Imagine a car accident claims your life. While your family is grieving, the loan company calls asking about next month's payment. Most people never think about what happens to their vehicle financing and ownership when they die, but these questions surface quickly for surviving family members.
Our East Texas Estate Planning Attorneys routinely help families understand how car loans and vehicle title transfers work after death. The process depends on how you titled the vehicle, whether you designated a beneficiary, and how much you still owe.
Does Your Car Loan Die With You?
No. When you die, your car loan becomes a debt of your estate.
The lender retains its lien on the vehicle, which means they can repossess it if payments stop, even though your family members usually don't owe the debt personally. Surviving relatives should not pay the loan from their own money unless they co-signed or jointly borrowed. Let the estate handle it through the proper legal channels.
Your estate has three options:
- Continue payments and transfer the vehicle. Your personal representative can keep making payments during estate administration, then transfer the car to a beneficiary. The beneficiary must either refinance in their name or continue the existing loan (with lender approval).
- Pay off the loan from estate funds. If your estate has cash available, your representative can pay the loan in full and transfer the car free and clear to your beneficiary.
- Surrender the vehicle. When the car is worth less than the loan balance, or estate funds are limited, your representative can return it to the lender. Many car loans have specific payoff procedures, title-hold rules, and repossession timelines, so call the lender first.
Suppose you died owing $12,000 on your SUV worth $15,000. Your daughter says she wants it. Your executor could then make the $380 monthly payments during probate, then transfer the SUV with the loan to your daughter, who can refinance it in her own name.
How Does Your Title Determine What Happens Next?
How you title your vehicle makes all the difference.
Beneficiary Designation (Transfer-on-Death)
Both Texas and Arkansas allow transfer-on-death beneficiary designations on vehicle titles. When you die, your designated beneficiary submits an application packet to the county tax assessor-collector's office in Texas, or to the appropriate office in Arkansas.
This is the fastest, simplest transfer method. In both states, any lien on the vehicle stays with the vehicle regardless of who receives it.
Joint Ownership With Right of Survivorship
When two people own a vehicle jointly with survivorship rights, the surviving owner automatically inherits full ownership upon the other's death. The survivor presents the death certificate to the appropriate office, pays a small transfer fee, and receives a new title. No probate is required.
Sole Ownership (Probate Required)
When you're the only name on the title and haven't designated a beneficiary, your vehicle enters probate. The process often takes months and can take longer depending on estate complexity, creditor issues, or disputes.
How Do Trusts Avoid Probate Entirely?
Revocable living trusts bypass probate completely. When you transfer your vehicle title into your trust's name, you remain in full control as trustee during your lifetime. After your death, your successor trustee transfers the title directly to your beneficiary according to your trust instructions.
Both Texas and Arkansas allow trust ownership of vehicles.
You simply complete standard transfer paperwork showing yourself as the seller (individual) and the buyer (trustee). The total time needed after death is often just one office visit.
You can still finance a trust-owned vehicle. Most lenders work with trusts once you provide documentation of your trustee authority. Your successor trustee gains immediate authority to handle loan payments upon your death.
Key Differences Between Texas and Arkansas
While both Arkansas and Texas handle vehicle title transfers similarly, important distinctions exist that affect timing, costs, and procedures.
- Probate thresholds. Texas Small Estate Affidavit covers estates under $75,000 (excluding homestead and exempt property, where assets exceed liabilities); Arkansas offers simplified procedures up to $100,000.
- Community property. Texas is a community property state, meaning vehicles purchased during marriage with marital income belong half to each spouse. Arkansas is not a community property state.
- Title transfer timing. Arkansas requires transfer within 60 days after receiving authority. For vehicle sales in Texas, inheritance and beneficiary transfers have different paperwork and timing rules, including the 180-day deadline for beneficiary transfers.
- Creditor claim periods. Arkansas requires most creditor claims within six months after the first publication of notice. Texas timing varies by administration type.
What Should Your Family Do Immediately?
When a loved one dies with a vehicle, quick but careful action protects the estate and prevents unnecessary complications.
- Find the title. Determine whether it lists joint owners, beneficiaries, or just the deceased person alone.
- Check for co-signers. If someone co-signed the loan, they're already fully responsible and must keep making payments.
- Contact the lender. Inform them of the death and ask about payment requirements, payoff procedures, and transfer options.
- Keep insurance active. Gaps create serious liability risks. Ask your agent whether the policy covers the personal representative or family members driving the vehicle during administration.
- Don't drive it without confirmation. Until ownership transfers, driving the vehicle may violate insurance terms or create legal issues.
- Secure the vehicle properly. Park it safely and keep it locked until the estate is settled.
- Contact an Estate Planning Attorney. Before making decisions about loans, surrenders, or transfers, get professional guidance to avoid costly mistakes.
Don't Leave Your Family Guessing
Your car represents both value and necessity for your family. Without proper planning, transferring it after death becomes tangled in probate delays, loan complications, and confusion about who's responsible for what.
Ross & Shoalmire, P.L.L.C. serves families throughout Texas and Arkansas. Whether you need Estate Planning, Probate assistance, or Asset Protection, our team brings decades of experience. Call us today to discuss your vehicle ownership and Estate Planning needs. You've worked hard for what you have. Let's protect it for the people you love.
