Kentucky Red TitlesSo what is a Kentucky red title? We get a lot of calls from people who are looking to get a title for a vehicle, and what they’ve obtained from the last owner is a Kentucky red title or maybe they didn’t even get it; they just found out that’s what’s on it. Here’s what happens: If a vehicle has been declared a parts-only vehicle or non-repairable vehicle, most states don’t give anything for it. They might give you a title that says “non-repairable,” they might give you a “junk title” or “parts-only title.” In Kentucky, they give you a document that just says “title,” but it doesn’t say “parts only,” it doesn’t say “non-repairable” it just says “Kentucky title,” and it’s red.
Eligibility and RestrictionsThe problem is that vehicle is not eligible for title or registration in any state. It’s been declared a parts-only, non-repairable vehicle, and federal law doesn’t allow it to be titled in any state. But Kentucky gave this document for ownership just to prove ownership. A really good description of this comes from the Tennessee Department of Revenue, and the reason Tennessee has this on their website is because Tennessee is right next to Kentucky, so a lot of people try to go from Kentucky to Tennessee with these vehicles to get them on the road.
Tennessee’s Stance on Kentucky Red TitlesWhat does Tennessee say? They say that a Kentucky red title is the equivalent of a non-repairable certificate. Vehicles that are issued Kentucky red titles or Tennessee non-repairable titles are damaged beyond repair and would not meet Federal Motor Vehicle Safety Standards for road operation. A vehicle that is issued a Kentucky red title may not be registered in Tennessee. This is the same as every other state that doesn’t give out titles or registrations for these vehicles.
Warnings and Buyer CautionSo, if somebody’s trying to sell you a Kentucky red title, be very wary. And also, if you’re not a resident of Kentucky, you can’t put it on the road because it’s not allowed to be driven they consider the condition to be poor. Now, you may say, “Hey, my car is fine, there’s nothing wrong with it.” That doesn’t matter. At some point in its history, an insurance company decided they don’t want this car back on the road for whatever reason, and it doesn’t matter what their reason was. It may just have been that they just don’t want it for liability reasons.
Final Thoughts and PrecautionsSo, that car is not eligible to get a title. Beware of Kentucky red titles; they’re the same as a non-repairable, junk, parts-only, or certificate of destruction. Every state calls it something different, so don’t try to buy one unless you’re 100% sure that you can take it apart and get money back from selling the parts.
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Car Registration ChallengesThe Question About State RegistrationThe question comes up quite a bit: what is the best state to register and title your car in? A lot of people ask what’s the easiest state that I can use to title my car. If you have a vehicle you’ve purchased without a title and you’re running into problems in your state, many times the instinct is to try to pick another state to use to title or register your car. At first, this might seem like a good idea.
Misconceptions About State DifficultyThe problem is a lot of people think, “Oh, my state’s really hard. My state’s the hardest state to title a car.” The only reason that they have that opinion is because it’s really the only state they’ve had any experience with. Most people have never tried to title or register a car in another state. They may have heard things through the grapevine or on some web forum or social media that other states are easy. They might have heard about loopholes regarding Vermont or Montana or other states.
Understanding the Source of Title RulesHere’s the problem: every state has rules about how to get a title and registration. Guess where those rules come from? They come from the federal government. Even though titles and registrations (certificates like this) are issued by the state, it’s not the state that makes up the rules they’re just the ones who enforce and execute the rules. The rules come from the federal government, and all states have to abide by the rules. All states use the same criteria.
Options for Obtaining a TitleThe most basic one is that in order to get a new title for a vehicle, you’re supposed to have the old title signed over to you, or a couple of other options. Some states allow you to do a bonded title with a surety bond. Some states allow you to do a court order title. But no states allow you to do a title with just a bill of sale.
You might say, “Well, I heard Vermont did a bill of sale.” Vermont used to do a registration with a bill of sale they didn’t give you a title, they gave you a license plate. So no states ever gave titles with a bill of sale because federal law doesn’t allow it.
Reasons for Using LoopholesSo why are people using loopholes? For the most part, the reason that people use loopholes is to try to avoid and evade other things like taxes. The reason people use Montana LLCs is to do tax evasion. If you register or title a car in Montana, you don’t have to pay sales tax, so that could save you a lot of money.
