As 2014 kicks off with major sporting events like the Super Bowl and the Winter Olympics, it is hard to imagine sports figures with money troubles. But perhaps the greatest potential legal mishap that professional athletes will encounter is going bankrupt.
A recent example is reported in a CNBC article by Adam Molon. “Former NFL quarterback Vince Young, who made millions during his playing years, recently filed for bankruptcy protections” – and he is just the latest former player with serious money problems.
Athletes are paid a lot of money for their skills. Contracts and endorsements mean multi-million dollar contracts for many players. But even the healthiest, injury-free athlete can expect a career that is short-lived compared to other careers. Depending on their sport, most professional athletes retire in their late twenties or early to mid-thirties. The average career length for an NFL player is 3.5 – 6 years, barring any career-ending injuries.
When the “playing” stops, so does the money.
Most athletes are not prepared for the abrupt transition when they are forced to retire due to age or injury, or their team lets them go. In the prime of their lives, athletes suddenly lose a constant, lucrative income. If their financial planning is inadequate (or non-existent), bankruptcy becomes a reality. A study by Sports Illustrated reveals that
- about 78% of former NFL players have gone bankrupt or encounter financial adversity because of joblessness or divorce within two years of leaving the game;
- Within five years of retirement, an estimated 60% of former NBA players are broke.
Why are athletes unprepared for the inevitable end-of-career issues?
Part of the answer is that athletes are dealing with fame and fortune at an early age, and do not have the necessary understanding of finances. They also do not imagine their fortunes ending abruptly; they dream of playing at their prime for a long time, but really only stay in the game for a few years.
Players may not envision steep medical bills from high-impact injuries or repetitive stress on their bodies. They do not think about lawsuits being brought against them, or making horrible financial investments. Many sports figures are even preyed upon by family and friends for money and handouts, and feel obligated to help them – they cannot say “No.”
“Riches to rags” should not be an athlete’s story.
They need a lawyer to help them with the boring-but-indispensable legal stuff that can make the difference from going bankrupt to living out a long and lucrative retirement. They need a legal advisor to make certain that their future is being looked after by a true advocate that will look out for their interests 100% of the time.
In many respects, athletes are no different from you and me. They need a will, they need an estate plan, they likely need a prenup or postnup, and they need to understand their finances.
Estate planning for athletes is alive and well
The entire purpose of estate planning is to stretch earnings of today to an uncertain tomorrow – so there will be no bankruptcy, no financial ruin. For athletes who earn most of their lifetime earnings within a short window of time, that need is especially urgent.
A good sports lawyer will help you coordinate and align with other advisors for money management, risk management, and tax planning.
As with any estate plan, there are basic recommendations and documents our sport lawyers will help you understand and put in place:
- Health care directives and financial powers of attorney in case of disability,
- A will or trust for handling assets and beneficiaries upon disability or death.
- Legal entities such as an LLC or corporations, and asset protection trusts (irrevocable and revocable trusts)
- A plan to defer capital gains taxes and reduce income taxes
- A plan to eliminate the probate process
- A plan to eliminate estate tax
- A plan to protect your wealth against frivolous lawsuits
Legal Help from Orlando Sport Lawyer
Most people start thinking about asset protections after something has already happened. The reality is, the time to “do” asset protection is early in the game, when the seas are calm.
At TK Law, we know that an athlete’s primary focus is maximizing his or her athletic performance. As an athlete’s attorney, our focus is to look at the athlete’s big picture, including life beyond the playing field. Our sport lawyers are highly skilled in balancing current career goals with long-term estate planning goals, while incorporating “2nd career” ambitions and wise investments. This helps the client create great stability and understanding of their future as their sports career transitions or winds down.
TK Law is a versatile law firm composed of attorneys qualified to help you with sports law matters and any other issues you may face in your lifetime, including corporate law, tax and estate planning, business law, intellectual property, divorce and family law, bankruptcy and foreclosure law, criminal defense law and personal injury law and litigation.
Speak with an experienced Florida attorney at our firm today.Call 855-Kramer-Now (855-572-6376).
Sources:
1. http://www.cnbc.com/id/101377457 - 1/31/14
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