Over the years, leasing cars has become more and more popular. People often are interested in the idea of being able to lease a new car for a few years, then return it for a newer model. This leaves you less committed to a long-time car purchase and allows you to try out different types of cars and switch up your style of vehicle. If you, like many others, have a car lease and have begun to plan for your future, you may be wondering how this will affect your Estate Plan.
Understanding the different rules that apply when someone dies before their lease is up will be important to know when you enter into a lease. This may not feel like an important thing to think about, as it can often be hard to imagine our own death, or that it may be closer than we think. However, you can never know what the future may hold, so it is important to do your best to prepare for it well in advance. Here at Trust & Will, we want to equip you with the necessary information to ensure you can correctly plan for your death. Below, we will go over what happens to your car lease when you pass away and what options are available to you.
Does a Car Lease End Automatically When You Die?
Unfortunately, your car lease terms will remain in effect after your death. Regardless of how many payments were left unpaid when you died, all of it must be repaid in full after you pass.
Can a Car Lease Be Terminated When a Lessee Dies?
Although not common, it is sometimes possible to terminate a car lease after the lessee passes away. It is important to note that leasing companies may charge a fee in order to have your lease terminated, meaning you will still owe some money even if you terminate the lease. However, this is not always an option. It will be important to review your contract to determine whether or not your contract can be terminated in the event of your untimely death.
Who is Responsible for Paying Your Car Lease After You Die?
Once you pass away, the responsibility of repaying your car lease will go one of two ways. First, if there is a co-signer or co-borrower, this person will most likely be expected to continue making the monthly payments until the contract is up in place of the primary owner or co-borrower who passed away. This person will also take up full ownership of the lease and will be able to use the car in place of the person who passed away.
However, if there is no cosigner or co-borrower on file, the car lease will become a part of the Estate with the rest of the person’s assets, including property, jewelry, and houses. To settle all assets and debt, the Estate will have to go to probate court, which is the court proceedings in which assets are transferred to their new owners and debts are repaid.
To repay the money that is owed on a lease, the finances left behind by the deceased will be used. However, if the deceased’s remaining finances are not sufficient to repay the funds, then the deceased’s assets may be sold in order to make the rest of the payments.
Is It Possible to Transfer a Car Lease After the Lessee Dies?
In certain circumstances, you may have a family member or spouse who may want to take the lease over in your place after you pass. Although not common, it is occasionally possible to transfer your car lease to another individual if there is not already another co-borrower or co-signer. However, this will depend upon your specific contract to determine whether or not this option is available to you and your family members.
If you can transfer your lease and a relative wants to do this, it will be important to act fast. You will want to notify the dealer you are leasing your car from immediately. This will allow them to have time to transfer over the ownership of the lease before it goes to probate court and is settled with the rest of the deceased’s debt.
Cleaning Out the Leased Car
Before you return a leased car because a contract has been terminated, the debt has been repaid in full, or the car is transferred to a new owner, it will be important to clear the car of the deceased owner’s belongings. Over the years, your car can become home to many of your personal belongings, and someone will want to ensure that all of them are removed. There may be valuable assets left behind in the vehicle, such as jewelry, or sentimental assets, such as photographs, that the deceased’s loved ones will not want to misplace.
Additionally, vehicles must be cleared out of all personal belongings before they are returned to the company or dealership that you were leasing the car from. They will want the car returned in as close to the same condition as when it was leased. If this is not done, it is possible that additional charges may be made by the company to have the car cleaned properly before it is given to a new owner.
Ensuring all of your affairs are in order before your passing, as well as creating your Estate Plan, can feel like a daunting task. It may seem easier and more convenient to instead put it off to a later date, as your death may feel like a faraway event. However, it is not something you want to put off. Trust & Will wants to help make this process easier and more manageable. Unsure where to start? Consider taking our free online Estate Planning quiz to allow us to start you in the right direction.