Issues with Nonresident TitlesThe problem is, if you are a resident of, let’s say, California, and you decide “I’m going to go to Montana and register my car there so I don’t pay tax,” two things are going to happen. First, no state is allowed to give a title to a person who is a nonresident. So if you’re not a resident your driver’s license is not from Montana they’re not going to give you a title.
What people do is they form an LLC. They form a corporation in Montana, put the title in the corporation name, and then drive around with a Montana license plate. First, you have to form that corporation, which is not that hard to do and doesn’t cost that much maybe $300-400.
Risks of Driving with Out-of-State PlatesThe problem is, whatever state you’re driving in California, Texas, Illinois, New York, whatever you’re driving around with your car with a Montana license plate. Now, there’s no law against driving it in another state, but states that are notorious for tax evasion, like Montana, that license plate is going to stick out like a sore thumb.
There are what’s called ALPRs (Automated License Plate Readers) all over the country. They’re on police cars, they’re on tow trucks, they’re in parking lots, they’re on street signs that read every plate that goes by and run plates. If it sees a Montana plate, it’s going to run that plate, and if it sees it comes back to an LLC, that’s a red flag.
Consequences of LLC RegistrationsThey’re going to look at the name on the LLC, and if that name is a resident of the state, there are counties right now in New York and California and other states as well that are actively searching for Montana license plates. They back-search the corporation, they find the name, and they look to see if you’re a resident of their state.
Even if they don’t find that, if they see the same license plate go past that ALPR reader at a certain parking lot, a certain street sign, a certain intersection every day on your way to work, they’re going to pull you over. If they see you driving with a California license and a Montana license plate, they’re going to refer you to in California it’s called the Franchise Tax Board. Every state has a taxing authority that collects sales tax.
Increased Scrutiny from AuthoritiesThey’re going to refer you for an investigation, and people are being fined. Some people are even having criminal records because of this.
What’s another reason you might want to go out of state? Well, because maybe your car won’t pass inspection in your state. Maybe your state has smog inspection or safety inspection, and your car is not going to pass. If you register a car in another state to avoid inspection, the same thing’s going to happen it’s going to be found out, and your car will be impounded because it’s not safe for the road.
Insurance Challenges with Out-of-State RegistrationAnother big problem with an out-of-state loophole is insurance. When you go to your insurance agent to purchase an insurance policy for your vehicle, you have to tell them what’s called a garaging address. That doesn’t mean you have to have a garage where you park your car it just means you have to tell them where your car is most of the time.
So let’s say if you do a Montana LLC, where are you going to tell them the garaging address is? If you tell them it’s in Montana, that matches the LLC okay, great, here’s your policy. But if you’re driving around in Illinois all the time and, God forbid, something happens to your car it’s in an accident, it injures somebody, it’s stolen, it’s damaged, even if somebody else crashes into you and it’s their fault they’re going to look at the garaging address.
The Importance of Accurate Garaging AddressThey’ll say, “Your car is not supposed to be in Illinois all the time it’s supposed to be in Montana. What were you doing in Illinois? Your driver’s license is Illinois, your employment is Illinois, why were you in Illinois?” You can’t just say, “Well, I was just here on the weekend.” They’re going to ask you to prove it show records where that car was in Montana or they’re going to deny your claim, and you’re out that money.
Potential Claim DenialsOr you can give them your address in Illinois where you live on your policy, and then they’re going to ask you, “Well, why are you titling it in Montana? What’s the reason for it?” They might not insure your vehicle because it doesn’t match it’s what’s called fraudulent jurisdiction. They’re going to think that there’s higher risk involved with that policy because you’re titling in one place, registering in another place, living in a third place it’s not going to match up. So insurance is going to be another problem that most people don’t think about.
The Easiest State to Title Your CarNow, what’s the easiest state? The easiest state is the state you live in, because all the states have the same rules for titling and registration. Every state has a method you could use to get a title, whether it’s a bonded title, court order title, VIN verification, or prior owner contact there are many methods you could use. All of those methods are easier, cheaper, and faster than going to some out-of-state place. They always are easier, cheaper, and faster.
