Pro Athlete Clients: Spring Training for Estate Planners

Originally appeared in Estate Planning, a Thomson Reuters publication. Copyright 2012 Thomson Reuters/Tax & Accounting.

Pro athletes require financial and estate planning similar to most high net worth clients.  However the professional athlete is affected by unique circumstances that require planners to reconsider the planning process itself.  Common issues athlete clients face, and which practitioners need to address include:

• -A very short duration, but high earning career. The accumulation period is often a short time span, and the consumption period is long. Thus, the typical athlete faces far greater risk from the potential adverse financial impact from inflation.

• -A peak earning period generally early in life. This career arch raises a host of unique challenges for retirement, estate planning and asset protection planning.

• -A limited financial and legal background.  The lack of prior knowledge in state and financial planning can create a greater need for planner assistance.

• -Endorsement deals and other intangible contractual rights.  These agreements are major variables and potentially lucrative income streams, and they can create unique planning challenges.

• -The involvement of a sports agent, manager or management team.  Other professionals who surround the athlete need to be factored into the planning process.

• -An increased (even high) risk of disabling injuries.  Injury can occur anytime n the athlete’s career and often cannot be insured against with the simple purchase of a disability income replacement policy that protects most clients.

• -A greater need for privacy.  As the athlete’s success grows, maintaining privacy can prove to be a nearly impossible task.

• -The risk of a lockout.  Being locked out from one’s job presents a financial risk few other clients face.  A lockout can be a great financial challenge for young athletes, especially those who have not accumulated significant financial reserves.

• -Pressure on young athletes to keep up with the lavish spending of their more established, and often wealthier teammates.  These teammates have often not taken basic financial planning step themselves, and the perceived spending standard can be ruinous for a younger athlete.

• -An entourage.  Although many individuals who surround the athlete may be true well-wishers, others might attempt to manipulate and leech.  For many athletes, these purported “friends” are their most dangerous financial risk.

• -Unique family and significant-other relationships.  The statistics of divorce and failed relationships for athletes is far worse for the general population, requiring increased consideration in planning.

Each of these common characteristics affects every aspect of the planning and drafting process.  Practitioners need to tailor efforts on behalf of these clients to enable them to achieve the security that the planning process should provide.

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