How To Receive A Gifted Car From Your Grandparent
A grandparent giving you a gift of a vehicle can come at a much needed time. Not having to pay for a car note will leave more income free to use for housing and other needs or savings. A car with no strings attached can help you on the path to becoming financially stable by providing transportation to and from work. Receiving a car as a gift is under a different class than purchasing the car from a dealer or a private seller. Here are some ways to properly receive and register a vehicle from grandma and grandpa.
Get the appropriate amount of insurance
Before you will be allowed to register the vehicle, you will need to get proper insurance coverage. With a car that has no loan or liens on it, you will be able to have liability coverage, alone, on the vehicle. If you would prefer more coverage, you can select full coverage. Depending on the state, there will be statutory minimum amounts of coverage that must be met in order for the insurance to be viable. Be sure that the insurance is properly secured in your name prior to attempting to register the car.
Find out the gift tax cost
When you purchase a vehicle, you often have to pay the taxes on the vehicle in order to get the car registered in your name. For a gifted vehicle, you will need to pay gift tax in order to register the car. In many counties, this will be a flat rate fee. Be sure to find the gift tax for the county in which you will register the car and not the county that you will be taking the car from, as these can differ. You will pay the gift tax and the title exchange fee at the same time.
Figure out how it will affect your grandparents at tax time
Once you take possession of the car, it will legally become your responsibility. One of the responsibilities that your grandparents may still have is the gift tax. If a gift car is worth a certain amount of money, your grandparent may have to pay taxes on the gift amount. Prior to signing the title and registration over to your possession, determine how much gift tax will be owed by your grandparent, if anything. If this comes to a large chunk of the money they owe on taxes, you may be able to help pay to cover the gift tax so that the gift is affordable.