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Im getting the razr and more then likely giving my droid x to my daughter. I have had no problems with my x and was just wondering if i should Do a factory reset or just let it go? Is there anything to gain by a factory reset?
It will wipe everything off of the phone, not the SD. If there are messages or other things on there that you don't want her to see or just isn't necessary then it should not hurt any to do the reset. It will also remove any accounts (including Google) or apps you have on there.
It is definitely not necessary but it will give her a clean start basically. And yes you can do it through the settings. Usually something like Settings > Privacy > Factory Reset.