Gifting a car to a family member, friend, or charity is an act of generosity, but it also comes with legal and insurance implications. Concrete steps must be taken to ensure that the transfer of ownership occurs smoothly and within the law.
The basics include making sure there is clear title, creating a sales invoice with a value of $0, and understanding and following your state’s title transfer process.
Important points
- Gifting a car to a family member, friend, or charity is an act of generosity, but it also comes with legal and insurance implications.
- You must ensure that you have clear ownership of the car and that it is in running condition.
- Learn and follow your state’s title transfer process, including notarization and required paperwork.
- Be sure to understand and explain the insurance requirements to the new owner and ensure that insurance company coverage is discontinued promptly.
- If you’re donating a car, be sure to do your research and follow the proper tax procedures to take a deduction for your gift, if necessary.
Ownership and legal considerations
The process of transferring ownership when gifting a car is similar to the process when selling a car. First, you’ll need to prove your ownership by showing a title to the car that doesn’t have a lien on it. From there, you and the recipient will follow the process of conveying ownership to the recipient. This is called transfer of title. As part of this process, you will be required to disclose your vehicle’s odometer reading. Your state may require your recipient to provide proof of insurance or may delay it until a later time. Depending on your state, additional forms or documentation may be required before the transaction can be completed.
To transfer a car, you must own it outright (no liens).
When you sign the title to your car, you are transferring ownership to another person. Whether you’re gifting a car to a family member or a friend, transferring ownership is very important. Many states have their own requirements, such as an invoice of purchase price or an affidavit of gift of a motor vehicle.
car preparation
Before gifting a car, consider its condition and whether the recipient will be able to maintain it in the future. Here are some things you (or a qualified mechanic) can do to make sure your car is in good condition before you hand it over.
- Check or replace engine oil.
- Check and refill your windshield washer, coolant, and brake fluid.
- Inspect belts and hoses for signs of wear.
- Rotate your tires to evenly wear them and extend their lifespan.
- Check the intake system and emissions controls.
- Check fuel system components.
- Check the ignition system.
- Discuss the importance of any necessary repairs with the recipient.
Some states (or counties within states) require a passed vehicle emissions inspection report before ownership can be transferred. Other states require recipients to undergo emissions testing. Learn your state’s rules before transferring.
Documents and administrative procedures
Documentation and paperwork are an important 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 documents and documents associated with gifting a car.
Create sales details
The bill of sale proves the transfer of ownership. It serves as legal evidence of the transaction in case of a dispute. In most states, the bill of sale when you gift a car is the same as the bill of sale when you sell a car, except the list price is $0. Common elements included in most state sales statements include:
- Seller and Buyer Names: Must be printed and legible.
- Sale Price: Since this car is a gift or donation, the price is $0.
- Vehicle description: Include year, make, model, and VIN (Vehicle Identification Number).
- Terms and conditions (if any): List terms and conditions, including “as is” or “no warranties.”
- Seller (donor) signature and date: Your signature will appear here along with the date of the transfer.
- Purchaser (recipient) signature and date: Recipient signs and dates here.
Although most states do not require notarization of the sale proceeds, it is still a good idea to take additional steps.
Completing the Automobile Gift Transfer Affidavit
In addition to stating the sale price as $0 on the bill of sale, many states require both the donor and recipient to sign an auto gift transfer affidavit that includes the following: I am.
- That the car was a gift
- That there was no exchange of money
- Donor-recipient relationship
In New York, this form is called the Statement of Transaction (DTF-802), and if the car is a gift to someone other than a spouse, parent, or child, or is being sold for less than fair market value, the parties must fill out the form must be filled out. stepparent or stepchild.
Transfer and registration of title
Transferring car ownership is the most important step in the gifting process. The least complicated method is for the donor and recipient to go together to the Land Transport Office. This eliminates notarization concerns and last-minute questions about missing documents. Here are the most commonly required documents and forms. Be sure to check your state’s DMV website for more information.