Considerations for Out-of-State TitlesSo don’t feel like you have to go out of state to get a title. It’s not going to save you any money, and it’s going to take longer because you have to deal with the other state. Even if you decide to do it, at some point there may be liability because of taxes, insurance, or other factors.
Some people just feel like they have to go out of state because they want to feel like they’re getting away with something. That’s fine, but just realize that your personal interest in getting away with something is going to cost you time, money, and everything else.
The Good NewsThe good news is this: getting a title is not that hard. If you walk into the DMV without a title and say “give me a title,” they’re going to tell you they can’t help you because they don’t have the information they need. But there are legitimate methods available in every state to obtain a proper title for your vehicle.
Tesla Vehicle Impound Due to Unrelated CrimesSo you may have seen this news going around. I want to hear what you all as car enthusiasts think about this. Tesla owners have been losing their vehicles to police impounds due to crimes they had nothing to do with. How this is playing out is that Teslas, like some other vehicles (Tesla’s not the only car that has this), have exterior vehicle monitoring that watches around the car using cameras even when the car’s turned off. Some manufacturers call it 360-degree visibility, some call it monitoring mode, and some call it Sentry mode. But what happens is there are cameras outside the vehicles in mirrors, door handles, and certain parts of the car that watch what’s going on around the car. That way, if somebody bumps into your car in a parking lot and you’re not there, you know who it is. If somebody tries to break into your car, you know who it is. If somebody scratches your car with a key, you know who it is. These monitoring systems are very convenient, so you know what’s going on. In some vehicles, you can watch it from your phone. But what’s happening is just like a Ring doorbell camera.
Car Cameras as EvidenceIf there’s a crime committed in view of one of these cameras, now that becomes evidence. So what’s happening? If there’s a major crime—someone gets robbed or assaulted or murdered, or something really bad happens in a parking lot or on a street—the police, as part of their investigation, are going to look to see if there were any Teslas around. And if there were, they’re going to contact the owner and say, “We need your car because your car has evidence. It’s got a recording of a crime, it’s got a record of a perpetrator or a criminal, and we need to get it.”
Police Impound for EvidenceAs of right now, the police need to have the whole car. They can’t just plug in something and download the video; they don’t have that technology at this point. So they tow your car, and because it’s a criminal case, they may need to keep the car for evidence. The lawyers can inspect it, validate it, and also, as you know, the Fifth Amendment of an accused person gives them the right to cross-examine their witness. That doesn’t mean just asking the witness questions. It means if the witness is technology, you have to be able to evaluate it, inspect it, and have a forensic scientist go through it.
Length of Car Seizure and No CompensationSo they may need to keep the car so the defense can verify that this was a correct recording. How long is your car gone for? Who knows. And they don’t give you a rental car. It’s not like when you bring your car to a dealership for an oil change and they give you another car to drive. This is a car out of your hands. It’s not just Tesla Tesla is the most prominent but many cars, even some minivans, have 360° cameras that look around the car for parking.
Challenges and Risks for Car OwnersWhat are your thoughts on this as an automotive enthusiast? Is this a good thing to have in cars? And what’s the solution, what’s the answer? If you have one of these, how do you keep this from happening to you? You don’t have any control over it. You don’t know that there’s not going to be a major crime or some event happening near your car that you had nothing to do with, and now your car’s gone.
Comparing Vehicle to Ring Doorbell CameraRing doorbell cameras this has been happening for years, but not having your Ring doorbell camera doesn’t change your life. You can go get another one and put it on your wall. But a Tesla as a vehicle is your way of getting back and forth to work or to the store or wherever you need to go, and that could be a serious problem for you.
Vehicle Titling Out of StateOne of the most common questions that comes up is whether you can register or title your vehicle out of state. You live in a certain state and you want to title it somewhere else. Well, the first question to ask is why would you want to do that, because depending upon the reason, it could determine whether you can or can’t.
Now, in most states, they don’t give out titles or registrations to out-of-state residents. The federal guidelines for DMV say that in order to get a title in your state, you’re supposed to be a resident of that state. If you’re not a resident of the state, they’re going to ask you, “Well, why do you want to title it here?” Registrations and titles are for use in that state.
