First off, it is completely legal for you to transfer a car that has a lien on it. It just means that the bank still has the right to sieze the car. For example, if I bought a used car that was advertised somewhere and the person selling me the car used the funds to pay for a Caribbean cruise instead of paying off the car loan and then defaulted on the car loan, the bank would still have the right to sieze the car and sell it to cover their losses. That is why it is extremely important to complete a lien search prior to purchasing a used car. You would think that the fact that you registered it legally would absolve you of this risk but it doesn't. The DMV doesn't care whether the vehicle has been pledged as an asset for a loan or not, it is buyer beware.
The comments regarding the bank siezing the car or going after your parents are correct. Also, it is a criminal offence to hide assets in the event of bankruptcy and that one is just way to easy to prove.
Secondly, the common law rules changed way back in the 80's. The common-law period is three-months under the family relations act or immediately in the event that the couple have a child together.
Thirdly, Revenue Canada (or whatever the current name actually is) doesn't go after you too much for assets like cars unless it was reported that you were trading cars for a living without reporting your income (usually cars go down in value so there isn't any income tax effect). In which case there would be a few other agencies also interested in you.
You are probably looking to avoid PST (there is no GST on used cars sold privately). That is the reason for the gift letter or declared value letter. Generally speaking, it isn't worth going after small sums of cash. Assume that your car is worth $20,000 in the market, the amount of PST owing would be $1400. If we assume that your declaration is picked out for further examination, then there would have to be a reason for the auditor to question the transaction.
For example a gift from a "father to daughter" who happen to have differing last names. Not too uncommon these days, so the auditor looks into it and finds out that the ages of the "father and daughter" are only 2 years apart, well that might raise some suspicions. Then they would have to conduct a more formal investigation.
All together let's assume that the auditor spend 40 hours getting statements and preparing the case and the supervisor 5 hours. If the auditor makes $50k a year and the supervisor $75 plus benefits. Then the cost of the audit is 40 hrs x $50,000 / 2080hrs x 1.35 to include benefits = $1298 + 5 hrs x $75,000 / 2080 hrs x 1.35 benefits = $243 or a total of $1,541 to chase a potential $1400 and I am probably low on the number of hours spent on the case. Finding the fraud is easy. Building the case is not.
The governement does look at the return on investment for auditors so they generally don't go after the small fruit at the top of the tree when there is big ripe juicy fruit that is easy to pick at ground level, unless they want to make and example of someone just to keep a few more honest people honest.
My two cents
Trev.
