Estate Planning
I don’t like financial jargon ~ You know, like “Estate Planning.” The first time I heard that, I thought, “Isn’t that what old people do?”
Well, let me ask you this…
Have you worked hard to earn money from your sport? Do you want to make sure that money is protected? Do you want that money to have a future direction? If you are anything like me, your answer is a resounding yes.
That is all estate planning is at its core.
You see, you get one of two options with your money ~ The Government Plan or Your Plan.
Estate planning is the broad term for how you do this.
So, let’s break down the key factors to consider for professional athletes.
Direction
- Guardianship – Who will take care of those in your legal care?
- Medical Directive – Who will make health care decisions if you can’t?
- Financial Directive – Who will handle your financial decisions if you can’t?
- Revocable Trust – Who will receive your money when you die, and how will they do that?
- Pour-Over Will – Where will all those key belongings go that aren’t able to be titled in your estate?
Consider your estate plan as the parking garage that houses your things. The direction is the guard at the exit to make sure those assets go where, when, and how you want.
Protection
Everyone can Google your name and figure out how much money you make.
That level of public information requires proper protection.
The parking garage you build around your assets (estate plan) provides you with the necessary protection.
In athlete wealth management, we focus on the trust owning as much as possible while the individual (you) owns as little as possible. In reality, you still own and control those assets, but from a legal perspective, there is separation.
Titling
The most common mistake I see is professional athletes doing the work to build the parking garage.
Documents are drafted and signed, but the assets are never parked in the garage.
Let me be clear, without proper titling of your assets, those documents are paperweights ~ they do nothing.
The key is ensuring your financial team helps you consider what assets should be titled in your trust and helps you execute that.
Taxes
The two knowns in life are death and taxes.
They are inevitable, and everyone knows it.
What most don’t know is the government can tax even after you die ~ this is called Estate Taxes.
Estate taxes work like this:
- The government takes a snapshot of everything you own upon your death, including any life insurance.
- Any money over $13.61M at the time of your passing is taxed at 40%.
As a professional athlete, you have the advantage of planning for this decades in advance. Done correctly, you can limit or potentially avoid these taxes.
So remember, when I said I thought estate planning was for old people?
Yeah, not so much. When it comes to athlete wealth management, it is a key component from day one.
Why Estate Planning is Critical for Athletes
Athletes have unique financial situations that make estate planning even more essential. Unlike traditional careers, sports earnings are often concentrated within a short period. According to the National Bureau of Economic Research, nearly 16% of NFL players file for bankruptcy within 12 years of retirement, despite high earnings during their careers.
Key Statistics:
- The average NBA career lasts only 4.5 years, and the NFL average is even shorter at 3.3 years.
- A study by Sports Illustrated found that 78% of former NFL players face financial stress within two years of retirement, while 60% of former NBA players are broke within five years.
- Without proper estate planning, athlete wealth is vulnerable to mismanagement, taxes, lawsuits, and unexpected life events.
By having a solid estate plan, athletes can ensure their wealth lasts well beyond their playing years.
Common Estate Planning Mistakes by Athletes
1. Failing to Create a Will or Trust
- Many athletes neglect to draft a will or trust, leaving their assets unprotected and subject to intestacy laws.
2. Not Updating Beneficiaries
- Life changes, such as marriage, divorce, or having children, require updates to estate planning documents.
3. Ignoring State and International Laws
- Athletes who own properties or businesses in multiple states or countries must understand differing estate laws.
4. Not Planning for Disability or Incapacity
- Injuries are common in sports. A power of attorney and medical directive ensure decisions can be made if an athlete becomes incapacitated.
Resources for Athletes: Building a Strong Estate Plan
To help professional athletes secure their wealth, here are some resources:
Financial and Legal Advisors
- Professional Sports Financial Advisors Association (PSFAA) – Helps connect athletes with certified financial planners.
- National Association of Estate Planners & Councils (NAEPC) – Provides guidance on selecting estate planning professionals.
Estate Planning Tools
- Trust & Will (Online Platform) – A digital platform for estate planning documents.
- LegacyShield – A service that helps track assets, insurance, and estate planning documents.
Books & Education
- “The Total Money Makeover” by Dave Ramsey – A financial literacy book for managing and protecting wealth.
- “Professional Athletes’ Financial Playbook” by Ed Butowsky – A guide tailored to financial planning for athletes.
Steps to Take Today
- Hire an Estate Planning Attorney – Ensure legal documents are in place.
- Set Up a Trust – Protect assets and minimize tax burdens.
- Review Beneficiaries Regularly – Update as life circumstances change.
- Secure Life & Disability Insurance – Essential protection for athletes.
- Educate Yourself – Stay informed on financial planning best practices.
By taking these steps, athletes can protect their wealth, secure their legacy, and ensure financial stability for generations to come.
Estate planning is not just about securing assets—it’s about securing your future and that of your loved ones. Athletes face unique financial challenges, but with the right planning, their wealth can be preserved and protected long after their playing days are over. Don’t wait—start planning today!
