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Part of the Series How to Give Digital Assets as a GiftGiving a car to a family member, friend, or charitable organization is a generous gesture, but it also comes with legal and insurance-related ramifications. You should take specific steps to ensure that the transfer of ownership goes smoothly and is within the law.
The basics include ensuring you have a clear title, creating a bill of sale with a price of $0, and making sure you understand and follow your state’s title transfer process.
The process of transferring ownership when gifting a car is similar to that involved in selling a car. First, you must prove ownership by presenting the title to the car with no liens attached. From there, you and the recipient follow a process to convey ownership to the recipient. This is known as transferring the title. You must disclose the vehicle’s odometer (mileage) reading as part of this process. Your state may require that the recipient provide proof of insurance or may defer that until later. Additional forms and documents may be required before the transaction is complete, depending on the state.
You must own the vehicle outright (no liens) in order to give it away.
When you sign over the car title, you’re transferring ownership to another person. Transferring ownership is crucial whether you’re gifting the vehicle to a family member or a friend. Many states have unique requirements, such as a bill of sale or affidavit of motor vehicle gift transfer.
Before gifting a car, consider the vehicle’s condition and whether the person receiving it can maintain it in the future. Here are some things that you (or a qualified mechanic) can do to ensure the car is in good working condition before passing it on:
Some states (or counties within a state) require a passing vehicle emissions inspection report before a title can be transferred. Other states require the recipient to get the emissions test. Learn about the rules in your state before the transfer.
Documentation and paperwork are a big part of gifting or donating a car in any state. You can’t simply hand over the keys. Here are some of the more common types of paperwork and documentation that pertain to gifting a motor vehicle.
A bill of sale verifies a transfer of ownership. It can serve as legal proof of the transaction should any dispute arise. In most states, a bill of sale for gifting a car is the same as the one for selling a car, except the listed price is $0.
Here are the common elements found in most state bills of sale:
Although most states do not require the notarization of a bill of sale, taking that additional step is still a good idea.
In addition to noting a selling price of $0 on the bill of sale, many states require that both the donor and recipient sign an affidavit of motor vehicle gift transfer, stating:
In New York, the form is called a Statement of Transaction (DTF-802), and the parties must complete the form if the motor vehicle is a gift or sold below fair market value to a person other than a spouse, parent, child, stepparent, or stepchild.
Transferring vehicle ownership is the most important step in the gifting process. The least complicated way is for the donor and recipient to go to the Department of Motor Vehicles together. This eliminates concerns about notarization or last-minute questions about missing documentation.
Here are the most commonly required documents and forms. Be sure to check your state’s DMV website for specifics.
What to Take to the DMV
*If required by the state
If both parties show up at the DMV together, the registrar can perform any required notarization at that time. If they appear separately or at different DMVs, make sure all documents signed by an absent party have been notarized if required.
Here are the steps to transfer a title from you to the recipient.
Step 1: Assign title. (Donor)
After presenting a valid ID, you must transfer ownership of the vehicle to the recipient on the back of the title by entering your name, address, signature, and date, as well as the recipient’s name and address. This step must be notarized.
Step 2: Show proof of insurance and/or bill of sale. (Recipient)
After presenting a valid ID, the recipient may have to show proof of automobile insurance and a bill of sale if required by the state. Notarization of the bill of sale is required in some states.
Step 3: Present an affidavit of motor vehicle gift transfer. (Donor)
Some states require an affidavit of motor vehicle gift transfer (see above) to show that the vehicle was either sold below value or given as a gift and exempt from taxes. Typically, this is required when you gift a car to a family member.
Step 4: Apply for a certificate of title. (Recipient)
The recipient must apply for a title in their name. Some states require proof that the car passed an emissions test within a certain period. You or the recipient can provide this proof.
Step 5: Register the vehicle and apply for license plates. (Recipient)
Armed with a new title, the recipient can now register the vehicle in their name and apply for license plates following the procedure established by the state.
Each state establishes its procedures for gifting or donating a car. While most follow a similar process, variations include additional steps depending on the state. The federal government maintains a list of links to all state DMVs where you can look up specific procedures for your state.
Unless you live in New Hampshire, you are required to have automobile insurance. When you transfer ownership to another person, you must cancel your insurance, and the recipient must obtain insurance.
There is no one rule when it comes to how much car insurance you have to have. Each state has a different minimum amount of car insurance that drivers must obtain to drive on public roads legally. You must purchase liability insurance against bodily injury and property damage at a minimum. Do your research to ensure you’re getting the best car insurance policy for your needs.
When it comes to donating a car to a charity, the process is relatively simple. The steps outlined below are typical.
Step 1: Contact the charity by phone or online.
You will be asked questions about the vehicle’s make, model, and condition. You may need to complete some documentation and make an appointment for the charity to pick up the vehicle.
Step 2: Compile relevant paperwork.
Documents could include the title, service documents, registration, etc. Required documents will vary by state and by charity.
Step 3: Remove your personal items from the car.
Do not remove license plates unless instructed to do so. Parking a car on the street without plates is illegal in some jurisdictions.
Step 4: Have the car ready for pickup.
Most charities prefer the car to be in the driveway or street. You may have to turn over paperwork or documents to the driver who picks up the car.
Step 5: Get a receipt.
The charity will give you a tax-deductible receipt for the car’s value. Sometimes, the charity will auction off the car and send you a receipt at that time. You can deduct that amount from your income to reduce taxes at tax time.
Here are some of the charities that accept donations of motor vehicles.
You should check the rules of your state to be sure, but at the national level, the IRS requires gift disclosures above a fair market value of $17,000 in 2023, but you still may not have to pay taxes depending on how close you are tot he lifetime exclusion of $12.92 million.
According to sales numbers tracked by Cox Automotive, new vehicle sales does increase in December. In 2023, their numbers indicate 1.36 million new vehicles were sold in December, up 6.2% from 2022. That gives some credence to the idea that people may, in fact, be giving those vehicles as gifts.
Gifting or donating an automobile can be one of the most generous and rewarding things that you do. While it isn’t difficult, such a gesture does follow a legal process that varies by state. Two essential elements are a clear title and a vehicle in good running condition.
Transferring ownership, also known as transferring the title, is a multistep process with slight differences by state. All but three states require automobile insurance, making it critical that you and the recipient coordinate coverage to avoid a lapse in coverage or any last-minute hassles at the DMV.
If the car is being donated, the process is more straightforward because the charity often takes on much of the paperwork responsibility. As a bonus, you can deduct the car’s value on your income taxes—something you can’t do when gifting the car to another person.
Above all else, familiarize yourself with state-specific rules and policies when gifting or donating a vehicle. Finally, pat yourself on the back for a truly one-of-a-kind, often life-changing gesture to a family member, friend, or favorite charity.
Article Sources
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The Smart Traveler Enrollment Program is a service that allows travelers to register their trip with the nearest U.S. embassy or consulate.
A bookie, slang for “bookmaker,” is someone who facilitates gambling, most commonly on sporting events. Bookies also set odds and pay out winnings on behalf of others.
Middle class is a socio-economic category of people who fall into the median range of income for the geographic area in which they live.
An exit visa is a government document granting an individual permission to leave a country. It is a requirement for travelers to several countries.
Engel's Law states that as household incomes rise, the percentage of income spent on food decreases and more money goes to other goods or services.
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