Proving ResidencyMaybe you have a piece of land there, maybe you have a business there, maybe you vacation there, maybe you’re a snowbird and you come from New York down to Florida. There are certain exemptions; however, you have to prove what’s called a domicile or a nexus to that state, and if you don’t have a legitimate connection to the state, you’re probably not going to have your application approved.
State Titling ComplexityThe reason you want to go to a different state is because it’s easier to get a title there. Well, there are two problems with that argument. First of all, there are no easy states. Everybody thinks their state is hard because that’s the only state they have experience with. Every state is going to be hard to get a title unless you have all the right paperwork, unless you have the actual title certificate from the last owner properly signed over to you. It’s going to be hard to get a title because that’s what you’re supposed to have, and if you don’t have it, technically you’re not supposed to get a title at all.
Titling ProcessesBut there are some processes you can use in order to get a title. Sometimes those are simple, but most times you have to jump through a bunch of hoops. For example, in New Jersey, they have a process where it’s a defective title document process. It’s 15 steps. It may take you months. In some states, you can do a bonded title, but it’s not going to be easy because getting a title is considered to be like getting money out of the bank you have to have the right credentials.
Avoiding State RequirementsWhy would you want to go to another state? Well, if you think it’s going to be easier, that means you’re trying to avoid something difficult in your state. That’s the key word avoid or evade. If you’re trying to evade something in your state, like an inspection or taxes or paperwork, trying to go out of state is going to get you into trouble because when you get that title from out of state, you have to do one of two things: Either you have to transfer it to your state, or you have to drive around with an out-of-state plate in your local state.
Driving with Out-of-State PlatesIf you drive around with an out-of-state license plate, the problem is you’re going to get pulled over. Because when you are seen driving a vehicle with an out-of-state plate on a regular basis, at some point you’re going to get pulled over. They’re going to start asking you questions: “Why didn’t you register in your state?” Most states have a law that says you have to title or register your car in that state within a certain period of time not from when you bought the vehicle, but a certain period of time from when you moved to the state. So if you already lived in the state for 30 days, the clock is over.
Schemes and Insurance IssuesThere are a lot of schemes that people use, like forming a corporation in another state, putting it in that corporation’s name, and then driving it around. The problem is you have to figure out where you’re going to get insurance. Your insurance policy is going to ask you for what’s called a garaging address. A garaging address doesn’t necessarily mean you have to have a garage; it just means where your car is parked on a regular basis.
Garaging Address and Insurance ComplicationsIf, let’s say, you get a corporation in Oklahoma and title it in Oklahoma, your insurance company’s going to say, “Well, where do you keep the car?” If you say Oklahoma, okay, that matches your registration. But what happens if you live in Georgia and every day you park your car in your driveway in Georgia? If something happens to that car and you have an insurance claim in Georgia, they’re going to ask you, “What were you doing in Georgia?” If they find out that you improperly gave a wrong garaging address, they’re going to decline your claim and you’re not going to get paid.
Catch-22 and Legitimate ReasonsOn the other hand, if you try to put Georgia as your garaging address, they’re going to ask you, “Well, then why are you titling it in Oklahoma? What’s the reason for that?” It’s a catch-22. So, the short answer is, unless you have a very good legitimate reason to title in another state, like you have a second property there or you have land there, trying to jump around different states in the long run is going to get you into trouble.
Task Forces and PenaltiesThere are a lot of interstate task forces agencies that are collaborations between different states’ departments of motor vehicles, state police, tax authorities that are looking for people trying to use loopholes to get their titles in other states. In most cases, using the loophole ends up costing more money and more hassle, and it’s not even as good as just biting the bullet and doing it in your own state.
Schemes and Criminal OffensesMany people feel like they want to get away with something, so they’ll use these loopholes. But many of them are now getting prosecuted. We’ve posted news stories before where some of these schemes of forming LLCs in other states, putting titles in those names to avoid taxes or avoid inspections, have resulted in people getting into legal trouble. It’s just a matter of time before, when they go back and audit your ownership, they could go back four or five years and find out that you avoided taxes. They’ll charge you penalties and interest, and in some states, it’s actually a criminal offense because you avoided taxes.
