Title transfers to family members often comes up during estate settlements, but they can also be a consideration when, for example, a grandparent gives a car to a grandchild rather than trading it in or selling it outright.
The answer seems pretty simple: Just fill out the title and Bob’s your uncle (or parent or grandfather, as the case may be).
But doing so can incur sales tax and other registration fees if you don’t fill the paperwork out properly. Researching how to avoid all of the taxes and fees that typically come with vehicle transfers is a bit of a rabbit hole, often leading to uninformed forum members offering opinions based on urban myth and conjecture. Here, we'll stick to the facts to provide you with the answers you need.
What is a Title?
A certificate of title is the piece of paperwork that proves ownership of your vehicle. For at least the last 50 years, whenever you purchase a car new from a dealership or other retailer, that retailer provides the department of motor vehicles in your state with a Manufacturer Statement of Origin (MSO). The MSO shows that the vehicle is new, with its corresponding vehicle identification number (VIN), and that the manufacturer is transferring ownership of that vehicle to you, the buyer.
All 50 states require that you fill out a title application every single time a vehicle transfers ownership from you to a new owner.
Once you’ve filled out the title application, your state's Department of Motor Vehicles (DMV) will process the paperwork and eventually send you a physical vehicle title on watermarked paper for your records. When you sell your vehicle, you'll fill out the appropriate section of the title, and then the next buyer will use that to establish the chain of ownership, again applying for their own title, which they’ll eventually get in the mail.
What Vehicles Need a Title?
Again, determining which vehicles need a title is state-specific. Most states—41, in fact—require a title for ALL vehicles, regardless of year.
The nine remaining states have varying requirements:
- Alabama: 1980 and newer
- Connecticut: 20 years old and newer
- Georgia: 1986 and newer
- Maine: 1995 and newer
- Massachusetts: 1990 and newer
- New Hampshire: 15 years old and newer
- New York: 1973 and newer
- Rhode Island: 2001 and newer
- Vermont: 15 years old and newer
In those states that don’t require a title for older vehicles, other legal documents such as a bill of sale and the current vehicle registration typically suffice for proof of ownership.
What if I’m Missing a Title?
All states have a duplicate title process if you find that your original title has gone missing. If you’re from one of the nine states above, check to be sure that your vehicle needs a title at all. If it does, you’ll need to visit your state’s DMV or Department of Revenue to fill out the duplicate title paperwork and pay the appropriate fee.
Be aware that a duplicate title may take several weeks to process.
What if I Never Received a Title When I Bought My Car?
If you never received a title from your department of motor vehicles, it's most likely because you have a lien on the vehicle. If you took out a loan to pay for the car, then in 41 states, known as "title-holding states," the DMV sends the title to the lienholder. Once you've paid the vehicle off in full, the lienholder sends the title to you.
There are nine "non-title-holding states:"
- Arizona
- Kentucky
- Maryland
- Michigan
- Minnesota
- New York
- Oklahoma
- South Dakota
- Wisconsin
In those nine states, the title comes directly to you regardless of whether there's an outstanding loan on the vehicle. However, the title will be in both your name and the lender's. Once you pay the vehicle off in full, you'll receive a Release of Lien letter, which then allows you to apply for a title in just your name.
How Do I Transfer a Title?
Vehicle title transfers are simple, but highly specific. States can be absurdly stringent about any kind of marks, missing data, or information filled out incorrectly,or in the wrong place on a vehicle title. There was a time when the Commonwealth of Massachusetts would reject a vehicle title if it had staple holes in it, for example.
States usually provide warnings for filling out the title, like Kentucky's: “Warning: Do not use liquid paper/Wite-Out on your title. Do not scratch through or mark out information on the title. Do not erase or mutilate.”
When you’re transferring any title—whether it’s to a family member or otherwise—be sure to read the instructions on the title carefully, and only print, sign, and fill out the odometer reading where you’re supposed to.
Do I Need a Title Notarized?
42 states allow vehicle owners to sign over the title and submit the paperwork to the local DMV office or Department of Revenue without any oversight.
In the following eight states, do not sign the title or fill out any of the fields until you are in the presence of a notary public:
- Arizona
- Kentucky
- Louisiana
- Montana
- North Carolina
- Ohio
- Oklahoma
- Pennsylvania
If you live one of these states, you must sign your title in front of a notary, providing your driver’s license number or valid ID. The notary witnesses the signature and provides a notary stamp on the title. Most local banks, UPS stores, and law firms have a notary on staff, as do some insurance agencies.
Can I Avoid Paying Sales Tax if the Vehicle Transfer is from a Family Member?
As far as all 50 states are concerned, transferring a title to a family member is no different from transferring a title to anyone else. If the vehicle is going to be housed in another location and registered by another person, that person needs to receive a signed title filled out by the previous owner and then needs to submit it, along with an application for a new title and the requisite title transfer fee.
Where things get interesting is whether or not states require sales tax to be paid between family members. Five states—Alaska, Delaware, Montana, New Hampshire and Oregon—have no sales tax. In 45 other states, sales tax is expected to be paid every time a vehicle changes hands. Almost every state at this point collects sales tax based on some arbitrary “blue book” value, rather than on the actual purchase price you paid.
Any potential tax exemptions are specific to your state’s laws. We’ll use Massachusetts as an example:
In the Commonwealth of Massachusetts, you can avoid paying sales tax on a vehicle if it’s transferred from one of the following:
Father/Mother
Brother/Sister
Husband/Wife
Son/Daughter
The family member transferring the vehicle must fill out Form MVU-26, Affidavit in Support of a Claim for Exemption from Sales or Use Tax for a Motor Vehicle Transferred Within a Family. Other states offer similar methods of avoiding sales tax through the transfer from an immediate family member.
What if the vehicle I received was a gift?
There are also provisions that allow the transfer of title avoiding sales tax by gifting the vehicle to a new owner. This doesn't necessarily have to be a family member; for example, a vehicle can be "gifted" if someone's done work on your house and they agreed to take your 1971 Nova as payment instead of cash.
The Tennessee Department of Revenue offers an Affidavit of Non-Dealer Transfers of Motor Vehicles and Boats (Form RV-F1301201). That form allows the transferee to declare that the vehicle was either given as a gift or sold for a low selling price, with a space for the transferee to declare the reason for the sale price.
Can I Avoid Paying Registration Fees When Transferring a Title to a Family Member?
In general, no. Registration fees are assessed whenever a new license plate is issued. If you're acquiring a vehicle from a family member, you must go through the process to acquire a new registration, even if you received your new car through a gift transfer.
There are some specific circumstances that may allow you to keep a family member's license plate number. In Massachusetts, for example, low number license plates have been passed from family member to family member for generations. Massachusetts has a specific process for making that transfer, which usually requires a death certificate but still also requires a nominal license plate transfer fee.