What to bring to the DMV
- Valid ID (both sides)
- Title (donor)
- Delivery note (recipient)*
- Insurance card (beneficiary)*
- Automotive Gift Affidavit (Donor)*
- Vehicle Emissions Test Report (Donor or Recipient)*
- Application form for title certificate (recipient)
*If requested by the state
If both parties appear together at the DMV, the registrar can perform the necessary notarization at that time. If they are filed separately or at different DMVs, make sure all documents signed by absent parties are notarized, if necessary.
To transfer title from you to a recipient:
Step 1: Assign a title. (donor)
After presenting a valid ID, you must transfer ownership of the vehicle to the recipient by entering your name, address, signature, date, and the recipient’s name and address on the back of the title. This step must be notarized.
Step 2: Present your insurance card and/or bill of sale. (Receiver)
After presenting valid identification, the recipient may be required to provide proof of auto insurance and a sales statement as required by the state. Some states require the bill of sale to be notarized.
Step 3: Present the Automobile Gift Transfer Affidavit. (donor)
Some states require a vehicle gift affidavit (see above) to show that the vehicle was sold below value or gifted to exempt taxes. This is usually required when gifting a car to a family member.
Step 4: Apply for a Certificate of Title. (Receiver)
Recipients must apply for the title in their own name. Some states require proof that the vehicle passed an emissions test within a certain period of time. You or the recipient can provide this proof.
Step 5: Register your vehicle and apply for license plates. (Receiver)
Those with the new title can now register a vehicle in their name and apply for a license plate according to procedures established by the state.
State-specific considerations
Each state has procedures for gifting or donating a car. Most follow a similar process, but variations include additional steps depending on the condition. The federal government maintains a list of links to every state’s DMV, from which you can search for your state’s specific instructions.
Insurance considerations
Unless you live in New Hampshire or Virginia, you must have auto insurance. If you transfer ownership to another person, you will need to cancel the insurance and the recipient will need to purchase insurance.
There are no hard and fast rules regarding how much car insurance you should buy. The minimum amount of auto insurance a driver must have in order to legally drive on public roads varies by state. You should carry at least liability insurance for personal injury and property damage. Are you doing your research to ensure you get the best car insurance for your needs?
donate a car
If you want to donate your car to charity, the process is relatively simple. The steps outlined below are general.
Step 1: Contact the charity by phone or online.
We will ask you about the make, model, and condition of your car. You may need to fill out some paperwork and make an appointment to pick up your vehicle with a charity.
Step 2: Create relevant documentation.
Documents include title, service documents, registration, etc. Required documentation varies by state and charity.
Step 3: Remove personal items from your car.
Do not remove your license plate unless instructed to do so. In some jurisdictions, it is illegal to park a car on the street without a license plate.
Step 4: Prepare your car for pickup.
Most charities prefer to leave their cars in their driveways or on the road. You may need to give documents and papers to the driver who picked up your car.
Step 5: Receive your receipt.
The charity will issue a tax-deductible receipt for the price of the car. In some cases, charities may auction off your car and provide you with a receipt. You can reduce your taxes by deducting that amount from your income when you pay your taxes.
Here are some charities that accept car donations.
conclusion
Gifting or donating a car is one of the most generous and rewarding things you can do. While not difficult, such a gesture must follow legal procedures that vary from state to state. Two important factors are a clear title and a vehicle in good running condition. Transfer of title (also known as title transfer) is a multi-step process that varies slightly from state to state. Auto insurance is required in all but three states, so it’s important that you and your recipient coordinate your coverage to avoid lapses or last-minute trouble at the DMV.
When a car is donated, the process is easier as the charity often takes on much of the paperwork. Also, as a bonus, you can deduct the value of the car from your income taxes, which is not possible if you gift the car. Give your car to someone else. If you’re gifting or donating a car, above all, be sure to understand your state’s specific rules and policies. Finally, give yourself a pat on the back for doing something truly unique and often life-changing for family, friends, or your favorite charity.