Legal Advice and ForumsAnother thing you might want to consider is anytime you’re looking to do something with out-of-state documents and legal matters, you might want to get advice from an attorney. Sometimes you can get something from an attorney that you may not be able to find the right answer to online. Some of these online forums or websites or chat boards will tell you, “Yeah, just go and do this loophole,” but they may not know what they’re talking about. A lot of people are getting into trouble because they didn’t know what they were doing was improper they just saw something on a website.
Legitimate CasesFood for thought: out-of-state may seem like it’s a good thing, but just make sure that it’s for a legitimate reason. Look, if you’re truly a snowbird and you live in Illinois and you go down to Palm Beach every year for the winter, and you have a car down there, that’s fine. That’s probably legitimate. But if you’re in New Jersey and you have a car you can’t get a title for, and it’s salvage, and you think maybe you can get an easier inspection in North Carolina, it’s not going to work.
Consequences of SchemesEven if it seems like it’s going to work, it’ll cost you more money and then get you into trouble. Just food for thought, because we see this happening a lot. It doesn’t really affect us either way, just make sure that you know what you’re getting into if you’re trying to jump around states. Most states have a law on the books that makes it a crime a misdemeanor to evade responsibility or requirements for titling a vehicle by going to another state.
Common Questions on Bill of Sale and TitleOne of the most common questions we get has to do with a bill of sale and a title and how they relate to each other and how you can get a title with a bill of sale maybe or how they’re different. And this is a great YouTube video from a channel that follows court cases. This YouTuber gets live feeds and recordings from various court cases around the country, and they play them on YouTube, which gets a lot of views. In this case, the person had a vehicle that was impounded by a towing company.
Towing Company Title VerificationSome of you may be familiar with this, where your car is impounded, and you try to get it out, but the towing company makes you show a title in order to release your car, and for good reason. You don’t want somebody to get your car out of impound just by paying a fee, and it’s not their car. So, the towing company is going to make sure they’re only giving the keys to that car to the actual owner by verifying the owner by looking at a title.
Bill of Sale vs Title at the Towing YardThey’re going to look at the title for the vehicle and make sure your name is on it before they hand over the car to somebody that just says, “Hey, give me that car out of your impound.” So, what happened with this person in the video was they went to the impound yard to get their car out after it was there for a few days. They wanted to pay the fee, but they didn’t have a title; they only had a bill of sale. And the towing company said, “No, we’re not giving you this car because we don’t know if it’s your car.” So, the person had to leave without the car, and in the meantime, the towing company racked up more storage fees. The person came back a few weeks later with a title, and now they had to pay more money. This person is in court complaining that they shouldn’t have to pay this money because they had a bill of sale. So, watch what the judge says. This is a very good legal description of how the government, the courts, and the DMV feel about a bill of sale.
Bill of Sale vs Title Legality“But I have a bill of sale; I bought the… I don’t care. A bill of sale is something somebody could write on the back of a napkin. Well, I’m not going to register my vehicle with the state.” So, you’re not the owner of it according to the state. You can see how the government looks at titles and bills of sale. If you don’t have your name on the title record with the government, they don’t consider it to be yours. A bill of sale is just a receipt that you gave somebody money.
Notarized Bill of Sale and OwnershipYou might say, “Well, it got notarized.” But who notarized it? Who signed it and verified that was the person? This is a very good example of a judge who’s not part of the DMV, not really part of the title system, who looks at the case and says, “Look, I don’t care if you had a bill of sale. Anybody could write that. Anybody could write up a bill of sale. It just means that somebody took your money. That’s all a bill of sale means. It’s somebody who’s willing to take your money and give you a receipt for your money.”
Ownership Issues with Bill of SaleIt doesn’t prove any ownership. It doesn’t prove they own the vehicle; it doesn’t prove you own the vehicle. For example, I could go to Enterprise Rent-a-Car right now and rent a vehicle. I could drive it off the lot, put an ad on Craigslist or Facebook, and say, “Hey, I’m selling this car without a title. I’ll give you a bill of sale.” I give somebody a bill of sale; it doesn’t mean they’re the owner because just because I gave them a bill of sale, it doesn’t mean I was the owner. I didn’t have the right to sell it to them.
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