What should I do before 'transferring' an Xbox Live account to someone else?

Solution 1:

Transferring your account is against Xbox Live's Terms of Use. I bolded the part that is relevant in this situation.

5. Your Service account, associated accounts and accounts from third parties.

Only you may use your Service account. You must keep your accounts and passwords confidential and not authorize any third party to access or use the Service on your behalf unless we provide an approved mechanism for that. You must tell us right away if you suspect misuse of your accounts or any security breach in the Service. For some parts of the Service, you may be able to set up additional accounts that are dependent on your account ( “associated accounts”). You’re responsible for all activity that takes place with your Service account and any associated accounts. Except as otherwise stated in this Section 5, you may not authorize any third party to access and/or use the Service on your behalf, except where we provide a mechanism for third parties to access the Service on your behalf. We may limit who may use your Service account or any associated accounts.

I don't think we can really provide any solutions for you without violating Microsoft's ToU.

Solution 2:

To be honest I would actually just tell him to set up his own gamertag and profile because one thing you cannot do AFAIK is change the email adress associated with the gamertag so he's going to have problems if he ever has to contact XBox Live support since they will send emails to the address associated with your account in most cases.

Due to the way XBox DLC works generally if one person has downloaded it onto an XBox all users have access to it on that console, so as long as you don't delete your profile completely (i.e. turn off the auto-login for the profile and ensure your friend does not know the password) then he should be able to play the DLC already on the console.

Additionally if you ever decide to get an XBox again (or even want to play local multiplayer at your friends) you will be able to reuse your existing account.

If you do really want to just hand over your gamertag and profile I'd ensure you do the following:

• If you have paid for using credit/debit card for points/games/content etc. in the past ensure the credit card is unlinked from your account so he can't spend money on your card. You can do this from the XBox Live website but not from the XBox itself.
• In a similar vein if you had XBox Live Gold membership ensure the auto-renew is disabled (though removing the card you paid for this on should be sufficient to do this)