Athletes usually create their wealth at a very young age and in a short period of time. Therefore the preservation and protection of this wealth for a longer time horizon is of utmost importance.
While all people need to protect their wealth and other interests, the special nature of the sports profession leads athletes to have special asset protection and estate planning considerations that are quite different from the more common issues addressed by estate planners. In the world of professional sports, the athletes’ ability to attain celebrity status at such a young age creates a mindset focused on professional successes, often at the expense of personal protection with many athletes overlooking some simple ways to protect the assets they have accumulated so early in their lives. Also, athletes should actually plan for two different retirements, the first from pro sports and the second from working altogether.
So what are the athletes’ special circumstances and how can they hedge against them and protect themselves, their assets and their families?
In the physically demanding world of sports, athletes are prone to injuries in the field which could end up being career ending. Therefore, athletes should be adequately insured to be able to overcome the sudden loss of their paycheck. Athletes can take on additional insurance in terms of disability and also their financial plan should cater for such circumstances by including a cash cushion which they can access in case they are unexpectedly left without a paycheck. In addition they should have both a health care and a financial power of attorney in place, in case an injury leaves them incapacitated. A health care power of attorney nominates and authorizes a particular person to make health care decisions on behalf of the athlete when he is incapacitated and cannot make such decisions himself. The financial power of attorney authorizes a different person to make financial decisions concerning the athletes’ assets if and when the athlete becomes incapacitated. In addition athletes can opt to have a living will in place which specifies what end-of-life actions should be taken in case the athlete is permanently brain dead or terminally ill with no hope of recovery.
Professional athletes usually own a number of assets such as real estate, collections of valuables, etc and since a large number of athletes have international careers, such assets can be scattered all over the world. These assets can be a target by the creditors of the athletes. To hedge against their assets becoming prey to creditors, athletes can create a trust and place their assets therein or even create separate entities which will hold such assets, offering them entity-based asset protection. Protecting wealth within a trust structure can keep earnings safe until the time comes to pass on the estate and it also offers added privacy. Another word of advice for athletes, in order to make sure that they do not leave their assets exposed and avoid legal claim against them, is to avoid personal guarantee of debts for a business or investment entities.
Professional athletes have a high rate of divorce and although a prenuptial agreement can be a difficult subject to discuss when one is in a loving and committed relationship, it can protect against a multitude of disastrous financial outcomes. A byproduct of the high rate of divorce for professional athletes is having children from multiple wives. Naturally, professional athletes want to provide for their children both during their lifetime and after their passing. The best way to do that is through a Last Will and Testament which outlines how an athlete’s property will be distributed upon his death. A will also identifies the person who will be making such distributions as well as who will serve as guardian to minor children. A will is basically a letter of wishes which ensures that the athlete’s desires are met in case of an untimely death.
An asset protection and estate plan are a necessity for professional athletes because there is a lot at stake. Once these plans are in place, they must be monitored and modified over time to adjust to changes in salaries and other compensation as well as changing family circumstances. Properly drafted asset protection and estate plans ensure athletes that themselves, their families, and loved ones will be provided for during the lifetime and subsequent to the passing of the athlete.
