets canceled automatically. However, in states where this notification doesn't occur, the survivor needs to terminate the license. Doing this as soon as possible helps prevent identity theft.
Canceling the driver's license usually includes contacting the DMV and showing an official death certificate. You might need to make an in-person appointment, although many states will let you complete the cancellation by mail. Check with the DMV to find out which forms and documentation to provide.