By: K. Eli Akhavan, Esq., Evan Bloom, Esq., Jonathan Shenkman, MBA,Martin M. Shenkman, Esq. Ben Utecht, and Eido M. Walny, Esq.1
The professionalathlete needsthe same sound foundation of financial and estate planning that all wealthyclientsrequire. However, theprofessional athletetypicallyfaces manyunique circumstances that must be integrated into the planning process. Movie stars, musicians, entertainers, and others with “star” power encounter some of the challenges common to athletes, so that the applicability of some of the planning ideas discussed here will be broader than merely for athlete clients.
There is potentially an important time pressure to planning for pro athletes that might require quick action. If the political balance of power changes in Washington in 2020, a Democratic administration might enact restrictive estate tax changes similar to that proposed by Senator Bernie Sanders in the Senate and Congressman Jimmy Gomez (CA-34) in the House. These bills reduce the gift tax exemption to $1 million and the estate tax exemption to $3.5 million. Discounts, GRATs, grantor trusts and GST planning may all be severely restricted. Thus, for athletes that have already amassed substantial wealth, planning should proceed before those changes might occur.
Athlete Special Circumstances
The professional athlete mayface any, or all,of the following circumstances whichpractitioners need to consider:
- Early financial peak. Most clients tend to achieve peak earnings and savings in their 50s, 60s,or later. While there are exceptions, e.g., high tech and other entrepreneurs,the professional athlete trends towards theextreme with many reaching peak earning years at a very young age, perhaps e.g. in their 20s. Peak earnings at asuch ayouthful stage of life cancreate significantchallenges for retirement, estate,and asset protection planning.
- Sudden wealth.The wealth of the professional athlete oftencomes quickly. Most clients have a build-up of years of increasing financialsuccess that can prepare themfor future high income years. Athletes are often thrust into wealth so quickly that there is no period for adjustment.Ontheir rapid, sometimes literally overnight,ascent to wealth,they frequently andincorrectlyperceive that they are protected from the vicissitudes of life and are impervious to insolvency, economicdownturns, unethical advisers, and more.