In Maryland we cheer for the Ravens, Orioles and Terrapins, but regardless of team or sport, professional athletes have a unique set of circumstances that require customized estate planning strategies. Some of the key issues professional athletes face include:
- Peak earnings at very young ages;
- Windfalls and sudden earnings;
- Multiple income streams;
- Risk of injury resulting in loss of income;
- Spending habits; and
- Fame resulting in lack of privacy.
Some harrowing statistics show that the issues above can lead to devastating financial consequences without proper planning. One study published in Sports Illustrated showed that 80% of NFL players are in or near bankruptcy within 24 months of their last professional game. This may be due to overspending, excessive gifting to friends and family or simply failing to understand the importance of saving.
NBA star Shaquille O’Neal educates fellow athletes on a simple strategy he derived after falling into financial woes himself. His method is to advise players to set aside 75% of their annual earnings. This aggressive approach is meant to balance out the short-lived time frame that most players can earn fees for playing sports.
Retirement from professional sports typically occurs at very young ages, in the twenties or thirties. Very few make into their forties still earning money from playing. While there may still be some earning capacity from other avenues like coaching, sportscasting or sponsorships, those opportunities can easily dry up without much notice.
Setting up proper safeguards to protect wealth using solid asset protection strategies can make all the difference. Financial ruin may occur without proper safeguards in place to hedge against the scenario of short career and long retirement.
Tips for Professional Athletes:
- Sign prenuptial agreements. The divorce rate is high for the general population and even higher for professional athletes and other celebrities.
- Stand up to peer pressure. It may be hard to resist some of the pressure to spend money on image enhancing depreciable assets, but it can make the difference in future security.
- Consult with an experienced estate planning attorney prior to making any gifts to friends or family.Gifting not only has consequences on cash flow and investment strategies, it may also result in tax liabilities.
- Utilize asset protection strategies like trusts and business entities to protect wealth from lawsuits and creditors.
- Do not procrastinate.Pro athletes keep very busy schedules but making the time to meet with solid advisors to develop a comprehensive financial plan and estate plan should be top priority.
- Build a Team. The star team of advisors should consist of an estate planning attorney knowledgeable of asset protection strategies, a CPA and a financial planner with wealth experience. Athletes may also need to include a sports agent and personal assistant on the team.
At Stouffer Legal, we understand the challenges faced by professional athletes. Our estate planning services include highly tailored and customized solutions that help athletes build for a solid retirement. You can schedule an appointment by calling us at (443) 470-3599, emailing us at office@stoufferlegal.com, or register for an upcoming free webinar using the link below:
https://attendee.gotowebinar.com/register/2992977720378807055
https://attendee.gotowebinar.com/register/538099208554974223
https://attendee.gotowebinar.com/register/7850280342799977231
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