It depends. Did you leave a will? Was there a TOD on the title to your car? Either way, the debt will have to be paid otherwise the lender will being repossession proceedings. The short answr is that until the estate is squared away, the estate owns it. Part of the duties of the personal representative (executor) is to pay off debts, including the vehicle. Once the debt is paid, the car can go to whomever you designated to receive it. Some documents though will say that property will pass with the debt still attached.
If you know of a bank that does that, please give me their name. It is extremely unlikely that any bank would offer for forgive a loan balance for any reason. The bank's loan dept. is not in the insurance business. Keep in mind that the bank actually owns the car because they hold the title in their name as collateral for the loan. The car does not legally belong to you until you hold clear title. If you die owing money on the loan, the bank will sell the car to recoup as much of the outstanding balance as they can. The bank might allow another party to assume the payments under a prearranged agreement. Calling the car a gift means nothing. And I wouldn't consider it a gift if you have to pay for it!
The estate has to resolve the loan, either through selling the car or returning it to the lender.
If you are borrowing money from a bank, the bank may require a collateral assignment of a life insurance policy in order to pay off the loan should you die prematurely. A collateral assignment will pay the bank off first in the event of your death with any leftover paid out to your beneficiaries. Once your loan is paid off, you can have the collateral assignment removed from your policy.
You must make certain the person who has agreed to co-sign your loan understands they will be fully responsible for paying the debt if you default on the loan or if you die while the loan is outstanding. Their name should also be on the title to the car and the insurance so they can be notified if you don't pay the insurance or take the car over if you fail to pay and they must make the payments. Most people don't realize all the financial responsibility that comes from co-signing for another person's car loan. If the co-signer owns any real property it could become vulnerable to your creditor if you default on the loan.
You are still respnsible for paying should the borrower die.
Mike Loan died in 1966.
Will Ferrell
Hoang Thi Loan died in 1901.
Huu Loan died on 2010-03-18.
Mai Thuc Loan died in 723.
The estate is responsible for settling the debts and accounts of the individual. It may be to the best interest of the estate to sell the vehicle and pay off the loan, or even allow the loan holder to reposses the vehicle. The executor of the estate will have to document and receive court permission regardless of what is done.
Someone, normally a family member, will be appointed as executor of your estate. That person is in charge of your assets and debts as allowed by law.