There are multiple reasons why you may want to give someone a car as a gift. For example, you may reward your child who just graduated from college. Or gift it to a relative who’s going through tough times and needs a vehicle to move around. Whatever the reason, you must do a few things as required by the Texas State laws before signing over the car to the new owner.
In this article, we give you a simple breakdown of the eight steps you should follow to successfully transfer the car ownership title into the new owner’s name. Here are Motors On Wheels we’re on standby in case you have any questions about this matter. Even if you don’t buy a car from us or sell us your car.
This might sound obvious, but the first step is to confirm that you are the real owner of the car. To do this, check the lienholders to see if anyone else claims a stake in the vehicle. For example, if the car has a debt collector who’s using it as collateral, you’ll need to pay off the debt before initiating the transfer. Otherwise, you do not meet all the financial obligations of owning the car. The most significant advantage of being the legal owner is that you don’t pay the sales tax when gifting the vehicle.
Create a bill of sale
Sure, you’re not selling your car, but your local department of motor vehicles will still need you to draft a document showing the details of the gift and other conditions attached. As the giver, you need to create a bill of sale that identifies you as the previous owner and the to-be owner.
This document helps to protect you from being financially responsible for the car once you’ve gifted it to someone else. The bill of sale contains the current odometer reading, the date of transfer, gift value, and the sales tax. It also includes personal information and signatures of both of you.
Check the odometer
Ideally, you will be gifting a used which is why it’s essential to check and record the odometer reading on the vehicle title. The number of miles will determine the value of the gift tax should the new owner want to sell it in the future.
For cars below ten years, the odometer reading must be recorded on an Odometer Disclosure Statement. A title document that lacks this reading may well lose its authenticity.
Signing the title
The next process involves filling out the assignment of the title at the local county court’s title office. In this section, both you and the gift receiver must fill it to avoid any legal issues in the transfer process.
It’s also a good idea for both of you to go together for the title servicing processing. This will help to make it easy to solve any questions and issues as they arise. Be sure to read up the state laws to stay informed about car transfer laws and fees. This form includes both the name of the giver and recipient, signatures and the date of transfer.
Application of the title
After the car’s title has been assigned to the new owner, it’s time to complete the title’s application. This document includes all the necessary details of the gift receiver, including their signature, driver’s license, and the odometer reading at the time of transfer.
As for the section of the title that asks for the price of the vehicle, indicate “Gift.” Be careful with how you fill this copy by writing clearly, with no cross-outs or erasures. Many title certificates will require you to fill in a new copy for simple writing mistakes.
Affidavit of motor vehicle gift transfer
Before the gift receiver goes to register the car, both of you need to fill out the Affidavit of Motor Vehicle Gift Transfer form. This document acknowledges that the title transfer involves no monetary exchange between the buyer and recipient.
Inside this form, you’ll be asked to provide personal information, the relationship between you and the person receiving your car, and your contact details. A notary should witness the signatures.
Please note that the recipient will need to pay the gift tax before filling this form.
Proof of insurance
What’s a car without insurance? One final document you need to produce before your recipient can finally have the car is proof of liability insurance. Luckily, this process is straightforward especially if the recipient has an existing policy. All they need is to contact their insurer and request them to add the vehicle to their cover. And if it’s one of your children, find them a decent policy that fully protects them.
Registration of the new title
At this point, you and the recipient have completed the paperwork and paid all the necessary fees required for gifting a car. The new owner is now free to register the vehicle under their name and take full ownership.
Here, they will be asked to provide personal identification documents, proof of insurance, bill of sale, while some agencies may require an inspection report. Keep in mind that there are registration and title fees and other county-specific rates before completing this registration.
After completing this step, your new title should arrive in a couple of weeks. Upon receiving it, check through to ensure that all the information included is correct. If there are any errors (even minor incorrect initials), immediately submit an application of a correction to the Registry of Motor Vehicles to avoid problems in the future.
Gift your car the right way!
The process of gifting a car closely resembles that of selling a car as both require the transfer of title ownership. For everything to flow smoothly, the secret is to gather all the proper paperwork first and determine the taxes and fees.