How To Transfer Ownership of a Car to a Family Member

Transferring a car may happen more often than you think. Parents and grandparents often transfer ownership to a new driver, or a car may be a part of a deceased owner’s estate. 

While it’s possible to do a vehicle title transfer, you must understand the state and federal laws.

Simply signing the title over to an immediate family member and taking it to the Department of Motor Vehicles is all it takes in most states. However, some situations have a few more nuances to consider.

Key Points

• Transferring car ownership to a family member resembles a private sale process.
• Promptly transferring vehicle titles is crucial to protect the original owner from potential liabilities.
• You may be able to transfer ownership of a car with an auto loan, but contacting the lender is necessary to discuss the process and requirements.
• Costs of vehicle transfer, including registration fees, vary by state, but taxes may be exempt in gift exchanges.

What Does Transferring Ownership of a Car Mean?

Transferring ownership of a car means the car is legally transferred to the new owner. Transferring ownership is crucial in family transfers where you give your vehicle to a family member to keep rather than borrow. It’s similar to a private sale without the transfer of funds. However, you must follow all legal requirements as if it were a sale.

For example, if Grandpa owns a car and wants to give it to his grandchild, you must transfer the vehicle’s title into the new owner’s name to make it legal. 

In most states, there is a grace period you must transfer the title within to avoid penalties or fees.

Why Must You Transfer a Car Title?

1. Legal responsibility: The person listed as the registered owner on the car’s title is legally responsible for the vehicle. This responsibility includes any criminal activity such as car theft, accidents, or liabilities that occur from the car’s use.

2. Law enforcement records: Law enforcement relies on the DMV’s most current records to establish liability. If your name remains the legal owner, you could be responsible for something you didn’t do if you don’t officially transfer ownership.

3. Timely transfer for protection: Transferring the title as quickly as possible protects you when you are no longer the one driving the car. 

What is a Family Transfer?

A “family transfer” is when any of the following immediate family members transfer a vehicle to one another:

• Spouse
• Parent
• Child
• Grandparent
• Grandchild
• Sibling

Who Can Transfer Ownership of a Car?

Typically, only the person named on the title can transfer a car title. If more than one person is named on the title, both must agree to transfer it before ownership can legally transfer. 

However, exceptions occur if a power of attorney is assigned to the estate. The person granted power of attorney may be able to transfer a car title on their behalf according to the original owner’s wishes.

Determine if the Title Is Transferable

Determining if a title is transferrable is a major factor in the transaction. The easiest situation occurs when you want to transfer a car to a family member without outstanding auto or title loans.

It may be possible if you have loans, but there are a few more steps to take.

Transferring a Title When You Have an Auto or Title Loan

Transferring a title when you have an auto title loan requires the following before you can get a new title:

1. Contact your lender: You must contact your auto lender if you have an outstanding auto loan to determine their requirements.
2. Pay the loan balance: Most lenders require you to pay the loan balance in full before transferring the title. If there are unique circumstances, the recipient may be able to apply to take over the lien.
3. Transfer the title: After satisfying the title loan on your vehicle, you have possession of the title again and can begin the title transfer process as your state requires. 

Transferring a Title to Someone Out of State

If you transfer a car to someone out of state, you must follow both state’s laws. Out-of-state title transfers can get a little more complicated, so you’ll need the guidance of both state’s DMV offices. 

The recipient often must complete a title application form and provide the vehicle’s VIN. This is to prevent fraud or theft when crossing state lines.

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How To Transfer Title to Family Members 

Knowing how to transfer car titles to family members is important to avoid unnecessary penalties or legal issues when transferring ownership of a car.

The Process

Transferring a car title to a family member is usually a simple process using the following steps:

1. The current owner must sign the car title to the new owner in the ‘Assignment of Title’ section.
2. The new owner must take the signed title to their local DMV office to transfer it.
3. The new owner may need to pay title transfer fees to take ownership of the vehicle title.

The steps and requirements vary by state, so always check with your local DMV to ensure you have all the necessary documentation.

Documents Required

Each state has different documentation requirements, but the most common documents needed include:

• The original car title signed by the current owner.
• A copy of the recipient’s current driver’s license.
• A copy of the recipient’s current car insurance.
• A bill of sale or transfer of ownership form (if applicable).
• Proof of the vehicle’s current odometer reading.
• A VIN verification form (if applicable in your state).

What’s the Cost?

In many states, transferring a car to a family member, such as a parent, child, grandparent, spouse, or sibling, doesn’t incur a cost. However, this varies by state, common fees you may incur include: 

• Title transfer fee
• Registration fee
• Sales tax
• Smog or emissions testing fee (if required)
• Vehicle inspection fee (if required)
• Lien recording fee (if applicable)
• Late or penalty fees (if applicable)
• Expedited processing fee (if needed)
• County or local fees (varies by city and state)

In many states, you may apply for an exemption from sales tax if you can prove you’re transferring the car to a close family member.

However, there are differences for family members who inherit vehicles as part of the estate. It’s important to consult with an estate lawyer to determine if there is an inheritance tax or if you must pay sales tax.

Determine if Your State’s Laws Require an Inspection

A vehicle inspection is typically required when transferring a vehicle across state lines. Each state has different laws regarding vehicle inspections when transferring a vehicle title.

If you’re conducting the transfer within the same state, it may not be necessary unless the vehicle is due for its annual emissions or another type of inspection.

Determine if You’re Gifting or Selling the Car to Your Family Member

Determining if you’re gifting or selling a car to a family member is important. When you gift, no money changes hands. However, when you sell the car to a family member, you accept money in exchange for the car, like you would with any other party. And there are more steps to take.

Selling a Car

If you sell a car to a family member, you must follow these steps.

1. Ask the fair market value of the vehicle. If you sell the car for too little, it could be seen as tax evasion.
2. Complete a bill of sale. Include all necessary information, including the current odometer reading and the vehicle identification number (VIN).
3. Sign the car’s title over to the buyer. All parties named on the title must sign the title over to the new owner.
4. Go to the DMV. The new owner must take the bill of sale and the signed title to the DMV to transfer the title and pay the sales tax, if applicable.

FAQs

Final Thoughts

Transferring ownership of a car to a family member is similar to transferring to someone buying the car. The only difference is that no money changes hands. The requirements differ by state, but the process is usually simple. You sign the title over to the recipient, and they bring it to the DMV.

Depending on the state, there may be sales tax or a transfer fee. Some states also require inspections or an official bill of sale, even though no money changes hands. Knowing your state’s requirements ensures you protect yourself when transferring ownership.