When your spouse dies, his property goes into probate. The executor of the estate is responsible for settling debts and disposing assets. If you want to keep a car after the death of your husband, you have a few options, most of which involve probate. However, in community property states, the laws vary and you may be able to bypass probate.
Responsibilities of Probate
Although laws vary from state to state, the probate process is very clear and precise; when someone dies, debts must be paid and then assets can be transferred to the beneficiaries. Under probate law, a car loan would be considered a debt and the car itself would be an asset. The executor of the estate is responsible for notifying all debtors of an individual's death and settling all debts before the executor can dispose of assets.
Settling the Debts
During probate, the executor must settle any debts as a part of the estate before assets can be distributed. The executor of the estate must notify all debtors, including credit card companies, banks and lenders, so they can attempt to collect any outstanding debts. If the estate doesn't have enough money to pay outstanding debts, banks and lenders may attempt to seize assets to pay off these debts. The executor must negotiate outstanding debts with lenders based on how the decedent or family members want the property disposed.
Keeping the Car
If you want to keep a car by assuming the payments after the death of your spouse, you must negotiate this directly with the creditor. In many cases, the lender will allow you to take over the payments and keep the car. Some banks may require you to qualify for the loan individually after the death of your spouse. If you can't qualify for the loan, a lender may choose to repossess the car after your husband's death.
Community Property States
If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin, any property that you acquire during a marriage is considered to be community property: a joint asset that is divided upon divorce, annulment or death. In most community property states, you're responsible for paying your spouse's car loan after his death. The bank should still be notified during probate, but in most cases you can assume the property and loan as long as you continue to make payments.
Credit Life Insurance
Some lenders provide "Credit Life Insurance" on outstanding debts, such as credit cards or car loans. If your husband purchased this coverage, the coverage may pay off a portion of the debt or may pay off the car loan entirely. A car note itself typically doesn't state whether this coverage is purchased; it's typically an add-on that the spouse buys after the fact. Contact your lender to find out if your husband had this coverage and your car loan is paid upon death.
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