My brother passed away in Jan 2009, a resident of Virginia. After his death, I paid off the loan on his vehicle. Unfortunately, his estate is insolvent. The title to the vehicle is in the names of my brother and his ex-wife.
- Can I keep the vehicle?
- Can I get reimbursed?
- Can I sell the truck and get my money back?
The short answer: No, no and no. You cannot keep the vehicle, you are not entitled to reimbursement, and you cannot sell the vehicle.
The lesson to learn: Never, ever, pay a debt of a decedent's estate. Many well meaning family members and personal representatives (executors or administrators) find out the hard way that they have to get in line behind other creditors of an estate before than can be reimbursed.
Unfortunately, you currently have no claim against the estate. Since the title to the vehicle is not in your name, you have no authority to act: you cannot sell it; you should not be driving it; you cannot give it away.
The title of the vehicle (the exact words on the title are important) will determine who has authority. If it is titled to your brother and his ex-wife as joint tenants with rights of survivorship, then the vehicle is probably hers -- regardless of the fact that you paid it off. Details like re-titling assets after a divorce are extremely important, and often overlooked.
One caveat, however, may be that some state laws dissolve a "joint tenancy with rights of survivorship" upon the entry of a divorce decree, and the property becomes a tenancy in common (that is, the parties each own equal shares, and can dispose of their share independently). If they were divorced in Virginia, that should be the case.
Another issue to investigate: did your brother and his ex-wife have a separation agreement (which was incorporated into a decree for divorce)? If so, it is likely that the matter of ownership of the vehicle was addressed in the agreement. Possibly, the estate may have a claim for the value of the vehicle against the ex-wife, if husband was to receive title to the vehicle through the settlement agreement.
Who is the personal representative (administrator or executor) of your brother's estate? If that person or entity does not know about the vehicle, it may be necessary to let him or her know of its existence. The personal representative ("PR") may have authority to take control of the property and deliver it to the correct owner, or sell it. There is personal liability for the PR. The PR's signature may be necessary to transfer the title, depending on the titling. Since it is an insolvent estate, a creditor may qualify as the PR if no one else has done so.
Virginia has some very specific rules about the order in which creditors get paid from an estate. Are you one of the estate's creditors? If not, perhaps you should be.
One method you may want to investigate with an attorney is whether or not you could file a claim against the estate for the amount you paid for the vehicle. At best you would be an unsecured creditor, and if the estate is insolvent, then you would likely get pennies back on the dollar. Also, you would probably need to get an assignment of interest from the finance company that held the auto loan since you paid it off on behalf of your brother's estate.
The problem is that you took on the liability of the debt. In an insolvent estate, not all of the debts get paid. Your situation is not unusual, and actually this catches many well meaning family members and executors off guard. Once you pay the debt of an estate, you don't have a right to reimbursement from the estate. You have to line up with all of the other creditors.
Lesson: do not pay the debts of your deceased friend or relative!
Who gets paid? First, all the costs of administration come off the top of the estate assets. In many insolvent estate cases, administration costs (probate fees, attorney's fees, executor's fees, etc...) whittle away the bulk of the estate.
Next, certain surviving family members get to take certain allowances and exemptions. These allowances are limited to immediate family such as a spouse and children.
Following, the funeral director gets paid up to $3,500. $3,500 is not much when you consider typical funeral costs. That is why funeral directors require a family member to personally guarantee the funeral costs. Surprise: you may not get reimbursed!
Then in the following order: Debts and taxes with precedence under federal law (the IRS, for example); medical and hospital costs (which are severely limited, again, causing health care facilities to seek a personal guarantee by another family member); debts and taxes due to the Commonwealth; debts due to a trustee, personal representative, guardian, conservator or committee "for moneys collected by anyone to the credit of another and not paid over;" municipal taxes; and finally, everyone else.
You fall in the "everyone else" category.
There are a number of variables in this particular matter that should be investigated, and this discussion just scratches the surface. That is why you need an attorney. If you do not know a Trusts and Estates attorney, the Virginia State Bar Association has an attorney referral service that could help you find a qualified attorney (http://www.vsb.org/site/public/lawyer-referral-service/).
The Virginia State Bar requires that I remind you that this general information is not meant to be legal advice and that no attorney client privilege is created by this on-line discussion. You should seek the advice of a qualified attorney to help you through this matter.
Best of luck.
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