Trusts are essential tools that protect assets from creditors, reduce estate and gift taxes, and provide protection for loved ones after a death. Trusts can be beneficial for all-sized estates but are particularly useful for people such as professional athletes who accumulate wealth quickly at a young age, allowing them to retire younger.
Take Allen “The Answer” Iverson, who played professional basketball from 1996 to 2013. Over the course of his career, he made an estimated $200 million but, by 2012, he experienced financial troubles with creditors. Iverson was able to resolve his problems by placing a significant portion of his $32 million deal with Reebok into a trust, which he can only access at the age of 55.
Not every athlete can score lucrative contracts with Reebok but they can be smart about their financial planning with creative estate planning for professional athletes. With long term planning and holistic strategies that minimize taxes, they can preserve and continue to build wealth for generations to come.
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What’s different
The career of an athlete differs from other professions in many ways. Athletes start their careers earlier in life, peak in their twenties and thirties, and have a limited window of opportunity to compete professionally. Additionally, their career can be highly unpredictable and often relies on factors such as talent, luck, and marketability.
Athletes can prepare for living in the long term by leveraging smart estate planning strategies. Here are just a few ways in which trusts can help:
- Asset Protection: Professional athletes often accumulate significant wealth through large contracts and endorsements that in turn support their lifestyle. An asset protection trust can help protect their wealth from lawsuits, creditors, or mismanagement.
- Privacy and Confidentiality: As public figures, athletes are often vulnerable to bad actors and creditors. Assets held within a trust are shielded from public disclosure or probate, affording athletes a level of privacy, confidentiality, and protection around their financial affairs.
- Estate Planning: Trusts are powerful estate planning tools that allow athletes to dictate how their wealth will be managed and transferred. By setting up a trust, athletes can ensure their loved ones, family and friends are provided for after their passing.
- Financial management: Some athletes struggle to manage their finances effectively because of busy schedules, pressure from outside influences, or because they lack the financial savvy to do so. Trusts can appoint professional trustees who have expertise in managing finances, investments, and brand and media rights, ensuring their financial interests are protected over the long term.
- Charitable giving: Many athletes like to give back to their communities or support causes they are passionate about. They can create charitable trusts or designate a portion of their assets to be given to charities and foundations, making a positive impact.
Your plan
Questions about estate planning for athletes? At Hatley Law Group, we understand the unique financial planning considerations of professional athletes. That’s why you want Attorney Rod Hatley on your team to determine where you have risk and which types of tax exemptions are available. Rod and his team will show you which valuable estate planning vehicles will best shield and preserve your wealth today and tomorrow.
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