Well the simple answer is (just like with everyone else) yes! However, when planning for athletes it’s a whole different ballgame (pun intended).
The goal for most clients is to make sure they have carefully planned the disposition of their wealth to family, friends, and/or charity. The vast majority of wealth with most clients is acquired over a lifetime of hard work and saving. The biggest difference between “most clients” and the high-wealth athletes is the time in which the individual came into said wealth. For most professional athletes, a great deal of wealth is earned through hard work in a relatively period of time. In fact, the average career is somewhere around 10-12 years. Thus, the goal in estate planning changes: we need to make sure that the wealth of our professional athlete clients lasts a lifetime. Certainly the individual still needs to plan for the disposition to his or her family, and that is always an important decision that needs to be made. But how does one make sure their money lasts? Well it comes down to making decisions at an early stage in life, which can sometimes mean making decisions that are irrevocable. There are a number of tools that can be used to help make sure professional athletes make their money last, and just like having the two best linebackers in the NFL on the same team, having a great estate planning attorney as well as a top notch financial advisor working together can make the biggest impact!
It is no secret that I am an avid Carolina Panthers fan. Our office is only a couple blocks away from Bank of America Stadium in Uptown Charlotte. This is what inspired me to write this. Do you remember when Cam Newton was involved in a car accident right outside the stadium in December of the 2014 season? Someone in my position can’t help but wonder, did he have a plan at that time? Cam was, and still is, a young man early in his career. So putting two of my passions together, (Estate Planning and Panthers Football), I wanted to discuss some of the tools that can be used to help professional athletes throughout their lifetime!
For most clients, and especially for pro athletes, a Will is insufficient to meet their Estate Planning goals. I read a story awhile back about NFL Hall of Fame Linebacker Derrick Thomas, who lost his life in a car accident at age 33. It was reported that he kept putting off meeting with a planner, and his estate was left to the Court to distribute. This became a huge legal battle, and at the end there wasn’t much left to fight over. Mr. Thomas had earned an estimated $30 million over his career, and there was only about $1.16 million in assets at the time of his death. If, at minimum, a Last Will & Testament had been drafted, Mr. Thomas’s estate could have avoided some of the huge costs that I mention in my last article.
Since professional athletes have busier schedules during the season than most clients have, revocable trusts can be an important tool to allow a professional trustee (like an attorney, a bank, or trustee company) to essentially handle the individuals finances. This takes the financial stress away in the midst of practice, watching film, travel, and gameday! What is equally important, is that the athlete can serve as the co-trustee with the professional trustee if they wish: this gives them the freedom to do what they want. As we know, if you pass away with or without a will, your assets become public through the court system. Assets held in a revocable trust remain private so the athlete doesn’t have to worry about what the world is going to see after he is gone. The property that is held in the trust can also serve as life-support if the athlete were to have a season ending, or worse, career ending injury.
Irrevocable Trusts & Asset Protection
This is certainly where the athlete is going to have to make some tough decisions at a very early stage in life. However these trusts provide the most protection for not only tax purposes, but also for ensuring that the wealth they’ve earned can last them long beyond retirement. The great thing is, the disposition of assets that are left over in these trusts can mirror that of the revocable trust. Given how quickly a professional athlete’s salary can change, and how significantly it can change, one way or another, these trust and the trustees involved are an essential part of every athletes plan.
Durable Power of Attorney
Remember that question regarding Cam Newton’s car accident posed earlier? Well, what if, God-forbid, something more serious happened and Superman was in a paralyzed state? We see this all the time with cases of Guardianship & Conservatorship: lack of planning for the worst. A durable power of attorney for financial management is quite honestly the most important document for your estate plan during the course of your lifetime. It allows your appointed power of attorney to make financial decisions on your behalf if you become unable to do so. This document is critical to professional athletes because of the dangers of their profession. Whether it be football, basketball, baseball, racing, or even golf, freak accidents can happen and you need to protect yourself if they do.
All in all, I hope this has been insightful and encouraging to those who are looking to plan, pro athlete or not. The key thing to remember is that although the tools may be the same, make sure your Estate Planning attorney knows how to use these tools to best fit your needs and more importantly your goals!