By Theocharis Georgiades, APC Sports
Gifts between members of the same family are quite common. In its simplest form, gifting, is the transfer of wealth and/or assets from one individual to another. Examples include Kevin Durant, Tiger Woods and Anthony Walker. It is believed that Dwayne Wade bought his mum a church; yes, an actual church.
How is a gift different from a sale? In a sale, a person gives up their property in return for money; in other words, an exchange occurs that is accompanied by a legal document – a sale deed – that proves the exchange. A gift is defined as something voluntarily transferred by one person to another without compensation. Due to their high earnings, many athletes donate assets to their relatives (parents, siblings, cousins), either by transferring ownership or by granting them an exclusive right of use. However, this common practice often brings both athletes and their loved ones into legal trouble.
Some of the gifts that wealthy athletes usually give to their family members are luxury cars and homes. Athletes need to be aware that the maintenance costs for such gifts are often enormous, making it difficult for those who receive the gift to cope. In particular, a luxury car requires the payment of road taxes and has a high overall cost of both general and mechanical maintenance. A bigger problem arises when it comes to luxury properties. The acquisition of a luxury home entails special expenses for its maintenance and the payment of various taxes related to the property. In case the ownership of the house was not transferred to the family member, if this member is unable to pay the taxes associated with the property, then the possible administrative and criminal sanctions will be borne by the athlete, as the owner of the house.
Another illustrative example is purchasing a business (e.g. restaurant, shop etc.) by the athlete for the benefit of their family members, without transferring ownership to them. This can lead to significant problems for an athlete if the business does not comply with the tax law or other legal obligations related to its operation. In addition, as an owner, the athlete will probably have the largest share of responsibility, which may even lead to criminal charges. For the above reasons, the simultaneous transfer of ownership is paramount for the athlete to avoid administrative, civil or criminal sanctions.
In addition to the above, in case an athlete makes a gift directly to a family member (e.g. child), they should be aware that third parties may use this asset against existing or future financial debts of the family member upon completion of the transfer of ownership. Moreover, depending on the applicable jurisdiction, the spouse can claim the property in case of divorce under family law. There are, however, jurisdictions in which any property a child acquires during the marriage as a gift from their parents is and remains their property even when the parents divorce.
Another important legal issue that athletes should consider and keep in mind before gifting property is the capital gains tax. In many countries, giving a gift to someone is accompanied by the obligation to pay capital gains tax. However, when the transfer takes place between spouses (married couple or civil partner), an exception is granted under certain conditions in many countries. In some other countries, the exception also includes members of the same family (e.g. parents, children, grandparents).
It should be noted that athletes must do their homework and seek legal advice when wishing to gift property to family members in order to avoid any unpleasant surprises in the future. They must also consider the additional costs that will arise as a result of the gift and the legal framework applicable to their jurisdiction to avoid potential legal traps. It is also strongly recommended that they actually transfer ownership when they wish to gift a property to a family member so as to stay away from any future liability in connection with the gifted property.
To find out more about the legal implications of gifting property to friends and family, please contact us at [email protected].
