Home > Research Legal Advice > Insurance > My son 20 yr. old will be getting a gifted car the title will be in his ...
Asked 11 months ago - Stuart, FL
Flagstudent-should we also use his address not his home address.
You should be aware of both a gift tax implication and insurance coverage implication in the question you are raising.
Tax: If you and your spouse give a car to your son in his name, you should be aware that if the car is worth more than $26,000, the amount above the $26,000 would be subject to a gift tax, and you and your spouse should report the gift when you file your 2012 tax return and you may use a unified credit to avoid paying a gift tax, if you have a unified gift tax credit available. If you made the gift to your son without a spouse joining in the gift, your annual gift tax exclusion is $13,000, so if the value of the car was more than $13,000 you would report the excess as a gift made by you when you prepare your tax return for 2012. You may note that money given to your son for education is not a gift, and some taxpayers will ask the IRS in a private ruling letter whether the use of a car is exempt from a gift tax if the car is necessary and required for the education. While you may avoid a gift tax issue by placing your name and your son's name on the title of the car, we next look at the insurance question.
Insurance protection: Regardless of whether the car is in your name and the name of your son, or in the name of your son only, it is important to disclose to the insurance company where the car will be garaged, which is where the car will be parked and used so that the insurance company underwriter may have full information to assess the risk. If you use an insurance agent to help you get insurance, then all of this information needs to be given to the insurance agent. The billing address for the premium invoice may be different from the location where the car is garaged (parked/used). The important thing is to disclose everything about who will use the car and where the car will be used and how many miles will be driven, because an insurance company may attempt to avoid coverage for a loss (won't pay) if the insurance company learns of a material misrepresentation in an insurance application or if there is a material change in the use of the car. Of course you should expect your son being 20 years old means a higher premium will be charged, but if he has good grades he can get a discount, so ask your insurance agent about a good student discount. Also, always get in adequate amounts both property damage and bodily injury liability coverage (to protect you and your son) and get uninsured and underinsured motorist coverage because there are many reckless uninsured and underinsured people driving around.
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